SECURITIES AND EXCHANGE COMMISSION
                      WASHINGTON, DC 20549

                          FORM 10-QSB

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

         For the quarterly period ended August 31, 2005

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

    For the transition period from            to

                 Commission file number 0-17741

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


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

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

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

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

                  Yes   [  X   ] No   [      ]

Indicate by check mark whether the Issuer 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  Issuers
classes of common equity, as of the latest practicable date:

Common, no par value per share: 11,815,355 outstanding as of
August 31, 2005

<PAGE>


                PART I - FINANCIAL INFORMATION


Item 1.   Financial Statements.

      See  the Consolidated Financial Statements annexed to  this
report.


Item  2.    Management's  Discussion  and  Analysis  or  Plan  of
Operation.

     The  following discussion should be read in conjunction with
the Financial Statements included in this report and is qualified
in its entirety by the foregoing.

Forward-Looking Statements

      This report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs
and  assumptions  made  by the Company's management  as  well  as
information currently available to the management.  When used  in
this document, the words "anticipate", "believe", "estimate", and
"expect"  and  similar  expressions,  are  intended  to  identify
forward-looking statements.  Such statements reflect the  current
views  of  the  Company  with respect to future  events  and  are
subject to certain risks, uncertainties and assumptions.   Should
one  or  more  of  these risks or uncertainties  materialize,  or
should underlying assumptions prove incorrect, actual results may
vary  materially  from  those described  herein  as  anticipated,
believed,  estimated or expected.  Certain  of  these  risks  and
uncertainties  are  discussed in this report  under  the  caption
"Uncertainties  and Risk Factors" in Part I, Item 1  "Description
of  Business"  of the Company's Form 10-KSB for  the  year  ended
February  28, 2005.  The Company does not intend to update  these
forward-looking statements.

Executive Overview

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

      The  Company has succeeded in growing over the last  decade
based  on  the development, application and manufacture  of  near
infrared  dyes.  Although the Company does not rely upon  patents
for  protection  of  its  dye business, no  competitors,  to  the
Company's knowledge, actively market the large variety and volume
of  infrared  dyes  as  sold by the Company.    Furthermore,  the
Company  has embarked on an aggressive campaign to make its  dyes
easier  to  use.   In this regard, the Company  offers  technical
service  support for extrusion and injection molding  of  Company
dyes  with  a variety of resin substrates.    The Company's  dyes
can  now be uniquely formulated to each customer's specifications
and manufactured in the Company's own facility.  In addition, the
Company  holds  a broad range of dyes in inventory for  immediate
sale.

       The  Company  sells  its  products  to  manufacturers   of
plastics/resins, credit cards, electronics, glass and other basic
materials.  The Company's customers are located in all regions of
the  world, although a material portion of the Company's business
is  dependent  on certain domestic customers, the loss  of  which
could  have  a  material effect on operations.   As  the  service
economy continues to dwarf the manufacturing sector in the United
States,  the  Company  anticipates  that  its  products  will  be
increasingly  used by manufacturers located abroad.   During  the
six

<PAGE>

months ended August 31, 2005, approximately 46.3%  of  sales
were  to four customers. Two of these customers, located  in  the
eastern United States, accounted for 35.1% of sales.  During  the
six  months ended August 31, 2004, approximately 53.8%  of  sales
were  to four customers.  Two of these customers, located in  the
eastern  United States, accounted for 47.7% of sales.   The  loss
of one or more key customers could have a material adverse effect
on the Company.

Results of Operations

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

                    Three Months Ended         Six Months Ended

                   August 31,   August 31,   August 31,  August 31,
                   2005         2004         2005        2004

Sales                100%        100%         100%        100%
Cost of sales        39.1        28.4         41.1        34.0

Gross Profit         60.9        71.6         58.9        66.0
Selling, general &
administrative       39.3        25.3         35.3        30.2

Operating Income     21.6        46.3         23.6        35.8

Income before taxes  23.3        47.5         24.8        37.4

Net income
(after taxes)        13.8        30.2         15.4        23.2


Sales

      For  the  three  months ended August 31, 2005,  sales  were
$860,000  as  compared  to $841,000 for the  three  months  ended
August  31, 2004, a slight increase of $19,000 or 2.3%.  For  the
six  months  ended August 31, 2005, sales increased to $1,666,000
from  $1,304,000  for the six months ended August  31,  2004,  an
increase  of $364,000 or 28.0%.  Such increase was primarily  due
to  increased  sales  overseas, especially in  Japan,  Korea  and
Taiwan  for the Company's products and increased orders  for  its
newer  security inks and codings products, as well  as  increased
orders  during the first quarter of the current fiscal year  from
many  of  the  Company's  regular customers  of  its  traditional
products.   The  Company  has recently  begun  providing  greater
technical  service to customers which has allowed the Company  to
sell  many of its traditional dye products to customers  who  may
not  have  known  how to best use the Company's products  in  the
past.

      While  management  believes that the Company  has  remained
strong  in the sale of dyes in its traditional markets of welding
and  eye  protection, sales did remain relatively  stagnant  from
fiscal 2002 through fiscal 2005.  In order to increase the  level
of  sales of its traditional dyes products, the Company has begun
to place greater emphasis on technical service as mentioned above
which  has resulted in sales to customers who have not  used  the
Company's  products  before  as well as  new  uses  of  such  dye
products  by  regular customers.  The Company also has  increased
its  sales in dyes for the newer security inks products which  is
an area the Company expects to achieve strong growth.

