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, 2002

     [ ] 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: 11,894,355 outstanding
  as of November 30, 2002 (excluding 659,645 treasury shares)

<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.

Introduction

     Epolin,  Inc.  (the "Company") is a  manufacturing
and   research  and  development  company   which   was
incorporated  in the State of New Jersey in  May  1984.
The  Company  is principally engaged in the  commercial
development, production and sale of near infrared  dyes
to  the  optical  industry for  laser  protection,  for
welding,  for  security inks and other dye applications
as well as specialty chemicals.

     This   report   contains  certain  forward-looking
statements  and information that reflect the  Company's
expectations   about  its  future  operating   results,
performance  and opportunities that involve substantial
risks  and  uncertainties.  When used in this document,
the words "anticipate",  "believe", "estimate", "plan",
"intend" and "expect" and similar expressions, as  they
relate  to Epolin, Inc. or its management are  intended
to  identify  such  forward-looking statements.   These
forward-looking  statements are  based  on  information
currently available to the Company and are subject to a
number of risks, uncertainties, and other factors  that
could  cause the Company's actual results, performance,
prospects  and opportunities to differ materially  from
those  expressed  in,  or implied  by,  these  forward-
looking   statements.   Certain  of  these  risks   and
uncertainties are discussed under the caption "Forward-
Looking  Statements" in Part I, Item 1 "Description  of
Business" of the Company's Annual Report on Form 10-KSB
for  the  year  ended  February 28,  2002.   Except  as
required  by  the Federal Securities Law,  the  Company
does  not  undertake any obligation to release publicly
any  revisions  to  any forward-looking  statements  to
reflect events or circumstances after the date of  this
report.

Results of Operations

     During  the quarter ended November 30,  2002,  the
Company  reported  sales of approximately  $792,000  as
compared to sales of approximately $628,000 during  the
quarter  ended  November  30,  2001,  an  increase   of
approximately  $164,000  or  26.1%.   During  the  nine
months  ended  November 30, 2002, the Company  reported
sales  of approximately $2,227,000 as compared to sales
of  approximately  $2,071,000 during  the  nine  months
ended  November 30, 2001, an increase of  approximately
$156,000 or 7.5%.

     Operating  income  for  the  three  months   ended
November  30, 2002 increased to approximately  $375,000
from operating income of approximately $280,000 for the
three  months ended November 30, 2001. Operating income
for  the  nine months ended November 30, 2002 decreased
to  approximately  $956,000 from  operating  income  of
approximately  $1,161,000 for  the  nine  months  ended
November  30,  2001.  This change for the  nine  months
ended  November  30, 2002 compared  to  the  comparable
period  of  the prior year resulted primarily  from  an
increase  in  cost  of  sales and  a  less  significant
increase   in   selling,  general  and   administrative
expenses.

     Cost  of sales for the three and nine months ended
November  30,  2002  was  approximately  $217,000   and
$715,000,  respectively, as compared to cost  of  sales
during  the  three and nine months ended  November  30,
2001  of  approximately $180,000  and  $393,000.   Such
increases  in  cost of sales were primarily  due  to  a

<PAGE>

reallocation of officers' salaries from SG&A to cost of
sales,  increases  in  laboratory  salaries  and  other
increases in labor and overhead expenses.

     During  the  three and nine months ended  November
30,   2002,   the   Company's  selling,   general   and
administrative expenses were approximately $200,000 and
$557,000, respectively, as compared to selling, general
and  administrative expenses of approximately  $169,000
and  $518,000  for  the  three and  nine  months  ended
November 30, 2001.   Such increases were primarily  due
to   an   increase   in  legal  and  accounting   fees,
environmental  costs  and employee  benefits  partially
offset   by  the  reallocation  of  officers'  salaries
referred to above.

     During  the  three and nine months ended  November
30, 2002, the Company realized approximately $4,000 and
$17,000,  respectively, in interest income as  compared
to approximately $10,000 and $42,000 in interest income
for the comparable periods of the prior fiscal year.

     During  the quarter ended November 30,  2002,  the
Company  reported income before taxes of  approximately
$383,000   as  compared  to  income  before  taxes   of
approximately  $290,000  for  the  three  months  ended
November  30, 2001.  For the nine months ended November
30,  2002, the Company reported income before taxes  of
approximately  $982,000 as compared  to  income  before
taxes  of approximately $1,203,000 for the nine  months
ended  November 30, 2001.  Net income after  taxes  was
approximately $237,000 or $.02 per share for the  three
months  ended November 30, 2002 as compared  to  income
after taxes of approximately $177,000 or $.02 per share
for  the three months ended November 30, 2001.  For the
nine  months ended November 30, 2002, net income  after
taxes  was approximately $587,000 or $.05 per share  as
compared  to  net  income after taxes of  approximately
$717,000 or $.06 per share for the comparable period of
the prior fiscal year.

