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 May 31, 2007

     [ ] TRANSITION REPORT UNDER 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 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: 11,966,355 outstanding as of July
2, 2007

<PAGE>

                           EPOLIN, INC.

                        TABLE OF CONTENTS

                                                            Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.                                3
Item 2. Management's Discussion and Analysis or Plan
        of Operation.                                        3
Item 3. Controls and Procedures.                             8

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.                                   9
Item 2. Unregistered Sales of Equity Securities  and
        Use of Proceeds.                                     9
Item 3. Default upon Senior Securities.                      9
Item 4. Submission of Matters to a Vote of Security
        Holders.                                             9
Item 5. Other Information.                                   9
Item 6. Exhibits.                                            9

SIGNATURES                                                   10


<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 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, 2007.  The
Company does not intend to update these forward-looking
statements.

Executive Overview

     Epolin, Inc. (the "Company", "we", "us" and "our") is a
specialized chemical company primarily engaged in the
manufacturing, marketing, research and development of infrared
dyes, laser absorbing dyes and infrared 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.  We also manufacture specialty chemicals for
certain chemical manufacturers.

     We have succeeded in growing over the last decade based on
the development, application and manufacture of near infrared
dyes.     In recent years, we have embarked on an aggressive
campaign to make our dyes easier to use.  In this regard, we
offer technical service support for extrusion and injection
molding of our dyes with a variety of resin substrates.  Our dyes
can now be uniquely formulated to each customer's specifications
and manufactured in our own facility.  In addition, we hold a
broad range of dyes in inventory for immediate sale.

     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.  As the service economy continues to dwarf the
manufacturing sector in the United States, we now offer our
customers added service in the form of formulated inks and
resins.  This has resulted in increasing our worldwide sales of
these products and, we believe, lessens the threat of competition
from lower cost dyes manufactured abroad.  During the three
months ended May 31, 2007, approximately 37.4% of sales were to
three customers.  Two of these customers, located in the Eastern
United States, accounted for 30.5% of sales.  During the three
months ended May 31, 2006, approximately 40.6% of sales were to
four customers.  Two of these customers, located in the Eastern
United States, accounted for 29.6% of sales.  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
months ended May 31, 2007 and 2006.

<PAGE>


                    Three Months Ended May 31,

                             2007        2006       % change

Sales                    $  842,001   $1,094,070     -23.0%

Gross profit                513,345      655,152     -21.6%

Gross profit percentage       61.0%        60.0%       1.0%

Selling, general &
administrative              295,999      296,116      -0.4%

Operating income            217,346      359,036     -39.5%
Other Income                 14,940       10,042      48.8%

Income before taxes         232,286      369,078     -37.1%

Income taxes                 79,510      143,179     -44.5%

Net income (after taxes)  $ 152,776    $ 225,899     -32.4%


Sales

     For the three months ended May 31, 2007, sales were $842,000
as compared to $1,094,000 for the three months ended May 31,
2006, a decrease of $252,000 or 23.0%.  Such decrease in sales
occurred in both our overseas markets and in North America.
Sales in Asia were $155,000 for the three months ended May 31,
2007, compared to $216,000 for the three months ended May 31,
2006, a decrease of $61,000.  In Europe, sales decreased by
$35,000 to $22,000 in the three months ended May 31, 2007 from
$57,000 in the three months ended May 31, 2006.  In North
America, which represents a majority of our sales income, sales
decreased by $155,000 to $661,000 in the three months ended May
31, 2007 from $816,000 in the three months ended May 31, 2006.
With respect to our various product groups, sales in our newer
product areas showed an overall decrease for the three months
ended May 31, 2007 compared to the prior year period, and sales
in our traditional product areas also generally declined.

Gross Profit

     Gross profit, defined as sales less cost of sales, was
$513,000 or 61.0% of sales for the three months ended May 31,
2007 compared to $655,000 or 60.0% of sales for the three months
ended May 31, 2006.  Although gross profit decreased by $142,000
in terms of absolute dollars primarily due to the downturn in
sales, the gross profit percentage remained relatively constant
from period to period.

