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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

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

                 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2009

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

                    For the transition period from ______ to ______

                        Commission file number 000-17741

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

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

            358-364 ADAMS STREET
             NEWARK, NEW JERSEY                             07105
           (Address of principal                          (Zip Code)
             executive offices)

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

                                 NOT APPLICABLE
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

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

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

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

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

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

State the number of shares outstanding of each of the Issuer's classes of common
stock,  as of the latest  practicable  date: no par value per share:  12,066,355
outstanding as of October 1, 2009.

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<PAGE>
                                  EPOLIN, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                     PAGE
<S>                                                                                  <C>
PART I - FINANCIAL INFORMATION

         Item 1.     Financial Statements..........................................    3
         Item 2.     Management's  Discussion and Analysis of Financial Condition
                     and Results of Operations.....................................    3
         Item 3.     Quantitative and Qualitative Disclosures About Market Risk....    9
         Item 4T.    Controls and Procedures.......................................    9

PART II - OTHER INFORMATION

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

SIGNATURES.........................................................................   11
</TABLE>

                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS.

         See the Consolidated Financial Statements annexed to this report.

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

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

FORWARD-LOOKING STATEMENTS

         This report contains certain forward-looking statements and information
relating to the Company  that are based on the beliefs and  assumptions  made by
the  Company's  management  as well as  information  currently  available to the
management.  When  used in this  document,  the words  "anticipate",  "believe",
"estimate",  and  "expect"  and similar  expressions,  are  intended to identify
forward-looking  statements.  Such  statements  reflect the current views of the
Company  with  respect  to future  events  and are  subject  to  certain  risks,
uncertainties   and   assumptions.   Should  one  or  more  of  these  risks  or
uncertainties  materialize,  or should  underlying  assumptions prove incorrect,
actual results may vary materially  from those described  herein as anticipated,
believed,  estimated or expected.  Certain of these risks and  uncertainties are
discussed in Part I, Item 1A "Risk  Factors" of the Company's  Form 10-K for the
year ended  February  28,  2009.  The  Company  does not intend to update  these
forward-looking statements.

EXECUTIVE OVERVIEW

         Epolin,   Inc.  (the  "Company",   "we",  "us"  and  "our")  which  was
incorporated  in the State of New Jersey in May 1984, is a specialized  chemical
company  primarily  engaged  in  the  manufacturing,   marketing,  research  and
development  of dyes and dye  formulations.  Our  business  is heavily  weighted
towards  the   development,   manufacture   and  sale  of  near  infrared  dyes.
Applications for these dyes cover several markets that include laser protection,
welding, sunglasses,  optical filters, glazing and imaging and security inks and
tagants.  Paralleling  the growth of the dye  business,  we  maintain a level of
production and sales of specialty products made on a custom basis. These include
additives  for  plastics,  thermochromic  materials for use in paints as well as
other specialty  chemicals made in low volume to sell at prices that reflect the
value of the product.  However,  unlike the dye  business,  we do not expect our
specialty chemical business to grow.

         We sell our products to manufacturers of plastics/resins, credit cards,
electronics,  glass and other basic materials.  Our customers are located in all
regions of the world,  although a material  portion of our business is dependent
on certain domestic customers, the loss of which could have a material effect on
operations.  During the six months ended August 31, 2009, approximately 41.0% of
sales were to three  customers.  During the six months  ended  August 31,  2008,
approximately  31.8% of sales were to three  customers.  The loss of one or more
key customers could have a material adverse effect on the Company.

RESULTS OF OPERATIONS

         The following  tables set forth  operations  data for the three and six
months ended August 31, 2009 and 2008.

                                       3
<PAGE>

<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED AUGUST 31,
                                       ------------------------------------------
                                            2009            2008        %change
                                       -------------    -----------   -----------
<S>                                    <C>              <C>           <C>
Sales...............................   $     708,578    $   851,680         -16.8%

Gross profit........................         358,040        475,235         -24.7%

Gross profit percentage.............            50.5%          55.8%         -5.3%

Selling, general & administrative...         293,191        330,418         -11.3%
                                       -------------    -----------

Operating income....................          64,849        144,817         -55.2%
Other Income........................           6,757         23,004         -70.6%
                                       -------------    -----------

Income before taxes.................          71,606        167,821         -57.3%

Income taxes........................          24,126         61,134         -60.5%

Net income (after taxes)............   $      47,480    $   106,687         -55.5%
                                       =============    ===========
</TABLE>

<TABLE>
<CAPTION>
                                              SIX MONTHS ENDED AUGUST 31,
                                       ------------------------------------------
                                            2009            2008        %change
                                       -------------    -----------   -----------
<S>                                    <C>              <C>           <C>
Sales...............................   $   1,434,747    $ 1,764,471         -18.7%

Gross profit........................         828,554        997,964         -17.0%

Gross profit percentage.............            57.8%          56.6%          1.2%

Selling, general & administrative...         552,256        624,065         -11.5%
                                       -------------    -----------

Operating income....................         276,298        373,899         -26.1%
Other Income........................          19,124         40,009         -52.2%
                                       -------------    -----------

Income before taxes.................         295,422        413,908         -28.6%

Income taxes........................         108,076        158,069         -31.6%

Net income (after taxes)............   $     187,346    $   255,839         -26.8%
                                       =============    ===========
</TABLE>

SALES

         For the three  months ended  August 31,  2009,  sales were  $709,000 as
compared to $852,000  for the three  months ended August 31, 2008, a decrease of
$143,000 or 16.8%. Sales decreased to $1,435,000 for the six months ended August
31, 2009 from $1,765,000 for the six months ended August 31, 2008, a decrease of
$330,000 or 18.7%.

         Such  decreases in sales are  primarily due to reduced sales in the ink
and coating market,  the eye protection market and the light management  market.
Sales in the ink and coating market were $196,000 and $328,000 for the three and
six months ended August 31, 2009 compared to $241,000 and $504,000 for the three
and six months  ended  August 31,  2008,  a decrease  of $45,000  and  $176,000,
respectively.  Sales in the eye  protection  market  decreased  to $295,000  and
$727,000 for the three and six months  ended  August 31, 2009 from  $376,000 and
$759,000  for the three and six months  ended  August 31,  2008,  a decrease  of
$81,000 and $32,000,  respectively.  While sales in the light management  market
were  $205,000 for the three  months ended August 31, 2009  compared to $166,000
for the three months ended August 31, 2008,  an increase of $39,000,  sales were
$335,000 for the six months  ended August 31, 2009  compared to $382,000 for the
prior year period, a decrease of $47,000.