     Management   continues  to  believe  that   future
business look promising.  The Company is confident that
it  can  continue  to  take  advantage  of  its  market
position  in  terms of availability of dyes  and  their
performance.   Management believes that  the  Company's
newest products, such as security inks, came along just
as the market recognized the need for stronger security
measures.    Credit   cards,   proprietary   packaging,
official  documents and personnel badges  can  use  the
near  infrared  inks  the Company  makes  because  they
provide a convenient and rapid addition to the security
features already in place.  No assurance can be  given,
however,  that  this trend will continue  or  that  the
Company  will  be able to successfully  penetrate  this
market.

Liquidity and Capital Resources

     On  November  30,  2002, the Company  had  working
capital of approximately $2,328,000, an equity to  debt
ratio  of  approximately  5.9 to  1,  and  stockholders
equity  of  approximately $2,944,000.  On November  30,
2002, the Company had approximately $1,245,000 in  cash
and  cash  equivalents, total assets  of  approximately
$3,442,000   and  total  liabilities  of  approximately
$498,000.

     The Company believes that its available cash, cash
flow  from  operations and projected revenues  will  be
sufficient  to  fund the Companys operations  for  more
than the next 12 months.

     The  Company  anticipates that it  will  incur  in
fiscal  2003 between approximately $75,000 and $100,000
in  renovation  costs to its facility  in  Newark,  New
Jersey.  Other than the foregoing, the Company does not
anticipate  making  any  other  significant  additional
capital  expenditures  in the immediate  future  as  it
believes  its  present  machinery  and  equipment,   in
conjunction with the above mentioned renovations,  will
be sufficient to meet its near term needs.

     Inflation  has  not  significantly  impacted   the
Company's operations.
<PAGE>

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  fiscal
year  ended February 28, 2002, a total of 30,000 shares
were  repurchased  at  a cumulative  cost  of  $14,837.
During  the nine months ended November 30, 2002, 12,500
shares were repurchased at a cumulative cost of $3,125.
Under a previous stock repurchase program authorized in
March  1998, which permitted the Company to  repurchase
up  to $150,000 of the Company's outstanding shares  of
common  stock, the Company had repurchased  from  April
1998 through December 2000 a total of 574,700 shares at
a cumulative cost of $148,641.

     During  the  quarter ended August  31,  2002,  the
Company  declared a $.04 per share dividend  which  was
paid  on  July 31, 2002.  Another dividend of $.03  per
share  has  been  declared which  will  be  payable  on
January  31,  2003  to stockholders  of  record  as  of
January  17,  2003.   During  the  fiscal  year   ended
February 28, 2002, the Company 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.


Item 3.   Controls and Procedures.

     The  Company's Chief Executive Officer  and  Chief
Financial  Officer have evaluated the effectiveness  of
the  Company's  disclosure controls and procedures  (as
such  term  is defined in Rules 13a-14(c) and 15d-14(c)
under  the Securities Exchange Act of 1934, as  amended
(the "Exchange Act")) as of a date within 90 days prior
to  the filing date of this quarterly report. Based  on
such evaluation, such officers have concluded that  the
Company's   disclosure  controls  and  procedures   are
effective  in  alerting  them  on  a  timely  basis  to
material information relating to the Company (including
its  consolidated subsidiaries) required to be included
in  the  Company's periodic filings under the  Exchange
Act. There have not been any significant changes in the
Company's  internal controls or in other  factors  that
could significantly affect such controls subsequent  to
the date of this evaluation.

<PAGE>

                  PART II - OTHER INFORMATION


Item 1.  Legal Proceedings.

     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 include breach  of
contract,  civil  rights, age discrimination,  wrongful
termination,  infliction of emotional  distress  and  a
shareholder  derivative  claim.   Such  litigation   is
currently in the discovery stage.  The Company believes
such  claims  are without merit and is  defending  such
matter vigorously.

     As   a  result  of  certain  information  recently
discovered  by  the  Company, the  Company  intends  to
commence a separate action against such two individuals
and  other parties in which action the Company  intends
to  allege,  among other things, tortious  interference
with   business  relations,  violation  of  non-compete
agreements  and  breaches  of  fiduciary  duty  to  the
Company.   The  Company intends to pursue  this  matter
vigorously.

     While  the  outcome  of  such  actions  cannot  be
predicted   at  this  time  taking  into  account   the
uncertainty  and  risks  inherent  in  any  litigation,
management  believes,  based on its  understanding  and
evaluation  of  the  relevant facts and  circumstances,
that  such  actions  will not likely  have  a  material
adverse  effect on the Company's results of operations,
financial  position  or  cash flows.   Other  than  the
foregoing,  there are no other material  pending  legal
proceedings to which the Company is a party or to which
any of its property is subject.


Item 2.  Changes in Securities.

     None.


Item 3.  Defaults Upon Senior Securities.

     None.


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

       On   August  6,  2002,  an  annual  meeting   of
stockholders was held to elect six 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,   Claire
Bluestein,  Morris  Dunkel, James R.  Torpey,  Jr.  and
Peter  Kenny,  each  an incumbent director,  were  duly
elected as directors of the Company. Each of Murray  S.
Cohen,  James Ivchenko, Claire Bluestein, Morris Dunkel
and James R. Torpey, Jr. received 9,810,355 affirmative
votes  and  227,500  negative votes,  and  Peter  Kenny
received   9,804,355  affirmative  votes  and   233,500
negative votes.