     Cost of sales was $329,000 for the three months ended May
31, 2007 which represented 39.1% of sales compared to $439,000
for the three months ended May 31, 2006 which represented 40.1%
of sales.  Total cost of materials decreased $39,000 in the three
months ended May 31, 2007 compared to the prior year period, and
total factory overhead also decreased $71,000 in the three months
ended May 31, 2007 compared to the prior year.

Selling, General and Administrative Expenses

     In terms of absolute dollars, selling, general and
administrative expenses remained constant in the three months
ended May 31, 2007 compared to the prior year period.  For the
three months ended May 31, 2007, selling, general and
administrative expenses were $296,000 or 35.2% of sales compared
to $296,000 or 27.1% of sales for the three months ended May 31,
2006.

Operating Income

     Operating income, in terms of absolute dollars, decreased to
$217,000 for the three months ended May 31, 2007 from $359,000
for the three months ended May 31, 2006, a decrease of $142,000.
This decrease was due to reduced sales for the quarter ended May
31, 2007 compared to the prior year period which sales decreased
at a greater rate than total cost of sales and expenses.

<PAGE>

Other Income

     Total other income for the three months ended May 31, 2007
was $15,000 as compared to $10,000 for the three months ended May
31, 2006.  Our interest income increased to $15,000 for the three
months ended May 31, 2007 from $6,000 in the prior year period
primarily due to a higher interest rate for certain cash on hand
in the three months ended May 31, 2007, compared to the prior
year period.  We did not realize any rental income in the three
months ended May 31, 2007 compared to $5,000 for the prior year
period.  At May 31, 2007, our sub-tenant was in arrears in its
rental obligations.

Net Income

     During the three months ended May 31, 2007, we reported
income before taxes of $232,000 as compared to income before
taxes of $369,000 for the three months ended May 31, 2006.
Income taxes were $80,000 for the three months ended May 31, 2007
compared to income taxes of $143,000 for the three months ended
May 31, 2006.  The decrease in income taxes is generally
attributed to changes from period to period in sales and
expenses.  Net income after taxes was $153,000 or $0.01 per share
for the three months ended May 31, 2007 as compared to net income
after taxes of $226,000 or $0.02 per share for the three months
ended May 31, 2006.  The decrease in net income after taxes was
primarily due to the decrease in sales, along with a lesser
decrease in total cost of sales and expenses.

     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.  Although sales have
grown in recent years, we experienced a decrease in sales in 2007
compared to the prior year (a decrease of $91,000), primarily due
to the downturn we experienced in the third and fourth quarters
of fiscal 2007.  Such decrease in sales continued into the first
quarter of fiscal 2008.   While sales have decreased in 2007,
total cost of sales and expenses also decreased by a relatively
comparable amount ($83,000) in fiscal 2007 compared to fiscal
2006.   Total cost of sales and expenses also decreased in the
first quarter of fiscal 2008 compared to the prior year period
but at a lesser rate than the decrease in sales for the periods.