         Sales in the United  States  increased  for the six months ended August
31,  2009 while  sales  decreased  in Europe  and Asia for the six months  ended
August 31, 2009  compared  to the prior year  period.  For the six months  ended
August 31, 2009 compared to the prior year period, sales increased in the United
States to  $1,224,000  from  $1,194,000,  while in  Europe  sales  decreased  to
$120,000 from $222,000, and in Asia, sales decreased to $88,000 from $348,000.

                                       4
<PAGE>

GROSS PROFIT

         Gross  profit,  defined as sales less cost of sales,  was  $358,000  or
50.5% of sales for the three months  ended August 31, 2009  compared to $475,000
or 55.8% of sales the three months  ended  August 31,  2008.  For the six months
ended August 31, 2009,  gross profit was $829,000 or 57.8% of sales  compared to
$998,000 or 56.6% of sales for the six months ended August 31, 2008. In terms of
absolute  dollars,  gross profit  decreased  $117,000 for the three months ended
August 31, 2009 compared to the prior year period,  and  decreased  $169,000 for
the six months ended August 31, 2009 compared to the six months ended August 31,
2008.

         Cost of sales was  $351,000  for the three months ended August 31, 2009
which represented 49.5% of sales compared to $376,000 for the three months ended
August  31,  2008 which  represented  44.2% of sales.  For the six months  ended
August 31, 2009,  cost of sales was $606,000 which  represented  42.2% of sales,
compared to $767,000 which  represented  43.4% of sales for the six months ended
August 31, 2008.  Total cost of materials and total factory  overhead  decreased
$91,000  and  $70,000,  respectfully,  in the six months  ended  August 31, 2009
compared to the prior year period.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling,  general and administrative expenses decreased to $293,000 for
the three months ended August 31, 2009 compared to $330,000 for the three months
ended  August 31,  2008,  a decrease  of  $37,000,  while  selling,  general and
administrative  expenses  decreased  to $552,000 for the six months ended August
31, 2009 from  $624,000  for the six months ended August 31, 2008, a decrease of
$72,000.  Such  decrease in absolute  dollars was primarily due to a decrease in
officers' salaries and administrative  salaries, and decreases in commission and
consulting  fees offset by increases in  professional  fees primarily  resulting
from costs  associated  with the  potential  sale of the  Company as  previously
disclosed and described  below. As a percentage of sales,  selling,  general and
administrative  expenses  were 41.4% of sales for the three  months ended August
31, 2009 compared to 38.8% for the three months ended August 31, 2008, while for
the six months  ended  August 31,  2009,  selling,  general  and  administrative
expenses  were 38.5% of sales  compared to 35.4% for the six months ended August
31, 2008.

OPERATING INCOME

         Operating income,  in terms of absolute  dollars,  decreased to $65,000
for the three months  ended  August 31, 2009 from  $145,000 for the three months
ended August 31, 2008, a decrease of $80,000,  while operating  income decreased
to $276,000 for the six months  ended August 31, 2009 from  $374,000 for the six
months ended  August 31,  2008, a decrease of $98,000.  Such change in the three
and six month  periods was  primarily due to the decrease in sales for the three
and six months ended August 31, 2009  compared to the three and six months ended
August 31, 2008.  As a percentage of sales,  operating  income was 9.1% of sales
for the three months  ended  August 31, 2009  compared to 17.0% of sales for the
three months  ended  August 31,  2008.  For the six months ended August 31, 2009
compared to the prior year period, operating income decreased as a percentage of
sales to 19.3% from 21.2%.

OTHER INCOME

         Total other  income was $7,000 and $19,000 for the three and six months
ended  August 31,  2009  compared  to $23,000  and $40,000 for the three and six
months ended August 31, 2008. We realize  rental income of $0 and $4,500 for the
three and six months ended August 31, 2009  compared to rental  income of $4,500
and $9,000 for the three and six months  ended  August 31,  2008.  Our  interest
income was $7,000 and $15,000 for the three and six months ended August 31, 2009
compared to $19,000 and $31,000 for the prior year periods.

NET INCOME

         During the three  months  ended  August 31,  2009,  we reported  income
before  taxes of $72,000 as compared to income  before taxes of $168,000 for the
three months ended August 31, 2008, a decrease of $96,000. During the six months
ended August 31, 2009,  we reported  income before taxes of $295,000 as compared
to income  before  taxes of $414,000 for the six months ended August 31, 2008, a
decrease of  $119,000.  Income taxes were $24,000 and $108,000 for the three and
six months  ended  August 31, 2009 while  income taxes were $61,000 and $158,000
for the  comparable  periods of 2008. The changes in income taxes were generally
attributed  to changes from period to period in sales and  expenses.  Net income
after taxes was $47,000 or $- per share for the three  months  ended  August 31,
2009 as  compared  to net income  after taxes of $107,000 or $0.01 per share for
the three  months  ended  August 31,  2008.  For the six months ended August 31,
2009,  net income after taxes was $187,000 or $0.02 per share as compared to net
income  after  taxes of  $256,000  or $0.02 per share for the six  months  ended
August 31, 2008.  As a percentage  of sales,  net income after taxes was 6.7% of
sales for the three months ended August 31, 2009  compared to 12.5% of sales for
the three months  ended  August 31, 2008,  while for the six months ended August
31, 2009,  net income after taxes was 13.1% of sales  compared to 14.5% of sales
for the six months ended August 31, 2008.