Item 5.  Other Information.

          None.

<PAGE>

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

          (a)  Exhibits.

            99.1      Certification pursuant to  U.S.C.
          Section  1350, as adopted pursuant to Section
          906 of the Sarbanes-Oxley Act of 2002

          (b)  Reports on Form 8-K.

          Listed  below are reports on Form  8-K  filed
          during the fiscal quarter ended November  30,
          2002.

             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: December 30, 2002     By:   /s/ Murray S. Cohen
                                       Murray S. Cohen,
                                       Chairman of the
                                       Board
                                       and Chief Executive
                                       Officer



Dated: December 30, 2002     By:   /s/ James Ivchenko
                                       James Ivchenko,
                                       President (Principal
                                       Financial Officer)


<PAGE>


                         CERTIFICATIONS

I, Murray S. Cohen, certify that:

1.   I  have  reviewed this quarterly  report  on  Form
10-QSB of Epolin, Inc.;

2.   Based on my knowledge,  this quarterly report does
not contain any untrue statement of a material fact  or
omit  to  state a material fact necessary to  make  the
statements  made, in light of the  circumstances  under
which  such statements  were made, not misleading  with
respect to the period covered by this quarterly report;

3.     Based   on   my   knowledge,    the    financial
statements,     and    other    financial   information
included  in this quarterly report,  fairly present  in
all   material   respects  the  financial    condition,
results of operations and cash flows of the  registrant
as  of,  and  for,   the  periods  presented   in  this
quarterly  report;

4.    The registrants other certifying officers  and  I
are   responsible  for  establishing  and   maintaining
disclosure  controls  and  procedures  (as  defined  in
Exchange   Act  Rules  13a-14  and  15d-14)   for   the
registrant and have:

     (a)    designed   such  disclosure  controls   and
procedures to ensure that material information relating
to   the   registrant,   including   its   consolidated
subsidiaries,  is  made known to us  by  others  within
those entities, particularly during the period in which
this quarterly report is being prepared;

     (b)     evaluated   the   effectiveness   of   the
registrants disclosure controls and procedures as of  a
date  within 90 days prior to the filing date  of  this
quarterly report (the "Evaluation Date"); and

     (c)    presented  in  this  quarterly  report  our
conclusions  about the effectiveness of the  disclosure
controls and procedures based on our evaluation  as  of
the Evaluation Date;

5.    The registrant's other certifying officers and  I
have disclosed, based on our most recent evaluation, to
the  registrant's auditors and the audit  committee  of
registrants  board of directors (or persons  performing
the equivalent functions):

     (a)  all significant deficiencies in the design or
operation  of  internal controls which could  adversely
affect  the  registrant's ability to  record,  process,
summarize and report financial data and have identified
for the registrants auditors any material weaknesses in
internal controls; and

     (b)   any  fraud,  whether or not  material,  that
involves  management  or other  employees  who  have  a
significant role in the registrant's internal controls;
and

6.    The registrant's other certifying officers and  I
have  indicted in this quarterly report whether or  not
there were significant changes in internal controls  or
in   other  factors  that  could  significantly  affect
internal  controls subsequent to the date of  our  most
recent  evaluation,  including any  corrective  actions
with  regard  to significant deficiencies and  material
weaknesses.


Date: December 30, 2002     /s/ Murray S. Cohen
                                Murray S. Cohen
                                Chairman   of    the
                                Board and
                                Chief Executive Officer
                                (Principal Executive
                                Officer)

<PAGE>

I, James Ivchenko, certify that:

1.   I  have  reviewed this quarterly  report  on  Form
10-QSB of Epolin, Inc.;

2.   Based on my knowledge,  this quarterly report does
not contain any untrue statement of a material fact  or
omit  to  state a material fact necessary to  make  the
statements  made, in light of the  circumstances  under
which  such statements  were made, not misleading  with
respect to the period covered by this quarterly report;

3.     Based   on   my   knowledge,    the    financial
statements,     and    other    financial   information
included  in this quarterly report,  fairly present  in
all   material   respects  the  financial    condition,
results of operations and cash flows of the  registrant
as  of,  and  for,   the  periods  presented   in  this
quarterly  report;

4.    The registrant's other certifying officers and  I
are   responsible  for  establishing  and   maintaining
disclosure  controls  and  procedures  (as  defined  in
Exchange   Act  Rules  13a-14  and  15d-14)   for   the
registrant and have:

     (a)    designed   such  disclosure  controls   and
procedures to ensure that material information relating
to   the   registrant,   including   its   consolidated
subsidiaries,  is  made known to us  by  others  within
those entities, particularly during the period in which
this quarterly report is being prepared;

     (b)     evaluated   the   effectiveness   of   the
registrants disclosure controls and procedures as of  a
date  within 90 days prior to the filing date  of  this
quarterly report (the "Evaluation Date"); and