Operations Outlook

     Since fiscal 2005, we have been going through a period of
reassessing our direction in order to increase value for our
shareholders.  Our business, though reasonably healthy, did not
grow to the degree management anticipated from 2002 to 2005.
While the sales level of $2,880,000 reached during fiscal 2005
was at the time an all time high for the Company, it was not
significantly more than the sales level we achieved in 2004
($2,734,000), 2003 ($2,690,000) or 2002 ($2,550,000). The plateau
of sales during that four years was in contrast to the greater
sales growth the Company experienced in certain years prior to
2002.  Based upon these observations, we tried to learn what
could be done to stimulate growth and recapture the promise of
our early years.  As a result, we assembled a business plan and
began to make changes consistent with such plan.  The plan showed
us that developments coming out of our R&D were not reaching the
marketplace and therefore, not commanding their proper attention.
Through this teamwork of R&D with marketing, we revamped our web
site, streamlined our pricing structure and reached out to our
key customers and agents. We believe the business plan made clear
the necessity of hiring a Sales/Marketing executive along with
back up technical service help, both of which have 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 in order to place
greater emphasis on business growth.  All of the foregoing
resulted in strong sales growth and we achieved $3,701,000 in
sales for fiscal 2006 which was $821,000 or 28.5% greater than
the prior year.  Nevertheless, in fiscal 2007, sales decreased to
$3,610,000, a decrease of 2.5% from the prior year.  Such
decrease was primarily due to the downturn in sales in the third
and fourth quarters of 2007 which has continued into the first
quarter of fiscal 2008.   During these periods of reduced sales,
we have especially seen a major decline in sales of security inks
for the credit card market which had been a key area of our
growth in recent periods.   We are confident, however, that the
decrease in our overall sales is simply a temporary downturn
which we do not expect will continue.  Whether or not our credit
card security inks business regains its strength, we expect that
sales in other areas will improve.

     With regard to the net income we have achieved in recent
years, we recognize that net income has not increased like our
revenues have increased.   When we began to reassess our
direction in fiscal 2005, we placed an emphasis on sales growth
which was achieved, although as mentioned above, it has now taken
a downturn.  We recognize that we still have to gain more control
over our costs and expenses so that we can improve our overall
results.  This is something we are currently undertaking and we
have already instituted certain measures in this regard.  Some of
these measures have

<PAGE>

already had a positive effect such as the
overall decrease in selling, general and administrative for
fiscal 2007 compared to fiscal 2006.

Liquidity and Capital Resources

     Our primary source of funds is cash flow from operations in
the normal course of selling products.  On May 31, 2007, we had
working capital of $2,599,000, a debt to equity ratio of 0.19 to
1, and stockholders equity of $3,565,000 compared to working
capital of $2,595,000, a debt to equity ratio of 0.22 to 1, and
stockholders equity of $3,490,000 on May 31, 2006.  On May 31,
2007, we had $1,686,000 in cash and cash equivalents, total
assets of $4,230,000 and total liabilities of $665,000, compared
to $1,733,000 in cash and cash equivalents, total assets of
$4,262,000 and total liabilities of $771,000 on May 31, 2006.

     Net cash provided by operating activities for the three
months ended May 31, 2007 was $219,000 which was primarily the
result of net income of $153,000, plus decreases in prepaid
expenses of $20,000 and increases in accrued expenses of $63,000
and taxes payable of $68,000, offset by increases in accounts
receivable of $50,000 and decreases in accounts payable of
$29,000.   Net cash provided by operating activities for the
three months ended May 31, 2006 was $475,000 which was primarily
the result of net income of $226,000, plus decreases in accounts
receivable of $65,000 and prepaid expenses of 22,000, and
increases in accounts payable of $24,000, accrued expenses of
$15,000 and taxes payable of $131,000, offset by increases in
inventories of $33,000.  Net cash used by investing activities
for the three months ended May 31, 2007 was $46,000 compared to
$23,000 for the three months ended May 31, 2006 which change was
primarily due to an increase in equipment purchases.  For the
three months ended May 31, 2007, net cash used by financing
activities was $239,000 and was $235,000 for the three months
ended May 31, 2006 which was primarily due to the payment of
dividends which occurred in both the first three months of fiscal
2008 and the first three months of fiscal 2007.

     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
our contemplated cash requirements for more than the next 12
months.  Our contemplated cash requirements for the balance of
fiscal 2008 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.

<PAGE>

     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 - We have adopted disclosure-only
provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation," and SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an Amendment of FASB
Statement No. 123."  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.