                                       5
<PAGE>

         Net income in the future will be dependent upon our ability to increase
revenues faster than increases, if any, in our selling, general and
administrative expenses, research and development expenses and other expenses.
Prior to fiscal 2007, sales had grown for a number of consecutive years. In
fiscal 2007, however, sales decreased by $91,000 compared to fiscal 2006 and, in
fiscal 2008, sales decreased by $17,000 compared to fiscal 2007. The largest
reduction in sales in recent years occurred in fiscal 2009 with sales decreasing
by $501,000 compared to fiscal 2008. Sales have continued to decrease into
fiscal 2010 with sales decreasing by $330,000 or 18.7% during the six months
ended August 31, 2009 compared to the prior year period. Unlike fiscal 2008 and
2007, however, in which net income did improve in each year compared to the
prior year, net income in fiscal 2009 decreased by $396,000 compared to fiscal
2008. While such decrease in net income has continued into the first six months
of fiscal 2010, such decrease has not been as dramatic with net income
decreasing by $69,000 in the six months ended August 31, 2009 compared to the
six months ended August 31, 2008.

OPERATIONS OUTLOOK

         Following a period of readjustment in our business priorities,  we were
able to achieved $3,701,000 in sales for fiscal 2006 which was $821,000 or 28.5%
greater than the prior fiscal year. In fiscal 2007, however,  sales decreased to
$3,610,000,  a decrease of 2.5% from the prior year,  and in fiscal 2008,  sales
decreased to  $3,593,000,  a decrease of 0.5% from fiscal 2007.  This  continued
into fiscal 2009 in which sales  decreased at a much greater rate to  $3,092,000
or 14.0%  compared to fiscal  2008,  as well as the first three months of fiscal
2010 in which sales decreased by $187,000  compared to the comparable  period of
fiscal 2009.  During these periods of reduced  sales,  we had a major decline in
sales of security  inks for the credit card market  which had been a key area of
our growth from 2005 to 2007. While this market remains a source of business for
us, we will  likely not be able to achieve the same level of sales in the future
which we achieved from 2005 to 2007 in the security  inks market.  Nevertheless,
we are  confident  that  with our core  group  of  products,  we will be able to
maintain sales in our principal  markets,  such as the eye protection market and
the light management  market,  while always seeking new areas for the use of our
dyes.

         As a result of recent  expressions  of  interest  received,  management
began in fiscal  2009 to explore  strategic  alternatives  for the  Company.  In
February  2009,  the Company  retained  Millburn  Capital Group as its financial
advisor  in  connection   with  the  Board's   decision  to  explore   strategic
alternatives  for the Company,  including the potential sale of the Company.  In
May 2009, the Company announced that it has entered into a non-binding letter of
intent  whereby all of the  outstanding  capital  stock of the  Company  will be
acquired by a strategic  purchaser.  Pursuant to an  amendment  entered  into in
September  2009,  the  Company  has agreed to  negotiate  exclusively  with such
strategic  purchaser until December 15, 2009. There can be no assurance that any
definitive agreement will be entered into, that any proposed transaction will be
approved  by the  shareholders  of the  Company  or that a  transaction  will be
completed as a result of the execution of the letter of intent. The Company does
not  currently  intend to publicly  disclose  additional  information  about the
status of this process but will publicly  report all required  information  on a
timely basis.

LIQUIDITY AND CAPITAL RESOURCES

         Our primary source of funds is cash flow from  operations in the normal
course of  selling  products.  On August 31,  2009,  we had  working  capital of
$2,801,000,  a debt to equity  ratio of 0.08 to 1, and  stockholders'  equity of
$3,737,000 compared to working capital of $2,530,000,  a debt to equity ratio of
0.14 to 1, and stockholders'  equity of $3,449,000 on August 31, 2008. On August
31,  2009,  we had  $1,679,000  in cash and cash  equivalents,  total  assets of
$4,041,000 and total liabilities of $305,000, compared to $1,527,000 in cash and
cash  equivalents,  total assets of $3,918,000 and total liabilities of $469,000
on August 31, 2008.

         Net cash  provided by  operating  activities  for the six months  ended
August 31, 2009 was  $123,000  which was  primarily  the result of net income of
$187,000, plus decreases in inventories of $19,000,  prepaid expenses of $40,000
and prepaid  taxes of $168,000,  and  increases in accounts  payable of $16,000,
offset by increases in accounts  receivable  of $95,000 and accrued  expenses of
$261,000.  Net cash  provided by operating  activities  for the six months ended
August 31, 2008 was  $333,000  which was  primarily  the result of net income of
$256,000, plus decreases in accounts receivable of $116,000 and prepaid expenses
of $41,000,  offset by increases in  inventories of $12,000 and prepaid taxes of
$27,000,  and  decreases  in accrued  expenses of $71,000  and taxes  payable of
$37,000.

                                       6
<PAGE>

         Net cash  provided by  investing  activities  for the six months  ended
August 31, 2009 was  $10,000  due a decrease  in cash value of a life  insurance
policy of $38,000  offset by payments  for  property  and  equipment of $28,000,
compared to net cash used by investing  activities of $67,000 for the six months
ended  August 31,  2008 due to an  increase  in cash  value of a life  insurance
policy of $6,000 and payments for property and equipment of $61,000.

         For the six months ended August 31, 2009, there were no cash flows from
or  used  in  financing  activities  compared  to  $718,000  used  in  financing
activities  in the six months  ended  August 31, 2008 due to  dividends  paid to
shareholders.  There were no comparable  dividends  paid in the six months ended
August 31, 2009.

         We  anticipate,  based on  currently  proposed  plans  and  assumptions
relating to our operations,  that our current cash and cash equivalents together
with  projected  cash flows  from  operations  and  projected  revenues  will be
sufficient to satisfy its contemplated  cash requirements for more than the next
12 months. Our contemplated cash requirements for the balance of fiscal 2010 and
beyond  will depend  primarily  upon level of sales of our  products,  inventory
levels,  product  development,  sales and  marketing  expenditures  and  capital
expenditures.

         Inflation has not significantly impacted our operations.

SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

                                       7
<PAGE>

RECENTLY ADOPTED ACCOUNTING STANDARDS

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

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

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

OTHER INFORMATION

         Subsequent to the end of fiscal 2006,  the Board of Directors  approved
the  adoption of a dividend  policy  under which we will issue a regular  annual
cash dividend on shares of our Common Stock. The amount of the dividend,  record
date and  payment  date will be subject to  approval  every year by the Board of
Directors.  In accordance  with the new dividend  policy,  a regular annual cash
dividend of $0.02 per share was paid in each of May 2006, May 2007 and May 2008.
In  addition,  since of the  adoption of the  dividend  policy in fiscal 2007, a
special  cash  dividend of $0.02 per share was paid in each of January  2007 and
January 2008,  and a  supplemental  special cash dividend of $0.04 per share was
paid in August 2008. We did not declare another special cash dividend in January
2009  similar to the  special  cash  dividends  we have paid in January of prior
years and we did not pay our regular annual cash dividend in May 2009 as we have
paid in  prior  years.  Primarily  due the  Company's  recent  decision  to seek
strategic  alternatives,  the Board  determined to postpone any action regarding
the  declaration of the regular annual cash dividend for 2009 and beyond pending
the outcome of this process.