     (c)    presented  in  this  quarterly  report  our
conclusions  about the effectiveness of the  disclosure
controls and procedures based on our evaluation  as  of
the Evaluation Date;

5.    The registrant's other certifying officers and  I
have disclosed, based on our most recent evaluation, to
the  registrants  auditors and the audit  committee  of
registrants  board of directors (or persons  performing
the equivalent functions):

     (a)  all significant deficiencies in the design or
operation  of  internal controls which could  adversely
affect  the  registrants ability  to  record,  process,
summarize and report financial data and have identified
for  the  registrant's auditors any material weaknesses
in internal controls; and

     (b)   any  fraud,  whether or not  material,  that
involves  management  or other  employees  who  have  a
significant role in the registrant's internal controls;
and

6.    The registrant's other certifying officers and  I
have  indicted in this quarterly report whether or  not
there were significant changes in internal controls  or
in   other  factors  that  could  significantly  affect
internal  controls subsequent to the date of  our  most
recent  evaluation,  including any  corrective  actions
with  regard  to significant deficiencies and  material
weaknesses.


Date: December  30,   2002  /s/ James Ivchenko
                                James Ivchenko
                                President (Principal
                                Financial Officer)

<PAGE>

EPOLIN, INC. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED NOVEMBER 30, 2002
AND NOVEMBER 30, 2001


<PAGE>
                          CONTENTS


                                              Page

Accountant's Review Report                    1

Consolidated Financial
Statements:

Consolidated Balance                          2 - 3
Sheets

Consolidated Statements of                    4 - 5
Income

Consolidated Statements of                    6
Stockholders' Equity

Consolidated Statements of                    7 - 8
Cash Flows

Notes to Consolidated Financial               9 - 17
Statements



<PAGE>

                 ACCOUNTANT'S REVIEW REPORT




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

       We   have   reviewed  the  accompanying   Consolidated
Balance  Sheets of Epolin Inc. and Subsidiary as of  November
30, 2002 and 2001 and the related Consolidated Statements  of
Income,  Stockholders' Equity and Cash  Flows  for  the  nine
months  then ended in accordance with Statements on Standards
for  Accounting  and Review Services issued by  the  American
Institute  of Certified Public Accountants.  All  information
included  in these financial statements is the representation
of the management of Epolin, Inc. and Subsidiary.

       A  review consists principally of inquiries of Company
personnel  and  analytical procedures  applied  to  financial
data.   It  is substantially less in scope than an  audit  in
accordance  with generally accepted auditing  standards,  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
November 30, 2002 financial statements in order for  them  to
be   in   conformity   with  generally  accepted   accounting
principles.







                              IWA FINANCIAL CONSULTING LLC

December 18,2002


<PAGE>



                           EPOLIN, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS


                                                               November 30,
                                                         -----------------------
Current assets:                                             2002         2001
                                                         ----------   ----------
Cash and cash equivalents                                $1,244,569    1,978,830
  Accounts receivable                                       582,052      375,506
  Inventories                                               598,998      675,783
  Notes receivable                                           21,405           --
  Prepaid expenses                                           35,853      118,626
  Deferred tax assets-current portion                         1,758        2,337
                                                         ----------   ----------

     Total current assets                                 2,484,635    3,151,082
                                                         ----------   ----------

Plant, property and equipment - at cost:
  Land                                                       81,000       81,000
  Building                                                  369,000      369,000
  Machinery and equipment                                   222,581      248,174
  Furniture and fixtures                                     12,223       12,223
  Leasehold improvements                                    538,315      449,191
                                                         ----------   ----------

     Total                                                1,223,119    1,159,588

  Less: Accumulated depreciation and amortization           680,778      690,108
                                                         ----------   ----------

     Net plant, property and equipment                      542,341      469,480
                                                         ----------   ----------

Other assets:
  Deferred tax assets-non current portion                   286,918      277,122
  Cash value - life insurance policy                        128,586      116,051
                                                         ----------   ----------

     Total other assets                                     415,504      393,173
                                                         ----------   ----------

       Total                                             $3,442,480    4,013,735
                                                         ==========   ==========


        See accountant's review report and notes to financial statements.


<PAGE>

                                EPOLIN, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS (CONTINUED)

                           LIABILITIES AND STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                          November 30,
                                                                    -----------------------
                                                                       2002         2001
                                                                    ----------   ----------
<S>                                                                 <C>              <C>
Current liabilities:
  Accounts payable                                                  $    3,250       11,650
  Accrued expenses                                                     114,342      105,862
  Taxes payable:
    Payroll                                                              1,342        1,065
    Income                                                              37,820      341,191
                                                                    ----------   ----------

    Total current liabilities                                          156,754      459,768
                                                                    ----------   ----------

Other liabilities:
  Deferred compensation                                                341,538      317,460
  Loans payable-officers                                                    --       10,319
                                                                    ----------   ----------

    Total other liabilities                                            341,538      327,779
                                                                    ----------   ----------

       Total liabilities                                               498,292      787,547
                                                                    ----------   ----------

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;
    12,554,000 and 12,179,000 shares issued and outstanding
    at 2002 and 2001, respectively                                   2,301,433    2,259,558
  Paid-in capital                                                        6,486        6,486
  Retained earnings                                                    813,922    1,123,190
                                                                    ----------   ----------

       Total                                                         3,121,841    3,389,234
Less: Treasury stock-at cost                                           177,653      163,046
                                                                    ----------   ----------

    Total stockholders' equity                                       2,944,188    3,226,188
                                                                    ----------   ----------

       Total                                                        $3,442,480    4,013,735
                                                                    ==========   ==========
</TABLE>


        See accountant's review report and notes to financial statements.