     In December 2004, the FASB issued Statement of Financial
Accounting Standards ("SFAS") No. 123(R), "Share-Based Payment".
SFAS 123R revises SFAS No. 123 and supersedes APB 25 to require
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.  That cost will
be recognized over the vesting period during which an employee is
required to provide service in exchange for the award.  On
April 14, 2005, the Securities and Exchange Commission issued a
ruling that amended the effective date for SFAS 123R. As a
result, we will adopt SFAS 123R on March 1, 2006.

Other Information

     Subsequent to the end of fiscal 2006, the Company approved
the adoption of a dividend policy under which the Company will
issue a regular annual cash dividend on shares of its 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, in April 2006, the
Board of Directors declared and the Company paid the first
regular annual cash dividend of $0.02 per share in May 2006.  In
addition, in December 2006 and considering our cash position, the
Board of Directors declared a special cash dividend of $0.02 per
share which was paid on January 3, 2007.   In April 2007, the
Board of Directors declared and the Company paid in May 2007 the
second regular annual cash dividend of $0.02 per share.

     In August 2001, our Board of Directors 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
three months ended May 31, 2007, no repurchases were made under
this program.  To date, a total of 331,500 shares have been
repurchased at a cumulative cost of $195,766.

Off-Balance Sheet Arrangements

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


<PAGE>


Item 3.   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 May 31, 2007, 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.

<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.

     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 Principal 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: July 12, 2007               By:  /s/ Murray S. Cohen
                                        Murray S. Cohen,
                                        Chairman of the Board



Dated: July 12, 2007               By:  /s/ James Ivchenko
                                        James Ivchenko,
                                        President
                                        (Principal Financial Officer)


<PAGE>



                           EPOLIN, INC. AND SUBSIDIARY

                              FINANCIAL STATEMENTS

                    THREE MONTHS ENDED MAY 31, 2007 AND 2006














<PAGE>

                                    CONTENTS

                                                                          Page
                                                                          ----

Accountant's Review Report                                                 1

Consolidated Financial Statements:

    Consolidated Balance Sheets                                          2 - 3

    Consolidated Statements of Income                                      4

    Consolidated Statements of Stockholders' Equity                        5

    Consolidated Statements of Cash Flows                                  6

Notes to Consolidated Financial Statements                               7 - 20



<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 May 31, 2007 and 2006 and the related Consolidated
Statements of Income, Stockholders' Equity, and Cash Flows for the three-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.



/s/ Weismann Associates LLC
---------------------------
Weismann Associates LLC
Branchburg, NJ 08876


June 13, 2007


                                       1
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS

                                                                      May 31,
                                                           ----------------------------
                                                               2007            2006
                                                           ------------    ------------
<S>                                                        <C>                <C>
Current assets:
  Cash and cash equivalents                                $  1,685,540       1,732,820
  Accounts receivable                                           596,625         631,102
  Inventories                                                   656,249         681,280
  Prepaid expenses                                               57,781          40,884
  Prepaid taxes                                                     470              --
  Deferred tax assets-current portion                            10,542           6,016
                                                           ------------    ------------

    Total current assets                                      3,007,207       3,092,102
                                                           ------------    ------------

Plant, property and equipment - at cost:
  Land                                                           81,000          81,000
  Building and improvements                                     710,758         704,578
  Laboratory equipment                                          280,368         243,958
  Office equipment                                              195,388         117,491
  Leasehold improvements                                        456,790         449,190
                                                           ------------    ------------

    Total                                                     1,724,304       1,596,217

  Less:  Accumulated depreciation and amortization              878,166         807,816
                                                           ------------    ------------

    Net plant, property and equipment                           846,138         788,401
                                                           ------------    ------------
Other assets:
  Deferred tax assets-non current portion                       146,111         166,132
  Cash value - life insurance policy                            230,667         214,911
                                                           ------------    ------------

    Total other assets                                          376,778         381,043
                                                           ------------    ------------