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

                                       8
<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS

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

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

ITEM 4T. CONTROLS AND PROCEDURES.

         Under the  supervision  and with the  participation  of our management,
including the Principal  Executive Officer and Principal  Financial Officer,  we
have evaluated the  effectiveness of our disclosure  controls and procedures (as
defined in Rule  13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end
of the period covered by this report.  Based on that  evaluation,  our Principal
Executive  Officer and Principal  Financial  Officer have concluded  that, as of
August 31, 2009,  these  disclosure  controls and  procedures  were effective to
ensure that all  information  required to be disclosed by us in the reports that
we file or submit under the Exchange Act is: (i) recorded, processed, summarized
and reported,  within the time periods  specified in the  Commission's  rule and
forms; and (ii)  accumulated and  communicated to our management,  including our
Principal  Executive Officer and Principal  Financial Officer, as appropriate to
allow timely decisions regarding required disclosure.

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

                                       9
<PAGE>

                           PART II - OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS.

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

Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

         None.

Item 3.  DEFAULTS UPON SENIOR SECURITIES.

         None.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.

         None.

Item 5.  OTHER INFORMATION.

         None.

ITEM 6.  EXHIBITS.

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

                                       10
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this Report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                  EPOLIN, INC.
                                                  (Registrant)

Dated:  October 14, 2009                     By:  /s/ Murray S. Cohen
                                                  ------------------------------
                                                  Murray S. Cohen,
                                                  Chairman of the Board

Dated:  October 14, 2009                     By:  /s/ James Ivchenko
                                                  ------------------------------
                                                  James Ivchenko,
                                                  President
                                                  (Principal Financial Officer)

                                       11
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY

                  CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                                SIX MONTHS ENDED

                            AUGUST 31, 2009 AND 2008

<PAGE>

                                    CONTENTS

                                                                           PAGE
                                                                          ------

Consolidated Financial Statements:

   Consolidated Balance Sheets (Unaudited).............................   2 - 3

   Consolidated Statements of Income Six Months Ended
      (Unaudited)......................................................     4

   Consolidated Statements of Income Three Months Ended
      (Unaudited)......................................................     5

   Consolidated Statements of Stockholders' Equity (Unaudited).........     6

   Consolidated Statements of Cash Flows (Unaudited)...................     7

Notes to Consolidated Financial Statements (Unaudited).................   8 - 24

                                        1

<PAGE>

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

                                     ASSETS

<TABLE>
<CAPTION>
                                                                              AUGUST 31,
                                                                      -------------------------
                                                                         2009           2008
                                                                      ----------     ----------
<S>                                                                   <C>            <C>
CURRENT ASSETS:
   Cash and cash equivalents.....................................     $1,678,605      1,527,488
   Accounts receivable...........................................        466,228        502,129
   Inventories...................................................        648,160        654,331
   Prepaid expenses..............................................         15,852         19,327
   Prepaid taxes.................................................         60,609         26,690
   Deferred tax assets-current portion...........................         11,804         18,750
                                                                      ----------     ----------

       Total current assets......................................      2,881,258      2,748,715
                                                                      ----------     ----------

PLANT, PROPERTY AND EQUIPMENT - AT COST:
   Land..........................................................         81,000         81,000
   Building and improvements.....................................        767,300        767,300
   Laboratory equipment..........................................        191,549        189,300
   Furniture and office equipment................................        260,962        220,543
   Leasehold improvements........................................        532,131        458,495
                                                                      ----------     ----------

       Total.....................................................      1,832,942      1,716,638

   Less: Accumulated depreciation and amortization...............        955,842        851,298
                                                                      ----------     ----------

       Net plant, property and equipment.........................        877,100        865,340
                                                                      ----------     ----------

OTHER ASSETS:
   Deferred tax assets-non current portion.......................        107,401         97,129
   Cash value - life insurance policy............................        175,543        207,257
                                                                      ----------     ----------

       Total other assets........................................        282,944        304,386
                                                                      ----------     ----------

           Total.................................................     $4,041,302      3,918,441
                                                                      ==========     ==========
</TABLE>

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

                                        2

<PAGE>

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

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                            AUGUST 31,
                                                                                    -------------------------
                                                                                       2009           2008
                                                                                    ----------     ----------
<S>                                                                                 <C>            <C>
CURRENT LIABILITIES:
  Accounts payable.............................................................     $   54,956         17,353
  Accrued expenses.............................................................         23,580        199,917
  Taxes payable:
     Payroll...................................................................          2,208          1,889
                                                                                    ----------     ----------

          Total current liabilities............................................         80,744        219,159

OTHER LIABILITIES - Deferred compensation......................................        224,235        250,035
                                                                                    ----------     ----------

           Total liabilities...................................................        304,979        469,194
                                                                                    ----------     ----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Preferred stock, $15.513 par value; 940,000 shares authorized;
     none issued
   Preferred stock, series A convertible non-cumulative, $2.50 par value;
     redemption price and liquidation preference; 60,000 shares authorized;
     5,478 shares issued and redeemed
   Common stock, no par value; 20,000,000 shares authorized; 13,015,000 and
     12,915,000 shares issued, and 12,066,355 and 11,966,355 shares
     outstanding at August 31, 2009 and 2008 repectively........................     2,364,693      2,364,693
     Additional paid-in capital................................................        104,820         76,820
     Retained earnings.........................................................      1,617,892      1,358,816
                                                                                    ----------     ----------

              Total............................................................      4,087,405      3,800,329
     Less: Treasury stock - at cost............................................        351,082        351,082
                                                                                    ----------     ----------

           Total stockholders' equity..........................................      3,736,323      3,449,247
                                                                                    ----------     ----------