<PAGE>

                            EPOLIN, INC. AND SUBSIDIARY

                         CONSOLIDATED STATEMENTS OF INCOME

                   NINE MONTHS ENDED NOVEMBER 30, 2002 AND 2001


<TABLE>
<CAPTION>
                                                             2002          2001
                                                         -----------   -----------

<S>                                                      <C>            <C>
Sales                                                    $ 2,226,836     2,071,161
                                                         -----------   -----------

Cost of sales and expenses:
  Cost of sales                                              714,526       392,633
  Selling, general and administrative                        556,748       517,619
                                                         -----------   -----------

     Total                                                 1,271,274       910,252
                                                         -----------   -----------

Operating income                                             955,562     1,160,909
                                                         -----------   -----------

Other income:
  Rental income                                                3,000            --
  Interest                                                    17,091        41,973
  Gain on sale of assets                                       6,200            --
                                                         -----------   -----------
     Total other income                                       26,291        41,973
                                                         -----------   -----------

Income before taxes                                          981,853     1,202,882

Income taxes                                                 394,620       485,936
                                                         -----------   -----------

Net income                                               $   587,233       716,946
                                                         ===========   ===========


Per share data:
  Basic earnings per common share                               0.05          0.06
                                                         ===========   ===========

  Fully diluted earnings per common share                       0.05          0.06
                                                         ===========   ===========

  Weighted average number of common shares outstanding    11,891,470    11,581,223
                                                         ===========   ===========
</TABLE>


        See accountant's review report and notes to financial statements.


<PAGE>

                            EPOLIN, INC. AND SUBSIDIARY

                         CONSOLIDATED STATEMENTS OF INCOME

                   THREE MONTHS ENDED NOVEMBER 30, 2002 AND 2001


<TABLE>
<CAPTION>
                                                             2002          2001
                                                         -----------   -----------

<S>                                                      <C>            <C>
Sales                                                    $   792,072       628,049
                                                         -----------   -----------

Cost of sales and expenses:
  Cost of sales                                              217,177       179,736
  Selling, general and administrative                        200,166       168,641
                                                         -----------   -----------

    Total                                                    417,343       348,377
                                                         -----------   -----------

Operating income                                             374,729       279,672
                                                         -----------   -----------

Other income:
  Rental income                                                3,000            --
  Interest                                                     4,320         9,625
                                                         -----------   -----------

    Total other income                                         7,320         9,625
                                                         -----------   -----------

Income before taxes                                          382,049       289,297

Income taxes                                                 144,707       112,716
                                                         -----------   -----------

Net income                                               $   237,342       176,581
                                                         ===========   ===========


Per share data:
  Basic earnings per common share                               0.02          0.02
                                                         ===========   ===========

  Fully diluted earnings per common share                       0.02          0.02
                                                         ===========   ===========

  Weighted average number of common shares outstanding    11,891,470    11,581,223
                                                         ===========   ===========
</TABLE>


             See accompanying notes and accountant's review report.


<PAGE>

                                   EPOLIN, INC. AND SUBSIDIARY

                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                          NINE MONTHS ENDED NOVEMBER 30, 2002 AND 2001


<TABLE>
<CAPTION>
                                           Additional
                                Common      Paid-in-     Retained     Treasury   Stockholders'
                                 Stock      Capital      Earnings       Costs       Equity
                              ----------   ----------   ----------   ----------   ----------

<S>                           <C>               <C>      <C>           <C>         <C>
Balance - March 1, 2001       $2,229,658        6,486      754,225     (155,316)   2,835,053

Dividends Paid                        --           --     (347,981)          --     (347,981)

Common stock issued               29,900           --           --           --       29,900

Treasury shares purchased             --           --           --       (7,730)      (7,730)

Net income                            --           --      716,946           --      716,946
                              ----------   ----------   ----------   ----------   ----------

Balance - November 30, 2001   $2,259,558        6,486    1,123,190     (163,046)   3,226,188
                              ==========   ==========   ==========   ==========   ==========




Balance - March 1, 2002       $2,295,183        6,486      701,963     (170,153)   2,833,479

Dividends Paid                        --           --     (475,274)          --     (475,274)

Common stock issued                6,250           --           --           --        6,250

Treasury shares purchased             --           --           --       (7,500)      (7,500)

Net income                            --           --      587,233           --      587,233
                              ----------   ----------   ----------   ----------   ----------

Balance - November 30, 2002   $2,301,433        6,486      813,922     (177,653)   2,944,188
                              ==========   ==========   ==========   ==========   ==========
</TABLE>


        See accountant's review report and notes to financial statements.