Gross Profit

      Gross  profit,  defined as sales less cost  of  sales,  was
$524,000 or 60.9% of sales for the three months ended August  31,
2005, compared to $602,000 or 71.6% of sales for the three months
ended  August 31, 2004. For the six months ended August 31, 2005,
gross  profit was $981,000 or 58.9% of sales compared to $861,000
or  66.0% of sales for the six months ended August 31, 2004.   In
terms  of  absolute  dollars,  gross  profit  increased  $120,000
although the gross profit percentage decreased 7.1% for  the  six
months ended

<PAGE>

August 31, 2005 compared to the first six months  of
fiscal  2004  due primarily to increased inventory  costs,  lower
margins and an increase in certain variable costs.

     Cost of sales was $336,000 for the three months ended August
31,  2005  which represented 39.1% of sales compared to  $239,000
for  the  three  months ended August 31, 2004  which  represented
28.4%  of sales.  For the six months ended August 31, 2005,  cost
of  sales  was $685,000 which represented 41.1% of sales compared
to  $443,000  for  the  six months ended August  31,  2004  which
represented 34.0% of sales.  The increase in cost of sales  as  a
percentage of sales reflects increased inventory costs and  lower
margins  on  certain of the Company's products,  as  well  as  an
increase  in  certain variable costs associated with  the  higher
revenue level achieved.

Selling, General and Administrative Expenses

      Selling,  general and administrative expenses increased  to
$338,000,  or  39.3% of sales, for the three months ended  August
31,  2005 from $213,000, or 25.3% of sales, for the three  months
ended August 31, 2004, an increase of $125,000.  Selling, general
and  administrative expenses increased to $589,000, or  35.3%  of
sales, for the six months ended August 31, 2005 from $394,000  or
30.2%  of  sales, for the six months ended August  31,  2004,  an
increase  of  $195,000.   Such increase in  absolute  dollars  in
selling,  general and administrative expenses for the six  months
ended  August 31, 2005 compared to the comparable period  of  the
prior year was primarily due to increases in officer salaries and
employee benefits, together with increases in commission expenses
(resulting  from  an  increase in  sales  which  are  subject  to
commissions)..

Operating Income

      Operating income for the three months ended August 31, 2005
decreased to $186,000, or 21.6% of sales, from $389,000, or 46.3%
of  sales, for the three months ended August 31, 2004.  Operating
income for the six months ended August 31, 2005 also decreased to
$392,000,  or 23.6% of sales, from $467,000, or 35.8%  of  sales,
for  the  comparable  period of fiscal  2005.   This  change  was
primarily  due  to  a  an  increase in sales  offset  by  greater
increases   in  operating  expenses  and  selling,  general   and
administrative expenses as described above.

Other Income

      Total  other income for the three months ended  August  31,
2005  was  $14,000  as compared to $11,000 for the  three  months
ended  August  31, 2004.  Total other income for the  six  months
ended August 31, 2005 was $21,000 as compared to $21,000 for  the
six  months  ended August 31, 2004.  During the six months  ended
August 31, 2005, the Company realized rental income of $12,000 as
compared  to  $18,000 for the first six months  of  fiscal  2005.
Effective  November  1,  2002,  the  Company  began  to  sublease
approximately  2,500 square feet of its office space  to  a  non-
related  party to operate an optics and security inks  laboratory
at  an annual rental of $36,000.  During the quarter ended August
31,  2005,  such  tenant was behind in its rental payments  which
late  payments  were  made subsequent to August  31,  2005.   The
Company's  interest  income increased to  $5,000  for  the  three
months  ended  August 31, 2005 from $2,000 for the  three  months
ended August 31, 2004.  For the six months ended August 31, 2005,
interest  income  increased to $9,000 from  $3,000  for  the  six
months ended August 31, 2004.

Net Income

      During  the three months ended August 31, 2005, the Company
reported  income before taxes of $200,000 as compared  to  income
before  taxes of $400,000 for the three months ended  August  31,
2004.   During the six months ended August 31, 2005, the  Company
reported  income before taxes of $413,000 as compared  to  income
before  taxes  of  $488,000 for the six months ended  August  31,
2004.   Income  taxes  were $81,000 for the  three  months  ended
August  31, 2005 compared to $146,000 for the three months  ended

<PAGE>


August  31,  2004,  and income taxes were $156,000  for  the  six
months  ended August 31, 2005, compared to $185,000 for  the  six
months  ended  August 31, 2004.  The change in income  taxes  was
generally attributed to ordinary changes from period to period in
sales and expenses.  Net income after taxes was $119,000 or $0.01
per  share for the three months ended August 31, 2005 as compared
to  net income after taxes of $254,000 or $0.02 per share for the
three  months  ended August 31, 2004.  For the six  months  ended
August 31, 2005, net income after taxes was $257,000 or $0.02 per
share  as compared to net income after taxes of $303,000 or $0.03
per share for the six months ended August 31, 2004.  The decrease
in net income after taxes was primarily due to increases in sales
offset  by  greater increases in operating expenses and  selling,
general and administrative expenses.

      Net income in the future will be dependent upon our ability
to increase revenues faster than we increase our selling, general
and  administrative  expenses, research and development  expenses
and  other expenses Although there were modest increases in sales
in the entire 2005 fiscal year compared to the entire 2004 fiscal
year,  we have attained a $364,000 increase in sales for the  six
months ended August 31, 2005 compared to the prior year.  We also
did  incur in absolute dollars greater cost of sales and selling,
general  and administrative expenses for the first six months  of
fiscal  2006  compared  to the comparable period  of  last  year.
Certain  of these expenses are due to costs and expenses  related
to  a  greater  emphasis  being placed on  marketing,  sales  and
technical  service.   This meant hiring new  staff,  consultants,
continuing efforts to upgrade our facility and developing  a  new
web site.  We are encouraged with the increases in sales achieved
in  the  first six months of fiscal 2006, especially in our  less
traditional product areas.