                Total..........................................................     $4,041,302      3,918,441
                                                                                    ==========     ==========
</TABLE>

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

                                        3
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                    SIX MONTHS ENDED AUGUST 31, 2009 AND 2008

<TABLE>
<CAPTION>
                                                                               2009            2008
                                                                           -----------     -----------
<S>                                                                        <C>             <C>
SALES.................................................................     $ 1,434,747       1,764,471
                                                                           -----------     -----------

COST OF SALES AND EXPENSES:
  Cost of sales.......................................................         606,193         766,507
  Selling, general and administrative.................................         552,256         624,065
                                                                           -----------     -----------

     Total............................................................       1,158,449       1,390,572
                                                                           -----------     -----------

OPERATING INCOME......................................................         276,298         373,899
                                                                           -----------     -----------

OTHER INCOME:
   Rental income......................................................           4,500           9,000
   Interest...........................................................          14,624          31,009
                                                                           -----------     -----------

     Total............................................................          19,124          40,009
                                                                           -----------     -----------

INCOME BEFORE TAXES...................................................         295,422         413,908

INCOME TAXES..........................................................         108,076         158,069
                                                                           -----------     -----------

NET INCOME............................................................     $   187,346         255,839
                                                                           ===========     ===========

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...............      12,066,355      11,966,355
                                                                           ===========     ===========

   Fully diluted number of common shares outstanding..................      12,069,235      12,006,791
                                                                           ===========     ===========
</TABLE>

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

                                        4
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                   THREE MONTHS ENDED AUGUST 31, 2009 AND 2008

<TABLE>
<CAPTION>
                                                                               2009            2008
                                                                           -----------     -----------
<S>                                                                        <C>             <C>
SALES.................................................................     $   708,578         851,680
                                                                           -----------     -----------

COST OF SALES AND EXPENSES:
  Cost of sales.......................................................         350,538         376,445
  Selling, general and administrative.................................         293,191         330,418
                                                                           -----------     -----------

     Total............................................................         643,729         706,863
                                                                           -----------     -----------

OPERATING INCOME
                                                                                64,849         144,817
                                                                           -----------     -----------

OTHER INCOME:
   Rental income......................................................               -           4,500
   Interest...........................................................           6,757          18,504
                                                                           -----------     -----------

     Total............................................................           6,757          23,004
                                                                           -----------     -----------

INCOME BEFORE TAXES...................................................          71,606         167,821

INCOME TAXES..........................................................          24,126          61,134
                                                                           -----------     -----------

NET INCOME............................................................     $    47,480         106,687
                                                                           ===========     ===========

PER SHARE DATA:
   Basic earnings per common share....................................     $         -            0.01
                                                                           ===========     ===========

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

   Weighted average number of common shares outstanding...............      12,066,355      11,966,355
                                                                           ===========     ===========

   Fully diluted number of common shares outstanding..................      12,069,235      12,006,791
                                                                           ===========     ===========
</TABLE>

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

                                        5
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
                    SIX MONTHS ENDED AUGUST 31, 2009 AND 2008

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

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

NET INCOME...................               -            -            -      255,839             -            -          255,839
                                -------------   ----------   ----------   ----------    ----------   ----------    -------------

BALANCE - August 31, 2008....      12,915,000   $2,364,693       76,820    1,358,816       948,645     (351,082)       3,449,247
                                =============   ==========   ==========   ==========    ==========   ==========    =============

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

NET INCOME...................              -             -            -      187,346             -            -          187,346
                                -------------   ----------   ----------   ----------    ----------   ----------    -------------

BALANCE - August 31, 2009....      13,015,000   $2,364,693      104,820    1,617,892       948,645     (351,082)       3,736,323
                                =============   ==========   ==========   ==========    ==========   ==========    =============
</TABLE>

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

                                        6
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                    SIX MONTHS ENDED AUGUST 31, 2009 AND 2008

<TABLE>
<CAPTION>
                                                                              2009            2008
                                                                           ----------      ----------
<S>                                                                        <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income..........................................................     $  187,346         255,839
  Adjustments to reconcile net income to net cash provided by
   operating activities:
     Depreciation and amortization....................................         50,600          50,705
     Deferred tax expense.............................................         (5,324)          4,276
     Obligation under deferred compensation agreement.................          2,847           3,352
  (Increase) decrease in:
     Accounts receivable..............................................        (94,785)        116,316
     Inventories......................................................         19,024         (11,802)
     Prepaid expenses.................................................         40,446          41,085
     Prepaid taxes....................................................        167,737         (26,690)
   Increase (decrease) in:
     Accounts payable.................................................         16,258           7,693
     Accrued expenses.................................................       (260,844)        (70,838)
     Taxes payable....................................................              -         (37,400)
                                                                           ----------      ----------

        Net cash provided by operating activities.....................        123,305         332,536
                                                                           ----------      ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   (Increase) decrease in cash value - life insurance policy..........         37,909          (5,888)

   Payments for property and equipment................................        (27,575)        (61,321)
                                                                           ----------      ----------

         Net cash provided (used) in investing activities.............         10,334         (67,209)
                                                                           ----------      ----------

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

INCREASE (DECREASE) IN CASH...........................................        133,639        (452,654)

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

   Ending.............................................................     $1,678,605       1,527,488
                                                                           ==========      ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
   Income taxes paid..................................................     $  129,700         337,842
                                                                           ==========      ==========
</TABLE>

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

                                        7
<PAGE>

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

NOTE A - ORGANIZATION:

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

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

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION - The interim Consolidated  Financial Statements presented
herein are unaudited  and should be read in  conjunction  with the  Consolidated
Financial  Statements  presented in the Company's Annual Report on Form 10-K for
the fiscal year ended  February 28, 2009.  Such interim  Consolidated  Financial
Statements reflect all normal and recurring  adjustments that, in the opinion of
management,  are necessary for a fair  presentation  of the financial  position,
results of operations  and cash flows of the Company for the periods  presented.
All significant intercompany accounts and transactions have been eliminated.

     The results of operations for the six-month interim period ended August 31,
2009 and 2008 are not  necessarily  indicative of the results of operations  for
the fiscal year ending February 28, 2010.