<PAGE>

                              EPOLIN, INC. AND SUBSIDIARY

                         CONSOLIDATED STATEMENTS OF CASH FLOWS

                     NINE MONTHS ENDED NOVEMBER 30, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                   2002         2001
                                                                ---------    ---------
<S>                                                             <C>            <C>
Cash flows from operating activities:
  Net income                                                    $ 587,233      716,946
  Adjustments to reconcile net income to net cash provided by
   operating activities:
    Depreciation and amortization                                  19,879       17,094
    Deferred tax expense                                            2,120      (38,681)
    Obligation under deferred compensation agreement               18,059       18,059
    Gain on sale of assets                                         (6,200)          --
  (Increase) decrease in:
    Accounts receivable                                          (216,217)     (69,223)
    Inventories                                                    43,639     (174,191)
    Prepaid expenses                                                5,276      (89,503)
  Increase (decrease) in:
    Accounts payable                                              (17,324)       1,457
    Accrued expenses                                              (35,064)     (28,296)
    Taxes payable                                                 (71,182)     307,830
                                                                ---------    ---------

      Net cash provided by operating activities                   330,219      661,492
                                                                ---------    ---------

Cash flows from investing activities:
  Increase in cash value - life insurance policy                  (14,656)     (10,000)
  Increase in notes receivable                                    (21,405)
  Sale of equipment                                                 8,000           --
  Payments for equipment                                          (98,940)     (37,307)
                                                                ---------    ---------

      Net cash used by investing activities                      (127,001)     (47,307)
                                                                ---------    ---------
</TABLE>


        See accountant's review report and notes to financial statements.


<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                  NINE MONTHS ENDED NOVEMBER 30, 2002 AND 2001


                                                        2002            2001
                                                    -----------     -----------
Cash flows from financing activities:
  Dividends paid                                       (475,274)       (347,980)
  Proceeds from the issuance of common stock              6,250          29,900
  Purchase of treasury stock                             (7,500)         (7,730)
                                                    -----------     -----------

      Net cash used by financing activities            (476,524)       (325,810)
                                                    -----------     -----------

Increase (Decrease) in cash                            (273,306)        288,375

Cash and cash equivalents:
  Beginning                                           1,517,875       1,690,455
                                                    -----------     -----------

  Ending                                            $ 1,244,569       1,978,830
                                                    ===========     ===========

Supplemental information:
  Income taxes paid                                 $   463,557         299,935
                                                    ===========     ===========

  Interest paid                                     $        --             458
                                                    ===========     ===========


        See accountant's review report and notes to financial statements.


<PAGE>

                 EPOLIN, INC. AND SUBSIDIARY
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NOVEMBER 30, 2002



NOTE A - ORGANIZATION AND BASIS OF PRESENTATION:

Epolin, Inc., was incorporated under the laws of the State of
New  Jersey  in  May  1984. 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  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, it  was  controlled  by  two
officers/stockholders of the Company.

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 - Financial instruments  which
potentially subject the Company to a concentration of  credit
risk   consist  of  cash  and  cash  equivalents  and   notes
receivable. The Company and its Subsidiary had cash  deposits
of  $1,144,600  and  $1,878,800  at  November  30,  2002  and
November  30, 2001, respectively, in a financial  institution
and  a  brokerage house in excess of the FDIC insurance limit
or  not covered by the FDIC. In evaluating this credit  risk,
the  Company  periodically evaluates  the  stability  of  the
financial institution and the 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.

Fair  Value  of Financial Instruments - All reported  assets
and  liabilities,  which  represent  financial  instruments,
approximate the carrying values of such amounts.

Plant,  Property  and  Equipment  -  Stated  at  cost   less
accumulated  depreciation and amortization.  Provisions  for
depreciation  and  amortization are computed  based  on  the
straight-line or declining balance methods, based  upon  the
estimated useful lives of the assets.

Depreciation  and  amortization expense totaled  $19,879  and
$17,094 for the nine months ended November 30, 2002 and 2001,
respectively.

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                NOVEMBER 30, 2002


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, 2002:


                             CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
                                                                                      Epolin
                                      Consolidated   Eliminations      Epolin        Holding
                                      -----------    -----------    -----------    -----------
<S>                                   <C>               <C>           <C>              <C>
Current assets                        $ 2,484,635             --      2,414,255         70,380
Non-current assets                        957,845       (548,290)     1,027,655        478,480
                                      -----------    -----------    -----------    -----------
    Total assets                      $ 3,442,480       (548,290)     3,441,910        548,860
                                      ===========    ===========    ===========    ===========

      Total liabilities                   498,292       (163,882)       497,722        164,452
                                      -----------    -----------    -----------    -----------