    Total                                                  $  4,230,123       4,261,546
                                                           ============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       2
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                               May 31,
                                                                     ----------------------------
                                                                         2007            2006
                                                                     ------------    ------------
<S>                                                                  <C>                   <C>
Current liabilities:
  Accounts payable                                                   $     23,112          35,719
  Accrued expenses                                                        308,322         322,285
  Taxes payable:
    Payroll                                                                 1,889           1,653
    Income                                                                 75,194         137,303
                                                                     ------------    ------------

    Total current liabilities                                             408,517         496,960
                                                                     ------------    ------------


Other liabilities - Deferred compensation                                 256,450         274,492
                                                                     ------------    ------------

      Total liabilities                                                   664,967         771,452
                                                                     ------------    ------------
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;
    12,915,000 and 12,890,000 shares issued, and 11,966,355
    shares outstanding at 2007 and 2006, respectively                   2,364,693       2,357,193
    Paid-in capital                                                        62,111          44,700
    Retained earnings                                                   1,489,434       1,418,283
                                                                     ------------    ------------

      Total                                                             3,916,238       3,820,176
  Less: Treasury stock - at cost                                          351,082         330,082
                                                                     ------------    ------------

    Total stockholders' equity                                          3,565,156       3,490,094
                                                                     ------------    ------------

    Total                                                            $  4,230,123       4,261,546
                                                                     ============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        3
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                    THREE MONTHS ENDED MAY 31, 2007 AND 2006

                                                               2007            2006
                                                           ------------    ------------
<S>                                                        <C>                <C>
Sales                                                      $    842,001       1,094,070
                                                           ------------    ------------
Cost of sales and expenses:
  Cost of sales                                                 328,656         438,918
  Selling, general and administrative                           295,999         296,116
                                                           ------------    ------------

     Total                                                      624,655         735,034
                                                           ------------    ------------

Operating income                                                217,346         359,036
                                                           ------------    ------------

Other income:
  Rental income                                                      --           4,500
  Interest                                                       14,940           5,542
                                                           ------------    ------------

    Total other income                                           14,940          10,042
                                                           ------------    ------------

Income before taxes                                             232,286         369,078

Income taxes                                                     79,510         143,179
                                                           ------------    ------------

Net income                                                 $    152,776         225,899
                                                           ============    ============

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       11,964,806      11,959,942
                                                           ============    ============

  Fully diluted number of common shares outstanding          12,003,424      12,053,560
                                                           ============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       4
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    THREE MONTHS ENDED MAY 31, 2007 AND 2006


                           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, 2006    12,859,000   $2,348,483        6,486    1,431,711       918,645     (325,532)    3,461,148

Dividends paid                     --           --           --     (239,327)           --           --      (239,327)

Common stock issued for
  stock option                 31,000        8,710       38,214           --            --           --        46,924

Treasury stock purchased           --           --           --           --         5,000       (4,550)       (4,550)

Net income                         --           --           --      225,899            --           --       225,899
                           ----------   ----------   ----------   ----------    ----------   ----------    ----------

Balance - May 31, 2006     12,890,000   $2,357,193       44,700    1,418,283       923,645     (330,082)    3,490,094
                           ==========   ==========   ==========   ==========    ==========   ==========    ==========



Balance - March 1, 2007    12,915,000   $2,364,693       62,111    1,575,985       948,645     (351,082)    3,651,707

Dividends paid                     --           --           --     (239,327)           --           --      (239,327)

Net income                         --           --           --      152,776            --           --       152,776
                           ----------   ----------   ----------   ----------    ----------   ----------    ----------

Balance - May 31, 2007     12,915,000   $2,364,693       62,111    1,489,434       948,645     (351,082)    3,565,156
                           ==========   ==========   ==========   ==========    ==========   ==========    ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        5
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    THREE MONTHS ENDED MAY 31, 2007 AND 2006