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

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

     Financial   instruments,   which   potentially   subject   the  Company  to
concentrations  of credit  risk,  consist  principally  of accounts  receivable.
Generally,  the  Company  does not require  collateral  or other  securities  to
support  its  accounts  receivable.  Three  customers  represented  43.0% of the
Company's trade receivables at August 31, 2009.

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

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.

                                        8
<PAGE>

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

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

PRINCIPLES OF CONSOLIDATION - The accompanying  Unaudited Consolidated Financial
Statements  include the  accounts of the Company and  Subsidiary.  Inter-company
transactions  and balances  have been  eliminated  in  consolidation.  Condensed
Unaudited  Consolidating  Financial Statements as of August 31, 2009 and for the
six months then ended are:

                      CONDENSED CONSOLIDATING BALANCE SHEET

<TABLE>
<CAPTION>
                                                EPOLIN            EPOLIN
                                                 INC.         HOLDING, CORP.    ELIMINATIONS      CONSOLIDATED
                                             ------------     --------------    ------------      ------------
<S>                                          <C>              <C>               <C>               <C>
Current assets..........................     $  2,458,177          423,081                 -         2,881,258
Non-current assets......................        1,583,125          640,526        (1,063,607)        1,160,044
                                             ------------     ------------      ------------      ------------
      Total.............................     $  4,041,302        1,063,607        (1,063,607)        4,041,302
                                             ============     ============      ============      ============

   Total liabilities....................     $    304,979           24,435           (24,435)          304,979
                                             ------------        ---------        ----------         ---------

Stockholders' equity:
   Common stock.........................        2,364,693                -                 -         2,364,693
   Additional paid-in capital...........          104,820                -                 -           104,820
   Retained earnings....................        1,617,892        1,039,172        (1,039,172)        1,617,892
   Treasury stock.......................         (351,082)               -                 -          (351,082)
                                             ------------     ------------      ------------      ------------

   Total stockholders' equity...........        3,736,323        1,039,172        (1,039,172)        3,736,323
                                             ------------     ------------      ------------      ------------

      Total.............................     $  4,041,302        1,063,607        (1,063,607)        4,041,302
                                             ============     ============      ============      ============
</TABLE>

                   CONDENSED CONSOLIDATING STATEMENT OF INCOME

<TABLE>
<CAPTION>
                                                EPOLIN           EPOLIN
                                                  INC.        HOLDING, CORP.    ELIMINATIONS      CONSOLIDATED
                                             ------------     --------------    ------------      ------------
<S>                                          <C>              <C>               <C>               <C>
Sales...................................     $  1,434,747                -                -         1,434,747
Rental income...........................                -           53,370          (48,870)            4,500
                                             ------------     ------------      -----------       -----------
   Total................................        1,434,747           53,370          (48,870)        1,439,247
                                             ------------     ------------      -----------       -----------

Cost of sales...........................          606,193                -                -           606,193
Selling, general and administrative.....          585,310           15,816          (48,870)          552,256
                                             ------------     ------------      -----------       -----------
   Total................................        1,191,503           15,816          (48,870)        1,158,449
                                             ------------     ------------      -----------       -----------

Operating income........................          243,244           37,554                -           280,798

Other income - interest.................           10,767            3,857                -            14,624
                                             ------------     ------------      -----------       -----------

Income before taxes.....................          254,011           41,411                -           295,422

Income taxes............................          104,676            3,400                -           108,076
                                             ------------     ------------      -----------       -----------

Net income..............................     $    149,335           38,011                -           187,346
                                             ============     ============      ===========       ===========
</TABLE>

                                       9
<PAGE>

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

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

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

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

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

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

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

     Depreciation and  amortization  expense totaled $50,600 and $50,705 for the
six months ended August 31, 2009 and 2008, respectively.

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

     FASB  Interpretation  No. 48, Accounting for Uncertainty in Income Taxes --
an interpretation  of FASB Statement No. 109 (FIN 48),  clarifies the accounting
for  uncertainty in income tax  positions,  as defined.  FIN 48 requires,  among
other  matters,  that the Company  recognize in its  financial  statements,  the
impact of a tax  position,  if that  position  is more  likely than not of being
sustained on audit,  based on the technical merits of the position.  The Company
became subject to the provisions of FIN 48 as of March 1, 2007, the beginning of
fiscal year ended 2008, and analyzed the filing  positions in all of the federal
and state jurisdictions where it is required to file income tax returns, as well
as all open tax  years in these  jurisdictions.  The  adoption  of FIN 48 had no
impact on the Company's  financial  statements for fiscal year ended 2009. As of
August 31,  2009 and 2008,  the  Company  did not record  any  unrecognized  tax
benefits. The Company's policy, if it had unrecognized benefits, is to recognize
accrued interest and penalties  related to unrecognized tax benefits as interest
expense and other expense, respectively.

                                       10
<PAGE>

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

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

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

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

REGULATIONS  - The Company  expended  approximately  $19,456 and $8,386  through
August 31, 2009 and 2008,  respectively,  to maintain  compliance  with  certain
Federal and State and City government  regulations relative to the production of
near infrared dyes and specialty chemicals.

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

ADVERTISING  COSTS -  Advertising  costs,  included in operating  expenses,  are
expensed as incurred. Advertising expenses amounted to $8,925 and $9,766 for the
six months ended August 31, 2009 and 2008, respectively.

                                       11
<PAGE>

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

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

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

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

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

     The weighted average Black-Scholes value of options granted under the stock
plans  during  the  six  months  ended  August  31,  2009  and  2008  was  $.18,
respectively.  The fair value of each option  grant is  estimated on the date of
grant using the Black-Scholes  option-pricing  model with the following weighted
average assumptions used for grants:

                                                    AUGUST 31,
                                               -------------------
                                               2009           2008
                                               ----           ----
Weighted average expected life in years.....      2              3
Dividends per share.........................      -           0.06
Volatility..................................    7.0%           7.0%
Risk-free interest rate.....................    2.8%           4.9%

                                       12
<PAGE>

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

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

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

     Also,  effective  March 1, 2008, the Company adopted SFAS No. 159 "The Fair
Value Option for Financial Assets and Financial  Liabilities"  ("FAS 159") which
allows an entity the irrevocable  option to elect fair value for the initial and
subsequent  measurement  for  certain  financial  assets  and  liabilities  on a
contract-by-contract  basis.  As of August 31, 2009, the Company has not elected
the fair value option for any additional financial assets and liabilities beyond
those  already  prescribed by accounting  principles  generally  accepted in the
United States.