Stockholders' equity:
  Common stock                          2,301,433             --      2,301,433             --
  Additional paid-in capital                6,486             --          6,486             --
  Retained earnings                       813,922       (384,408)       813,922        384,408
  Treasury stock                         (177,653)            --       (177,653)            --
                                      -----------    -----------    -----------    -----------

    Total stockholders' equity          2,944,188       (384,408)     2,944,188        384,408
                                      -----------    -----------    -----------    -----------

      Total                           $ 3,442,480       (548,290)     3,441,910        548,860
                                      ===========    ===========    ===========    ===========
</TABLE>


                          CONDENSED CONSOLIDATING STATEMENT OF INCOME
<TABLE>
<CAPTION>
                                                                                      Epolin
                                      Consolidated   Eliminations      Epolin        Holding
                                      -----------    -----------    -----------    -----------
<S>                                     <C>              <C>          <C>               <C>
Sales                                 $ 2,226,836             --      2,226,836             --
Other revenue                               3,000        (73,305)            --         76,305
                                      -----------    -----------    -----------    -----------
    Total                               2,229,836        (73,305)     2,226,836         76,305
                                      -----------    -----------    -----------    -----------

Cost of sales                             714,526             --        714,526             --
Selling, general and administrative       556,748        (73,305)       616,395         13,658
                                      -----------    -----------    -----------    -----------

    Total                               1,271,274        (73,305)     1,330,921         13,658

Operating income                          958,562             --        895,915         62,647

Other income                               23,291             --         22,908            383
                                      -----------    -----------    -----------    -----------

Income before taxes                       981,853             --        918,823         63,030

Income taxes                              394,620             --        388,910          5,710
                                      -----------    -----------    -----------    -----------

Net income                            $   587,233             --        529,913         57,320
                                      ===========    ===========    ===========    ===========
</TABLE>

<PAGE>

                EPOLIN, INC. AND SUBSIDIARY
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NOVEMBER 30, 2002



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

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.

Stock  Options - As permitted by FASB Statement of  Financial
Accounting  Standards No. 123, and explained in Note  G,  the
Company  accounts  for employee stock options  in  accordance
with  the  provisions of Accounting Principles Board  Opinion
No.  25, under which compensation expense is recognized  only
to the extent that the market price for stock options granted
exceeds the exercise price of the underlying common stock  at
the  date of grant. As of November 30, 2002, market price  in
excess  of  exercise  price  of certain  options  was  deemed
immaterial to the financial statements.

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.

Revenue  Recognition  - Revenue is recorded  on  the  accrual
basis and is recognized at the point of sale as products  are
shipped.

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.

Regulations - The Company expended approximately  $24,814  to
maintain  compliance  with certain Federal,  State  and  City
government  regulations relative to the  production  of  near
infrared dyes and specialty chemicals.

<PAGE>

                 EPOLIN, INC. AND SUBSIDIARY
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NOVEMBER 30, 2002



NOTE C - ECONOMIC DEPENDENCY:

A  material portion of the Company's business is dependent on
certain  domestic customers, the loss of which could  have  a
material effect on operations.  During the nine months  ended
November 30, 2002, approximately 52.7% of sales were to  four
customers.   Three of these customers, located in the Eastern
United States, accounted for 39.5% of sales. During the  nine
months ended November 30, 2001, approximately 68.8% of  sales
were to four customers, three of these customers, located  in
the Eastern United States, accounted for 66.3% of sales.


NOTE D - RENTAL INCOME UNDER SUBLEASE:

During the month of November 2002, the Company entered into a
sublease  agreement with a non related party on  a  month  to
month  basis until finalization of the agreement.  Under  the
terms  of  the lease, 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 is recorded on the balance sheet as a note
receivable, payable $2,500 a month including interest of 6% a
year.

NOTE   E   -  INVENTORIES:                2002      2001

     Raw materials and supplies       $  47,948    50,074
     Work in process                    149,898   214,249
     Finished goods                     401,152   411,460
                    Total              $598,998   675,783


NOTE F - INCOME TAXES:
                                              2002      2001
1.  Federal and State deferred tax assets include:

  Temporary differences - principally from
  accelerated amortization of leasehold
  improvements for book purposes and
  deferred compensation                     $288,676  279,459

  Current portion                              1,758    2,337

  Non-current portion                       $286,918  277,122

<PAGE>
                 EPOLIN, INC. AND SUBSIDIARY
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NOVEMBER 30, 2002



NOTE F - INCOME TAXES (continued):


2.  Income tax expense:

                                      2002            2001
     Current:
      Federal                      $302,300         406,327
      State                          90,200         118,290

         Total current              392,500         524,617

     Deferred:
      Federal                         1,677         (30,585)
      State                             443          (8,096)

         Total deferred               2,120         (38,681)

              Total                $394,620         485,936


NOTE G - EMPLOYEE BENEFITS:

Simplified  Employee Pension Plan - Effective June  1,  1994,
covering  all  eligible participating employees  as  defined.
Employer  contributions totaled $19,019 and $15,242  for  the
nine  months ended November 30, 2002 and November  30,  2001,
respectfully.