Operations Outlook

      We  are currently going through a period of reassessing our
direction  in order to increase value for our shareholders.   Our
business,  though reasonably healthy, has not recently  grown  to
the  degree management anticipated.  For example, the sales level
of $2,880,000 reached during fiscal 2005 was an all time high for
the  Company.  Yet, this was not significantly more than in  2004
($2,734,000), 2003 ($2,690,000) or 2002 ($2,550,000). The plateau
of  sales over the last four years was in contrast to the greater
sales  growth the Company experienced prior to 2002 and beginning
in  1991.  Based upon these observations, we tried to learn  what
could  be  done to stimulate growth and recapture the promise  of
our  early years. Our first task was to draw up a business  plan.
We  believe this highlighted our one major weakness and that  was
in  sales  and marketing.  For years we felt it to be unnecessary
to go out and reach our customers.  We believed that our web site
was  sufficiently explicit to attract anyone interested  in  near
infrared light management to come to us because we were the "only
game in town".  We now realize that the customer has alternatives
which  do  not  include the use of Epolin dyes.  We  believe  the
business   plan   made   clear  the   necessity   of   hiring   a
Sales/Marketing executive (which has been accomplished  with  the
hiring  of Greg Amato) along with back up technical service  help
(which  has also been accomplished).  In order to cover the  cost
of  these  additional personnel and place a greater  emphasis  on
company  growth, we suspended in fiscal 2005 the  cash  dividends
program  which we had been in place during fiscal 2002, 2003  and
2004.   We believed that it was in the long term best interest of
the  shareholders for us to reinvest profits for  future  growth.
However,  as  a result of our current cash position, we  declared
and paid a $0.02 cash dividend in August 2005.

      Management  has  recognized that the Company's  traditional
markets   -   serving   welding  and  eye   protection   plastics
manufacturers - have gone through certain changes over  the  last
few  years.   Certain  customers have consolidated  and/or  moved
manufacturing  operations to low-cost countries, usually  in  the
Far East.  In some of these countries, eye protection may not  be
as  highly valued by the citizenry.  Management expects that this
market  will remain important as a continuing source of  revenue.
The  Company also now offers fully formulated dye-resin  packages
to  customers  for  fabrication of finished  parts  by  injection
molding.   This  has  allowed the Company to  maintain  a  strong
position  in  this market.   Greater emphasis has  recently  been
placed on sales, marketing and technical support in order to grow
the  Company's business.  The new products that are now the  firm
underpinnings for future growth are based upon security inks, new
visible  and  infrared dyes and the forward  integration  of  the
Company's dyes into formulated pellets.  For the six months

<PAGE>

ended
August  31,  2005,  sales  in these new product  areas  increased
approximately $230,000 from the comparable period  of  the  prior
year.     Sales   in   these   new  product   areas   represented
approximately 31% of all Company sales for the six  months  ended
August 31, 2005 compared to the six months ended August 31,  2004
for   which   sales  in  these  new  product  areas   represented
approximately 22% of all Company sales.

      Another factor that was considered in the business plan was
management  succession.  Murray S. Cohen, the Company's  Chairman
of  the  Board  and  Chief Executive Officer, has  announced  his
intention  to  step  down  as  Chief  Executive  Officer,   while
continuing to remain as Chairman of the Board and Chief Scientist
for  the  Company.  It is anticipated that Greg Amato,  our  Vice
President of Sales and Marketing, will be nominated to fill  this
position.   Mr. Amato, age 48, has been employed by  the  Company
since  November  2004 and has been Vice President  of  Sales  and
Marketing since January 2005.

Liquidity and Capital Resources

      The  Company's  primary source of funds is cash  flow  from
operations in the normal course of selling products.   On  August
31,  2005,  the  Company had working capital (consisting  current
assets  less current liabilities) of $2,269,000, a debt to equity
ratio  of  0.150  to 1, and stockholders' equity  of  $3,119,000,
compared to working capital of $2,168,000, a debt to equity ratio
of  0.145 to 1, and stockholders' equity of $2,924,000 on  August
31, 2004.  On August 31, 2005, the Company had $1,275,000 in cash
and  cash  equivalents,  total assets  of  $3,588,000  and  total
liabilities  of $469,000, compared to $823,000 in cash  and  cash
equivalents, total assets of $3,349,000 and total liabilities  of
$425,000 on August 31, 2004.

     Net cash provided by operating activities for the six months
ended  August 31, 2005 was $407,000 compared to $344,000 for  the
six  months  ended August 31, 2004.  Net cash used  by  investing
activities for the six months ended August 31, 2005 was  $128,000
compared  to  $71,000 for the six months ended  August  31,  2004
which  change  was  primarily due to  an  increase  in  equipment
purchases.   For the six months ended August 31, 2005,  net  cash
used  by  financing activities was $236,000 compared to net  cash
provided  by  financing activities of $3,000 for the  six  months
ended August 31, 2004.  Such change was due to the payment of the
dividend  in the second quarter of fiscal 2006 in which  $236,000
in cash was paid to the shareholders.  There was not a comparable
item for the six months ended August 31, 2004.

      The  Company anticipates, based on currently proposed plans
and assumptions relating to its operations, that its current cash
and  cash  equivalents together with projected  cash  flows  from
operations  and projected revenues will be sufficient to  satisfy
its  contemplated  cash requirements for more than  the  next  12
months.  The Company's contemplated cash requirements for  fiscal
2006 and beyond will depend primarily upon level of sales of  its
products,  inventory  levels,  product  development,  sales   and
marketing   expenditures   and   capital   expenditures.    While
Management believes the Company has remained strong in  the  sale
of dyes in its traditional markets of welding and eye protection,
such  sales  did not increase in volume in the past few  complete
fiscal  years.   As a result, we have begun to  place  a  greater
emphasis  on sales, marketing and technical support in  order  to
grow our dye business and our newer business in security inks and
coatings which we expect to contribute meaningful growth  to  the
Company.