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

                                       13
<PAGE>

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

NOTE C - INCOME TAXES:

1.  Federal and State deferred tax assets include:

                                                  AUGUST 31,
                                            ---------------------
                                               2009        2008
                                            ---------     -------
Temporary differences:
   Accelerated amortization.........        $   6,730      11,877
   Deferred compensation............           96,421      87,948
   Stock-based compensation.........           16,054      16,054
                                            ---------     -------
      Total.........................          119,205     115,879

Current portion.....................           11,804      18,750
                                            ---------     -------

Non-current portion.................        $ 107,401      97,129
                                            =========     =======

2.  Income tax:

                                                  AUGUST 31,
                                            ---------------------
                                               2009        2008
                                            ---------     -------
Current:
   Federal..........................        $  88,300     122,076
   State............................           25,100      31,717
                                            ---------     -------

      Total current.................          113,400     153,793
                                            ---------     -------

Deferred:
   Federal..........................            5,737       3,176
   State............................              413       1,100
                                            ---------     -------

      Total deferred................            5,324       4,276
                                            ---------     -------

         Total......................        $ 108,076     158,069
                                            =========     =======

                                       14
<PAGE>

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

NOTE D - TREASURY STOCK:

Consists of 948,645 shares at a net cost of $351,082,  as of August 31, 2009 and
2008,  respectively.  There were no purchases of treasury shares made during the
six months ended August 31, 2009 and 2008, respectively.

NOTE E - ECONOMIC DEPENDENCY:

     A material  portion  of the  Company's  business  is  dependent  on certain
domestic  customers,  the  loss  of  which  could  have  a  material  effect  on
operations.  During the six months ended August 31, 2009, approximately 41.0% of
sales were to three  customers.  During the six months  ended  August 31,  2008,
approximately 31.8% of sales were to three customers.

NOTE F - RENTAL INCOME UNDER SUBLEASE:

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

NOTE G - RESEARCH AND DEVELOPMENT:

     The Company has developed substantial research and development  capability.
The  Company's  efforts are devoted to (i)  developing  new  products to satisfy
defined market needs, (ii) providing  quality  technical  services to assure the
continued  success  of its  products  for  its  customers'  applications,  (iii)
providing   technology  for   improvements   to  its  products,   processes  and
applications,  and (iv) providing  support to its  manufacturing  plant for cost
reduction,  productivity  and quality  improvement  programs.  Expenditures  for
Company  sponsored  product  research  and product  development  of $197,460 and
$231,891 were included in cost of sales for the six months ended August 31, 2009
and  2008,  respectively.  Expenditures  for the  fiscal  year  ended  2010  are
projected to remain at approximately the same level as in fiscal 2009.

NOTE H - EMPLOYEE BENEFITS:

SIMPLIFIED  EMPLOYEE PENSION PLAN - Effective June 1, 1994, the Company provides
a SAR/SEP  plan to its  employees  as a  retirement  and  income  tax  reduction
facility. Full time employees are eligible to participate immediately. Employees
may make pre-tax and after-tax contributions subject to Internal Revenue Service
limitations.  Company  contributions  range  from  three to five  percent  after
completion of one year of service.  Employer  contributions  totaled $23,881 and
$30,173 for the six months ended August 31, 2009 and 2008, respectively.

                                       15
<PAGE>

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

NOTE H - EMPLOYEE BENEFITS (CONTINUED):

STOCK  OPTION PLAN - The Company  adopted the 1998 Stock Option Plan on December
1, 1998.  Under the terms of the plan,  the Company  reserved  750,000 shares of
common  stock for  issuance  pursuant  to the  exercise of options to be granted
under the Plan,  which do not meet the  requirements of Section 422 of the Code.
On  September  15,  2001,  the  Board of  Directors  increased  the  reserve  to
1,500,000.  Options  granted expire five or ten years after the date granted and
are subject to various vesting periods as follows: (1) none exercisable prior to
the first  anniversary of the date of grant, and (2) certain options will become
exercisable  as to 50% of the shares  underlying the option on each of the first
and second  anniversaries  of the date  granted (3) certain  options will become
exercisable as to 50% of the shares  underlying the option on each of the second
and fourth anniversaries of the date granted.  From inception through August 31,
2009,  options granted totaled  1,242,000,  options  exercised  totaled 686,000;
options cancelled or expired for all years totaled 240,000.

     A summary  of the status of the  Company's  1998  stock  option  plan as of
August 31, 2009, and the changes during the six months ended August 31, 2009 and
2008 is presented below:

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

Balance - August 31, 2009............      316,000          $  .50
                                           =======

Exercisable at August 31, 2009.......      316,000          $  .50
                                           =======

STOCK OPTION AND  STOCK-BASED  EMPLOYEE  COMPENSATION - On November 1, 2004, the
Company entered into an "Option Agreement and Investment Agreement" with Gregory
Amato, CEO, the terms of which are as follows:

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

     2.  Stock-Based  Employee  Compensation  - A grant  of  100,000  shares  of
     restricted  common stock one year from the date of the agreement,  provided
     the employee is then employed by the Company.

                                       16
<PAGE>

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

NOTE H - EMPLOYEE BENEFITS (CONTINUED):

STOCK OPTION PLANS - The  following  table  summarizes  information  about fixed
stock options outstanding at August 31, 2009:

              OUTSTANDING OPTIONS                      EXERCISABLE OPTIONS
-----------------------------------------------   ------------------------------
                    NUMBER     WEIGHTED-AVERAGE     NUMBER
   RANGE OF      OUTSTANDING       REMAINING      EXERCISABLE   WEIGHTED-AVERAGE
EXERCISE PRICE   AT 08/31/09   CONTRACTUAL LIFE   AT 08/31/09    EXERCISE PRICE
--------------   -----------   ----------------   -----------   ----------------
    $ .41          116,000            4.4           116,000           .23
      .51          100,000            0.2           100,000           .25
      .54          200,000            0.8           200,000           .52

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

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

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

     The  2008  Plan  provides  that on  September  1 of each  year,  commencing
September  1, 2008,  each  person  who  serves as a Director  on such date shall
automatically receive a stock award of 25,000 shares of Common Stock. The dollar
value of the shares of Common Stock to be granted on September 1 of each year is
calculated  based upon the fair market  value of our Common Stock at the date of
grant.