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


<PAGE>

                 EPOLIN, INC. AND SUBSIDIARY
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NOVEMBER 30, 2002

NOTE G - EMPLOYEE BENEFITS (continued):

Employee  Option  Plan - The Company previously  adopted  The
1986  Stock Option Plan.  As of April 1996, options  were  no
longer granted.  Under the terms of the Plan, options granted
could  be designated as portions, which qualify for incentive
stock  option  treatment under Section 422A of  the  Internal
Revenue  Code  of 1986, as amended, or options which  do  not
qualify.  On  December  1, 1995, options  to  acquire  up  to
490,000  shares  of the Company's common stock  were  granted
with  an expiration date of December 1, 2005. During the year
ended February 28, 2002, the Company issued 185,000 shares of
common stock to three employees. Common stock issued for  all
prior  years totaled 270,000 shares. Options totaling  35,000
expired  for  all  prior  years. There  were  no  outstanding
options as of November 30, 2002.

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  did
not  meet  the  requirements of Section 422 of  the  Internal
Revenue  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 totaling  400,000
were exercised throughout the year ended February 28, 2002.

Options  exercised during the nine months ended November  30,
2002 amounted to 25,000.

Options granted as of November 30, 2002:

Number of       Exercise      Date               Expiration
Shares          Price         Granted            Date
425,000           $.15      December 1, 1998    December 1, 2008
 25,000            .15      February 10, 1999   February 10, 2009
 25,000            .15      February 10, 2000   February 10, 2010
 50,000            .15      September 1, 2001   September 1, 2006
330,000            .25      September 15, 2001  September 15, 2006

There are 645,000 options attributable to future grants.


<PAGE>

                 EPOLIN, INC. AND SUBSIDIARY
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NOVEMBER 30, 2002


NOTE H - TREASURY STOCK:

Consists of 659,645 shares as of November 30, 2002 at  a  net
cost of $177,653.

Purchases  of  12,500 shares were made by the Company  during
the nine months ended November 30, 2002.

NOTE I - RESEARCH AND DEVELOPMENT:

Amounts  of  $218,926 and $164,619 were included in  selling,
general,  and  administrative expenses for  the  nine  months
ended  November  30, 2002 and 2001, respectively.  All  costs
were borne by the Company.

NOTE J - ACQUISITIONS:

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

NOTE K - UNAUDITED FINANCIAL STATEMENTS:

The  financial statements as of November 30, 2002 and for the
periods ended November 30, 2002 and 2001 included herein  are
unaudited.    However,   such   information   reflects    all
adjustments, which are in the opinion of management necessary
in order to make the financial statements not misleading.

NOTE L - COMMITMENTS AND CONTINGENCIES:

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

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

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.


<PAGE>

                 EPOLIN, INC. AND SUBSIDIARY
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NOVEMBER 30, 2002

NOTE L - COMMITMENTS AND CONTINGENCIES (continued):

Rental   expense   charged  to  operations,   eliminated   in
consolidation, amounted to $73,305 for the nine months  ended
November 30, 2002 and 2001, respectively.

Future minimum payments for the current option period:

   Years ending February:
             2003                $24,435
             2004                 97,740
             2005                 97,740
             2006                 97,740
             2007                 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 such time as 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.

On  January  1,  1996, the Company entered  into  a  deferred
compensation  agreement  with  an  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.   The   Company  entered  into  a  second   deferred
compensation  agreement with the same  officer  on  June  25,
1998,  which provided for the payment of certain funds for  a
period of ten years beginning two weeks after the date of his
retirement. This agreement was terminated March 1, 1999.

Effective  March  1,  1999,  the  Company  adopted   deferred
compensation agreements for two of its 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.   Management  has  elected  not   to
provide any additional funding for either employee subsequent
to  the date the two employees were no longer employed by the
Company.

Deferred  compensation of $18,059 was charged  to  operations
for  the nine months ended November 30, 2002 and November 30,
2001, respectively.

<PAGE>


                 EPOLIN, INC. AND SUBSIDIARY
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NOVEMBER 30, 2002

NOTE L - 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 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.

CONTINGENCIES:

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
include breach of contract, civil rights, age discrimination,
wrongful termination, infliction of emotional distress and  a
shareholder  derivative claim.  Such litigation is  currently
in the discovery stage.  The Company believes such claims are
without merit and is defending such matter vigorously.

As a result of certain information recently discovered by the
Company,  the  Company intends to commence a separate  action
against  such  two  individuals and other  parties  in  which
action  the  Company intends to allege, among  other  things,
tortuous  interference with business relations, violation  of
non-compete agreements and breaches of fiduciary duty to  the
Company.    The  Company  intends  to  pursue   this   matter
vigorously.

While the outcome of such actions cannot be predicted at this
time  taking into account the uncertainty and risks  inherent
in   any  litigation,  management  believes,  based  on   its
understanding  and  evaluation  of  the  relevant  facts  and
circumstances,  that  such actions will  not  likely  have  a
material   adverse  effect  on  the  Company's   results   of
operations, financial position or cash flows.

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