      Inflation  has  not  significantly impacted  the  Company's
operations.

Significant Accounting Policies

      Our  discussion  and  analysis of the  Company's  financial
condition   and  results  of  operations  are  based   upon   our
consolidated  financial statements which have  been  prepared  in
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

<PAGE>

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

Other Information

     In  August  2001,  the  Board of Directors  of  the  Company
authorized a 500,000 share stock repurchase program.  Pursuant to
the  repurchase program, the Company may purchase up  to  500,000
shares  of  its common stock in the open market or  in  privately
negotiated  transactions  from time  to  time,  based  on  market
prices.  The Company indicated that the timing of the buyback  of
the  Company's  shares will be dictated by overall financial  and
market  conditions  and  other  corporate  considerations.    The
repurchase  program  may  be suspended  without  further  notice.
During  the  six months ended August 31, 2005, no repurchases  of
shares  were made by the Company.  During the fiscal  year  ended
February  28,  2005,  a  total of 50,000 were  repurchased  at  a
cumulative  cost  of  $29,750.   During  the  fiscal  year  ended
February 29, 2004, a total of 184,000 shares were repurchased  at
a  cumulative  cost  of $103,405.  During the fiscal  year  ended
February 28, 2003, a total of 32,500 shares were repurchased at a
cumulative  cost  of $18,624 while during the fiscal  year  ended
February 28, 2002, a total of 30,000 shares were repurchased at a
cumulative cost of $14,837.

<PAGE>

      In  July 2005, Herve A. Meillat, age 49,  was appointed  by
the  Board  of  Directors of the Company to serve on  the  Board.
From  1986  through 2004, Mr. Meillat was with  the  Bacou-Dalloz
Group   ("Bacou-Dalloz"),  a  world   leader   in   the   design,
manufacturing and sales of personal protection equipment.   While
with  Bacou-Dalloz, he was Senior Vice President of its  eye  and
face  business  unit from 2001 to 2004, the President  of  Dalloz
Safety  Inc.  from  1996 to 2001 and Chief Operating  Officer  of
Christian Dalloz in France from 1989 to 1995.

      As  mentioned  above,  the Company did  not  pay  any  cash
dividends during the fiscal year ended February 28, 2005 but  did
declare  and  pay a $0.02 cash dividend in August  2005.   During
fiscal 2004, the Company paid two cash dividends, the first being
$.02  per  share  in August 2003 and the second  being  $.02  per
shares  in February 2004.  During the fiscal year ended  February
28,  2003,  the Company also paid two cash dividends,  the  first
being  $.04 per share in July 2002 and the second being $.03  per
share in January 2003.  Prior thereto, and during the fiscal year
ended  February  28,  2002,  the  Company  also  paid  two   cash
dividends,  the  first being $.03 per share in June  2001  (which
represented the first time that a cash dividend was paid  by  the
Company) and the second being $.04 per share in February 2002.

Off-Balance Sheet Arrangements

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


Item 3.   Controls and Procedures.

     The   Company's   Chief  Executive  Officer  and   Principal
Financial Officer have reviewed the Company's disclosure controls
and  procedures  as  of  the end of the period  covered  by  this
report.   Based upon this review, such officers believe that  the
Company's  disclosure controls and procedures  are  effective  in
timely  alerting  them  to material information  required  to  be
included in this report.  There have been no significant  changes
in internal control over financial reporting that occurred during
the  fiscal  quarter covered by this report that have  materially
affected,  or  are  reasonably likely to materially  affect,  the
Company's internal control over financial reporting.

<PAGE>




                   PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

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


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

      In  June 2005, the Company granted options to each  of  its
four directors to acquire up to 50,000 shares of Common Stock  at
an  exercise  price of $0.54 (the market price of  the  Company's
Common  Stock on the date of grant).   Such options,  which  were
granted under the Company's 1986 Stock Option Plan, will  not  be
exercisable prior to the first anniversary of the grant date, but
thereafter  will become exercisable on a cumulative basis  as  to
50%  of  the  underlying shares on each of the first  and  second
anniversaries of the grant date.

     All of the foregoing securities were issued in reliance upon
the  exemption from registration pursuant to Section 4(2) of  the
Securities  Act  of 1933, as amended, for  "transactions  by  the
issuer not involving any public offering".


Item 3.  Defaults Upon Senior Securities.

         None.


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

         None.


Item 5.  Other Information.

         None.


Item 6.  Exhibits.

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

<PAGE>





                           SIGNATURES

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


                                   EPOLIN, INC.
                                   (Registrant)



Dated: October 17, 2005         By:/s/Murray S. Cohen
                                      Murray S. Cohen,
                                      Chairman of the Board
                                      and Chief Executive Officer


Dated: October 17, 2005         By:/s/ James Ivchenko
                                       James Ivchenko,
                                       President (Principal Financial
                                       Officer)


<PAGE>


                           EPOLIN, INC. AND SUBSIDIARY

                              FINANCIAL STATEMENTS

                    SIX MONTHS ENDED AUGUST 31, 2005 AND 2004
<PAGE>

                                    CONTENTS





                                                                           Page
                                                                           ----

Accountant's Review Report                                                   1

Consolidated Financial Statements:

    Consolidated Balance Sheets                                            2 - 3

    Consolidated Statements of Income                                      4 - 5

    Consolidated Statements of Stockholders' Equity                          6

    Consolidated Statements of Cash Flows                                    7

Notes to Consolidated Financial Statements                                8 - 22
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




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

    We have reviewed the accompanying Consolidated Balance Sheets of Epolin Inc.
and Subsidiary as of August 31, 2005 and 2004 and the related Consolidated
Statements of Income, Stockholders' Equity and Cash Flows for the six-month
periods then ended. These interim financial statements are the responsibility of
the Company's management.