                                       17
<PAGE>

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

NOTE I - SEGMENT REPORTING:

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

Sales by geographic area are as follows:

                                     SIX MONTHS ENDED
                                        AUGUST 31,
                              -----------------------------
                                  2009              2008
                              ------------        ---------
United States............     $  1,223,858        1,193,719
Asia.....................           88,470          348,392
Europe...................          119,539          221,760
Other nations............            2,880              600
                              ------------        ---------

   Total.................     $  1,434,747        1,764,471
                              ============        =========

     Three customers,  located in the United States and Asia, accounted for more
than 10% of revenues from continuing  operations.  These customers accounted for
41.0% of sales of infrared dies.

     Long-lived  assets include net plant,  property and equipment.  The Company
had long-lived  assets of $877,100 and $865,340  located in the United States at
August 31, 2009 and 2008, respectively.

                                       18
<PAGE>

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

NOTE J - ACCRUED EXPENSES:

     Accrued expenses consisted of the following as of August 31, 2009 and 2008,
respectively:

                                          AUGUST 31,
                                   ------------------------
                                       2009           2008
                                   ------------     -------
Salaries and wages.............    $      3,693      14,549
Purchases......................           3,521      27,310
Commissions....................           2,221           -
Rent...........................           8,145           -
Employment agreement...........               -     141,158
Professional fees..............           6,000       6,000
Pension contribution...........               -      10,900
                                   ------------     -------

   Total accrued expenses......    $     23,580     199,917
                                   ============     =======

NOTE K - INVENTORIES:
                                           AUGUST 31,
                                   ------------------------
                                       2009           2008
                                   ------------     -------
Raw materials and supplies.....    $    140,108     187,723
Work in process................          89,889     109,922
Finished goods.................         418,163     356,686
                                   ------------     -------

Total..........................    $    648,160     654,331
                                   ============     =======

                                       19
<PAGE>

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

NOTE L - EARNINGS PER SHARE:

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

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED               SIX MONTHS ENDED
                                                                        AUGUST 31,                      AUGUST 31,
                                                               ----------------------------     -------------------------
                                                                   2009              2008          2009           2008
                                                               -------------     ----------     ----------     ----------
<S>                                                            <C>               <C>            <C>            <C>
BASIC EARNINGS PER COMMON SHARE:

Net income.............................................        $      47,480        106,687        187,346        255,839
                                                               =============     ==========     ==========     ==========

Average common shares outstanding......................           12,066,355     11,966,355     12,066,355     11,966,355
                                                               =============     ==========     ==========     ==========

Basic earnings per common share........................        $           -           0.01           0.02           0.02
                                                               =============     ==========     ==========     ==========

DILUTED EARNINGS PER COMMON SHARE:

Net income.............................................        $      47,480        106,687        187,346        255,839
                                                               =============     ==========     ==========     ==========

Average common shares outstanding......................           12,066,355     11,966,355     12,066,355     11,966,355

Common shares issuable with respect to options
   issued to employees with a dilutive effect..........                2,880         40,436          2,880         40,436
                                                               -------------     ----------     ----------     ----------

Total diluted common shares outstanding................           12,069,235     12,006,791     12,069,235     12,006,791
                                                               =============     ==========     ==========     ==========

Diluted earnings per common share......................        $           -           0.01           0.02           0.02
                                                               =============     ==========     ==========     ==========
</TABLE>

                                       20
<PAGE>

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

NOTE M - COMMITMENTS AND CONTINGENCIES:

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

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

Rental expense charged to operations,  eliminated in consolidation,  amounted to
$48,870 for the six months ended August 31, 2009 and 2008, respectively.

Future minimum payments for the current option period:

FISCAL YEARS ENDING FEBRUARY:
-----------------------------
            2010                           $  48,870
            2011                              65,160

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

     In connection with this agreement,  deferred  compensation in the amount of
$2,870 and $3,352 was charged to selling,  general and  administrative  expenses
for the six months ended August 31, 2009 and 2008, respectively.

     On  January 1,  1996,  the  Company  entered  into a deferred  compensation
agreement with Dr. Murray S. Cohen, PhD, Chairman of the Board,  wherein $25,000
per year was  accrued.  This  agreement,  with  unfunded  accruals  of  $79,041,
terminated  on June 25, 1998,  and will be paid upon  retirement in either equal
consecutive  monthly  payments for a period not exceeding sixty (60) months or a
single payment equal to the then present value of the account, said selection to
be at the discretion of the Company.

                                       21
<PAGE>

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

NOTE M - COMMITMENTS AND CONTINGENCIES (CONTINUED):

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

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

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

     Accrued compensation included in selling,  general and administrative as of
August 31, 2008 was $141,158.

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

                                       22
<PAGE>

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

NOTE N - FAIR VALUE MEASUREMENTS:

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

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

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

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

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

<TABLE>
<CAPTION>
                                                    AUGUST 31, 2009                 FEBRUARY 28, 2009
                                             -----------------------------      --------------------------
                                               CARRYING            FAIR         CARRYING           FAIR
                                                AMOUNT             VALUE         AMOUNT            VALUE
                                             ------------        ---------      ---------        ---------
<S>                                          <C>                 <C>            <C>              <C>
ASSETS:

Cash and cash equivalents...............     $  1,678,605        1,678,605      1,544,966        1,544,966
Other assets:

     Cash value - life insurance........          175,543          175,543        213,452          213,452
                                             ------------        ---------      ---------        ---------

Total assets at fair value..............     $  1,854,148        1,854,148      1,758,418        1,758,418
                                             ============        =========      =========        =========
LIABILITIES:

Deferred compensation...................     $    224,235          224,235        221,388          221,388
                                             ============        =========      =========        =========
</TABLE>

                                       23
<PAGE>

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

NOTE N - DIVIDENDS:

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

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

NOTE O - ENVIRONMENTAL MATTERS

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

                                       24