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

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








Weismann Associates LLC
-----------------------
Weismann Associates LLC
Livingston, NJ 07039


September 22, 2005

                                       1
<PAGE>
                           EPOLIN, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                              August 31,
                                                     ---------------------------
Current assets:                                          2005           2004
                                                     ------------   ------------
  Cash and cash equivalents                          $  1,275,041        823,429
  Accounts receivable                                     434,625        646,224
  Inventories                                             698,282        822,458
  Prepaid expenses                                         16,898         22,655
  Prepaid taxes                                             7,299            200
  Deferred tax assets-current portion                       5,891          1,376
                                                     ------------   ------------

      Total current assets                              2,438,036      2,316,342
                                                     ------------   ------------

Plant, property and equipment - at cost:
  Land                                                     81,000         81,000
  Building and improvements                               662,288        549,201
  Laboratory equipment                                    194,135        193,335
  Office equipment                                        107,020         72,915
  Leasehold improvements                                  449,190        449,190
                                                     ------------   ------------

      Total                                             1,493,633      1,345,641

  Less:  Accumulated depreciation and amortization        766,002        732,295
                                                     ------------   ------------

      Net plant, property and equipment                   727,631        613,346
                                                     ------------   ------------

Other assets:
  Deferred tax assets-non current portion                 189,683        220,904
  Cash value - life insurance policy                      232,492        198,290
                                                     ------------   ------------

      Total other assets                                  422,175        419,194
                                                     ------------   ------------

      Total                                          $  3,587,842      3,348,882
                                                     ============   ============

        The accompanying notes are an integral part of these statements.

                                        2
<PAGE>
                           EPOLIN, INC. AND SUBSIDIARY

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                      LIABILITIES AND STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                            August 31,
                                                                    ---------------------------
                                                                        2005           2004
                                                                    ------------   ------------
<S>                                                                 <C>                  <C>
Current liabilities:
  Accounts payable                                                  $     17,565         16,047
  Accrued expenses                                                       148,090        113,092
  Taxes payable:
    Payroll                                                                1,653          1,719
    Income                                                                 1,331         17,820
                                                                    ------------   ------------

    Total current liabilities                                            168,639        148,678
                                                                    ------------   ------------

Other liabilities - Deferred compensation                                300,129        276,050
                                                                    ------------   ------------

       Total liabilities                                                 468,768        424,728
                                                                    ------------   ------------

Commitments and Contingencies

Stockholders' equity:
  Preferred stock, $15.513 par value; 940,000 shares authorized;
    none issued
  Preferred stock, series A convertible non-cumulative,
    $2.50 par value; redemption price and liquidation preference;
    60,000 shares authorized; 5,478 shares issued and redeemed
  Common stock, no par value; 20,000,000 shares authorized;
    12,729,000 and 12,716,500 shares issued, 11,815,355 and
    11,852,855 shares outstanding at 2005 and 2004, respectively       2,340,183      2,337,058
    Paid-in capital                                                        6,486          6,486
    Retained earnings                                                  1,094,337        872,792
                                                                    ------------   ------------

       Total                                                           3,441,006      3,216,336
    Less: Treasury stock-at cost                                         321,932        292,182
                                                                    ------------   ------------

      Total stockholders' equity                                       3,119,074      2,924,154
                                                                    ------------   ------------

      Total                                                         $  3,587,842      3,348,882
                                                                    ============   ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        3
<PAGE>
                           EPOLIN, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
                    SIX MONTHS ENDED AUGUST 31, 2005 AND 2004


<TABLE>
<CAPTION>
                                                             2005           2004
                                                         ------------   ------------
<S>                                                      <C>               <C>
Sales                                                    $  1,665,871      1,304,302
                                                         ------------   ------------

Cost of sales and expenses:
  Cost of sales                                               685,355        442,878
  Selling, general and administrative                         588,564        394,451
                                                         ------------   ------------

      Total                                                 1,273,919        837,329
                                                         ------------   ------------

Operating income                                              391,952        466,973
                                                         ------------   ------------

Other income:
  Rental income                                                12,000         18,000
  Interest                                                      8,825          3,066
                                                         ------------   ------------

      Total other income                                       20,825         21,066
                                                         ------------   ------------

Income before taxes                                           412,777        488,039

Income taxes                                                  155,753        185,367
                                                         ------------   ------------

Net income                                               $    257,024        302,672
                                                         ============   ============

Per share data:
  Basic earnings per common share                        $       0.02           0.03
                                                         ============   ============

  Fully diluted earnings per common share                $       0.02           0.03
                                                         ============   ============

  Weighted average number of common shares outstanding     11,815,355     11,847,828
                                                         ============   ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        4
<PAGE>
                           EPOLIN, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
                   THREE MONTHS ENDED AUGUST 31, 2005 AND 2004


<TABLE>
<CAPTION>
                                                             2005           2004
                                                         ------------   ------------
<S>                                                      <C>                 <C>
Sales                                                    $    859,572        840,579
                                                         ------------   ------------

Cost of sales and expenses:
  Cost of sales                                               335,804        238,767
  Selling, general and administrative                         337,507        212,901
                                                         ------------   ------------

      Total                                                   673,311        451,668
                                                         ------------   ------------

Operating income                                              186,261        388,911
                                                         ------------   ------------

Other income:
  Rental income                                                 9,000          9,000
  Interest                                                      4,756          1,782
                                                         ------------   ------------

      Total other income                                       13,756         10,782
                                                         ------------   ------------

Income before taxes                                           200,017        399,693

Income taxes                                                   81,145        145,841
                                                         ------------   ------------

Net income                                               $    118,872        253,852
                                                         ============   ============

Per share data:
  Basic earnings per common share                        $       0.01           0.02
                                                         ============   ============

  Fully diluted earnings per common share                $       0.01           0.02
                                                         ============   ============

  Weighted average number of common shares outstanding     11,815,355     11,847,828
                                                         ============   ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        5
<PAGE>
                           EPOLIN, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                    SIX MONTHS ENDED AUGUST 31, 2005 AND 2004


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

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

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

Net income                           --             --             --        302,672              --             --         302,672
                           ------------   ------------   ------------   ------------    ------------   ------------    ------------

Balance - August 31, 2004    12,716,500   $  2,337,058          6,486        872,792         863,645       (292,182)      2,924,154
                           ============   ============   ============   ============    ============   ============    ============


Balance - March 1, 2005      12,729,000   $  2,340,183          6,486      1,073,620         913,645       (321,932)      3,098,357

Dividends paid                                                              (236,307)                                      (236,307)

Net income                           --             --             --        257,024              --             --         257,024
                           ------------   ------------   ------------   ------------    ------------   ------------    ------------

Balance - August 31, 2005    12,729,000   $  2,340,183          6,486      1,094,337         913,645       (321,932)      3,119,074
                           ============   ============   ============   ============    ============   ============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        6
<PAGE>
                           EPOLIN, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    SIX MONTHS ENDED AUGUST 31, 2005 AND 2004


<TABLE>
<CAPTION>
                                                                     2005            2004
                                                                 ------------    ------------
<S>                                                              <C>                  <C>
 Cash flows from operating activities:
   Net income                                                    $    257,024         302,672
   Adjustments to reconcile net income to net cash provided by
    operating activities:
     Depreciation and amortization                                     18,815          16,214
     Deferred tax expense                                               2,799          10,847
     Obligation under deferred compensation agreement                  12,039          12,039
   (Increase) decrease in:
     Accounts receivable                                              118,386          (2,643)
     Inventories                                                       52,134         (64,691)
     Prepaid expenses                                                  32,976          34,730
     Prepaid taxes                                                     (6,699)         70,450
   Increase (decrease) in:
     Accounts payable                                                  17,565          14,788
     Accrued expenses                                                 (95,324)        (64,998)
     Taxes payable                                                     (2,608)         14,112
                                                                 ------------    ------------

       Net cash provided by operating activities                      407,107         343,520
                                                                 ------------    ------------

 Cash flows from investing activities:
   Increase in cash value - life insurance policy                     (26,322)        (31,518)
   Payments for equipment                                            (102,103)        (39,628)
                                                                 ------------    ------------

       Net cash used by investing activities                         (128,425)        (71,146)
                                                                 ------------    ------------

 Cash used from financing activities:
   Issuance of common stock                                                --           3,125
   Dividends paid                                                    (236,307)             --
                                                                 ------------    ------------

       Net cash provided (used) by financing activities              (236,307)          3,125
                                                                 ------------    ------------

Increase in cash                                                       42,375         275,499

Cash and cash equivalents:
  Beginning                                                         1,232,666         547,930
                                                                 ------------    ------------

  Ending                                                         $  1,275,041         823,429
                                                                 ============    ============

Supplemental information:
  Income taxes paid                                              $    156,470         151,200
                                                                 ============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        7
<PAGE>
                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



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, Corp., 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:

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

Concentrations of Credit Risks - The Company and its Subsidiary had cash
deposits in a financial institution and brokerage house in excess of the amount
insured by agencies of the federal government in amounts of $1,075,000 and
$723,400 at August 31, 2005 and 2004, respectively. In evaluating this credit
risk, the Company periodically evaluates the stability of the financial
institution and brokerage house.

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

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

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

                                        8
<PAGE>
                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



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

Principles of Consolidation - The accompanying Consolidated Financial Statements
include the accounts of the Company and Subsidiary. Intercompany transactions
and balances have been eliminated in consolidation. Condensed consolidating
financial statements for the six months ended August 31, 2005 are:
<TABLE>
<CAPTION>

                      CONDENSED CONSOLIDATING BALANCE SHEET

                                                        Epolin
                                         Epolin         Holding      Eliminations    Consolidated
                                      ------------    ------------   ------------    ------------
<S>                                   <C>                  <C>           <C>            <C>
Current assets                        $  2,238,428         199,608             --       2,438,036
Non-current assets                       1,349,414         640,153       (839,761)      1,149,806
                                      ------------    ------------   ------------    ------------
       Total                          $  3,587,842         839,761       (839,761)      3,587,842
                                      ============    ============   ============    ============

     Total liabilities                     468,768         159,353       (159,353)        468,768
                                      ------------    ------------   ------------    ------------

Stockholders' equity:
  Common stock                           2,340,183              --             --       2,340,183
  Additional paid-in capital                 6,486              --             --           6,486
  Retained earnings                      1,094,337         680,408       (680,408)      1,094,337
  Treasury stock                          (321,932)             --             --        (321,932)
                                      ------------    ------------   ------------    ------------

   Total stockholders' equity            3,119,074         680,408       (680,408)      3,119,074
                                      ------------    ------------   ------------    ------------

     Total                            $  3,587,842         839,761       (839,761)      3,587,842
                                      ============    ============   ============    ============


                   CONDENSED CONSOLIDATING STATEMENT OF INCOME

                                                        Epolin
                                         Epolin         Holding      Eliminations    Consolidated
                                      ------------    ------------   ------------    ------------
Sales                                 $  1,665,871              --             --       1,665,871
Other revenue                                   --          60,870        (48,870)         12,000
                                      ------------    ------------   ------------    ------------
   Total                                 1,665,871          60,870        (48,870)      1,677,871
                                      ------------    ------------   ------------    ------------

Cost of sales                              685,355              --             --         685,355
Selling, general and administrative        627,527           9,907        (48,870)        588,564
                                      ------------    ------------   ------------    ------------

   Total                                 1,312,882           9,907        (48,870)      1,273,919
                                      ------------    ------------   ------------    ------------

Operating income                           352,989          50,963             --         403,952

Other income - interest                      7,879             946             --           8,825
                                      ------------    ------------   ------------    ------------

Income before taxes                        360,868          51,909             --         412,777

Income taxes                               150,862           4,891             --         155,753
                                      ------------    ------------   ------------    ------------

Net income                            $    210,006          47,018             --         257,024
                                      ============    ============   ============    ============
</TABLE>

                                        9
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



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



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

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

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

    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 $18,815 and $16,214 for the
six months ended August 31, 2005 and 2004, 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.

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

                                       10
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



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

Revenue Recognition - The Company recognizes revenue consistent with the
provisions of SEC Staff Accounting Bulletin No. 104, "Revenue Recognition",
which sets forth guidelines in the timing of revenue recognition based upon
factors such as passage of title, payments and customer acceptance. Any amounts
received prior to satisfying our revenue recognition criteria will be recorded
as deferred revenue in the accompanying balance sheet. The Company recognizes
revenue from product sales when there is persuasive evidence that an arrangement
exists, when title has passed, the price is fixed or determinable, and the
Company is reasonably assured of collecting the resulting receivable. The
Company's policy is to replace certain products that do not conform to customer
specifications; however, replacements are made at the discretion of the Company
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 $12,524 through August 31,
2005, 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 $12,304 and $14,817 for
the six months ended August 31, 2005 and 2004, respectively.

                                       11
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



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

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

    Deferred charges for options granted to non-employees are determined in
accordance with FAS No. 123 and EITF 96-18 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, 2005 and 2004 was $.10 and $.11,
respectively. The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants:

Six Months Ended August 31,                            2005           2004
                                                     --------       --------

  Weighted average expected life in years                   4              5
  Dividends per share                                    0.04           0.03
  Volatility                                             6.0%           6.0%
  Risk-free interest rate                                3.9%           4.1%

                                       12
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



Note B - Summary of Significant Accounting Policies (continued)

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

                                                 Six Months Ended August 31,
                                               ------------------------------
                                                   2005              2004
                                               ------------      ------------

Net earnings as reported                       $    257,024           302,672

Deduct total additional stock-based employee
compensation cost, net of tax that would
have been included in net earnings under
fair value method                                    28,550            34,050
                                               ------------      ------------

Proforma net earnings                          $    228,474           268,622
                                               ============      ============

Basic earnings per share:
  As reported                                  $       0.02              0.03
                                               ============      ============
  Proforma                                     $       0.02              0.02
                                               ============      ============

Average common shares outstanding                11,815,355        11,847,828
                                               ============      ============

Diluted earnings per share:
  As reported                                  $       0.02              0.03
                                               ============      ============
  Proforma                                     $       0.02              0.02
                                               ============      ============

Total diluted common shares outstanding          11,966,537        12,029,919
                                               ============      ============


Note C - Inventories:

                                                      August 31,
                                              ---------------------------
                                                  2005           2004
                                              ------------   ------------
       Raw materials and supplies             $     45,032         46,003
       Work in process                             241,747        279,588
       Finished goods                              411,503        496,867
                                              ------------   ------------

           Total                              $    698,282        822,458
                                              ============   ============

                                       13
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



Note D - Income Taxes:

1.  Federal and State deferred tax assets include:

                                                         2005           2004
                                                     ------------   ------------
Temporary differences:
    Accelerated amortization                         $     66,518         82,078
    Deferred compensation                                 129,056        140,202
                                                     ------------   ------------
               Total                                      195,574        222,280

        Current portion                                     5,891          1,376
                                                     ------------   ------------

Non-current portion                                  $    189,683        220,904
                                                     ============   ============

2.  Income tax expense:
                                                         2005           2004
                                                     ------------   ------------
    Current:
        Federal                                      $    118,431        135,200
        State                                              34,523         39,320
                                                     ------------   ------------

           Total current                                  152,954        174,520
                                                     ------------   ------------

    Deferred:
        Federal                                             2,213          8,577
        State                                                 586          2,270
                                                     ------------   ------------

           Total deferred                                   2,799         10,847
                                                     ------------   ------------

               Total                                 $    155,753        185,367
                                                     ============   ============


Note E - Treasury Stock:

    Consists of 913,645 shares as of August 31, 2005 at a net cost of $321,932
and 863,645 shares at a net cost of $292,182 as of August 31, 2004.

There were no treasury share purchases made by the Company during the six months
ended August 31, 2005 and 2004, respectively.

                                       14
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



Note F - 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, 2005, approximately 46.3% of
sales were to four customers. Two of these customers, located in the Eastern
United States, accounted for 35.1% of sales. During the six months ended August
31, 2004, approximately 53.8% of sales were to four customers, two of these
customers, located in the Eastern United States, accounted for 47.7% of sales.


Note G - Rental Income Under Sublease:

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


Note 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 $25,386 and
$19,469 for the six months ended August 31, 2005 and 2004, respectively.

                                       15
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



Note H - Employee Benefits (continued):


Stock Option Plan - The Company previously adopted The 1986 Stock Option Plan.
As of April 1996, under the terms of the Plan, options may no longer be granted.
On December 1, 1995, options to acquire up to 490,000 shares of the Company's
common stock were granted. Options exercised for all prior years totaled
455,000. Options cancelled for all prior years totaled 35,000. There were no
outstanding options as of August 31, 2005.

    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. Options exercised through August 31, 2005
totaled 600,000. Options cancelled for all years totaled 120,000.

    A summary of the status of the Company's 1998 stock option plan as of August
31, 2005, and the changes during the six months ended August 31, 2005 is
presented below:

                                                          Weighted-Average
Fixed Options:                               Shares        Exercise Price
--------------                              -------         --------------
Balance - March 1, 2004                     392,000            $ .29
    Granted                                      --               --
    Cancelled                               (45,000)             .30
    Exercised                               (25,000)             .25
                                            -------

Balance - February 28, 2005                 322,000              .30
    Granted                                 200,000               --
    Exercised                                    --               --
                                            -------

Balance - August 31, 2005                   522,000             $.39
                                            =======


Exercisable at August 31, 2005              180,000

                                       16
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



Note H - Employee Benefits (continued):

Stock Option Plan - The following table summarizes information about fixed stock
options outstanding at August 31, 2005:

<TABLE>
<CAPTION>
                Outstanding Options                              Exercisable Options
---------------------------------------------------      ---------------------------------
                      Number       Weighted-average        Number
Range of            Outstanding       Remaining          Exercisable      Weighted-average
Exercise Price      at 8/31/05     Contractual Life      at 8/31/05        Exercise Price
--------------      ----------     ----------------      ----------        --------------
<S>                   <C>             <C>                 <C>                  <C>
    $.25              155,000         1.0 years           155,000              $ .25
     .30               25,000         2.3                  25,000                .30
     .35              142,000         8.4                      --                .30
     .54              200,000         4.8                      --                .54
</TABLE>

There are 258,000 options attributable to future grants.


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

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

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



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.

                                       17
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



Note I - Segment Reporting (continued):

Sales by geographic area are as follows:

                                      Six Months Ended August 31,
                                      ---------------------------
                                          2005           2004
                                      ------------   ------------

               United States          $  1,172,396      1,092,834
               Asia                        315,323        124,355
               Europe                      166,833         86,092
               Other nations                11,319          1,021
                                      ------------   ------------

                  Total               $  1,665,871      1,304,302
                                      ============   ============

Two customers, located in the Eastern United States, accounted for more than 10%
of revenues from continuing operations. One customer accounted for 18.4% of
sales of which 12.2% was near infrared dyes and 6.2% was security inks. The
other customer accounted for 16.8% of sales of near infrared dyes.

Long-lived assets include net property and equipment. The Company had long-lived
assets of $727,631 and $613,346 located in the United States at August 31, 2005
and 2004, respectively.


Note J - Accrued Expenses:

Accrued expenses consisted of the following as of August 31, 2005 and 2004,
respectively:

                                               2005           2004
                                           ------------   ------------
          Salaries and wages               $     29,838         21,692
          Employment agreement                  108,281         78,259
          Professional fees                       5,900          5,000
          Property taxes                          4,071          8,141
                                           ============   ============

            Total accrued expenses         $    148,090        113,092
                                           ============   ============

                                       18
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



Note K - 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:

                                                     Six Months Ended August 31,
                                                     ---------------------------
                                                         2005           2004
                                                     ------------   ------------

Basic Earnings Per Common Share:

Net income                                           $    257,024        302,672

Average common shares
  outstanding                                          11,815,355     11,847,828
                                                     ============   ============

Basic earnings per
  common share                                       $       0.02           0.03
                                                     ============   ============

Diluted Earnings Per Common Share:

Net income                                           $    257,024        302,672
                                                     ============   ============

Average common shares
  outstanding                                          11,815,355     11,847,828

Common shares issuable with respect
to options issued to employees
with a dilutive effect                                    147,545        182,091
                                                     ------------   ------------

Total diluted common shares
  outstanding                                          11,966,537     12,029,919
                                                     ============   ============

Diluted earnings per
  common share                                       $       0.02           0.03
                                                     ============   ============

                                       19
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



Note L - 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, 2005 and 2004, respectively.

Future minimum payments for the current option period:

      Fiscal years ending February:
      -----------------------------
                   2006                            $48,870
                   2007                             97,740
                   2008                             97,740
                   2009                             65,160


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

    In connection with this agreement, deferred compensation of $12,040 was
charged to selling, general and administrative expenses for the six months ended
August 31, 2005 and 2004, respectively.

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

                                       20
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



Note L - Commitments and Contingencies (continued):

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

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

    James Ivchenko, President - To be paid an annual salary of not less than the
greater of his annual base salary in effect immediately prior to the effective
date of the agreement or any subsequently established annual base salary. He is
to receive 1.5% on gross annual sales of no more than $3,000,000, effective with
the year ended February 28, 2001, increasing by 0.25% a year during the term of
the agreement.

    Accrued compensation included in selling, general and administrative as of
August 31, 2005 and 2004 was $108,282 and $78,258, respectively.

Note M - 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 $213,953 and
$202,785 were included in cost of sales for the six months ended August 31, 2005
and 2004, respectively. Expenditures in 2006 are projected to remain at
approximately the same level as in 2005.

                                       21
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            AUGUST 31, 2005 AND 2004



NOTE N - STOCK DIVIDENDS:

In June 2003, the Company's Board of Directors declared a cash dividend of two
cents per share on all common shares outstanding. The dividend was paid on
August 3, 2005 to shareholders of record July 27, 2005.

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.

                                       22