                                                                         2007            2006
                                                                     ------------    ------------
<S>                                                                  <C>                  <C>
Cash flows from operating activities:
  Net income                                                         $    152,776         225,899
  Adjustments to reconcile net income to net cash provided by
    operating activities:
      Depreciation and amortization                                        19,315          13,669
      Deferred tax expense                                                  6,060           4,174
      Stock based compensation                                                 --          38,214
      Obligation under deferred compensation agreement                    (29,414)        (32,000)
  (Increase) decrease in:
      Accounts receivable                                                 (49,673)         64,549
      Inventories                                                          (4,601)        (33,407)
      Prepaid expenses                                                     19,986          22,188
      Prepaid taxes                                                         1,450           1,599
  Increase (decrease) in:
      Accounts payable                                                    (28,670)         23,908
      Accrued expenses                                                     63,417          15,230
      Taxes payable                                                        68,658         131,449
                                                                     ------------    ------------

        Net cash provided by operating activities                         219,304         475,472
                                                                     ------------    ------------

Cash flows from investing activities:
  Increase in cash value - life insurance policy                           (3,409)             --
  Payments for equipment                                                  (42,374)        (22,864)
                                                                     ------------    ------------

        Net cash used by investing activities                             (45,783)        (22,864)
                                                                     ------------    ------------

Cash used from financing activities:
  Issuance of common stock                                                     --           8,710
  Treasury stock purchased                                                     --          (4,550)
  Dividends paid                                                         (239,327)       (239,327)
                                                                     ------------    ------------

        Net cash used by financing activities                            (239,327)       (235,167)
                                                                     ------------    ------------

Increase (decrease) in cash                                               (65,806)        217,441

Cash and cash equivalents:
  Beginning                                                             1,751,346       1,515,379
                                                                     ------------    ------------

  Ending                                                             $  1,685,540       1,732,820
                                                                     ============    ============
Supplemental information:
  Income taxes paid                                                  $      3,242           5,955
                                                                     ============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        6
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006

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:

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-KSB for
the fiscal year ended February 28, 2007. 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 three-month interim period ended May 31, 2007
are not necessarily indicative of the results of operations for the fiscal year
ending February 28, 2008.

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 53.6% of the
Company's trade receivables at May 31, 2007.

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.

                                       7
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006


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

Principles of Consolidation - The accompanying Consolidated Financial Statements
include the accounts of the Company and Subsidiary. Inter-company transactions
and balances have been eliminated in consolidation. Condensed consolidating
financial statements as of May 31, 2007 and for the three months then ended are:

<TABLE>
<CAPTION>

                      CONDENSED CONSOLIDATING BALANCE SHEET

                                           Epolin           Epolin
                                             Inc.        Holding, Corp.     Eliminations      Consolidated
                                       --------------    --------------    --------------    --------------
<S>                                    <C>                      <C>           <C>                 <C>
Current assets                         $    2,690,092           317,115                --         3,007,207
Non-current assets                          1,540,031           645,805          (962,920)        1,222,916
                                       --------------    --------------    --------------    --------------
       Total                           $    4,230,123           962,920          (962,920)        4,230,123
                                       ==============    ==============    ==============    ==============

     Total liabilities                        664,967           126,923          (126,923)          664,967
                                       --------------    --------------    --------------    --------------

Stockholders' equity:
  Common stock                              2,364,693                --                --         2,364,693
  Additional paid-in capital                   62,111                --                --            62,111
  Retained earnings                         1,489,434           835,997          (835,997)        1,489,434
  Treasury stock                             (351,082)               --                --          (351,082)
                                       --------------    --------------    --------------    --------------

     Total stockholders' equity             3,565,156           835,997          (835,997)        3,565,156
                                       --------------    --------------    --------------    --------------

       Total                           $    4,230,123           962,920          (962,920)        4,230,123
                                       ==============    ==============    ==============    ==============

<CAPTION>

                   CONDENSED CONSOLIDATING STATEMENT OF INCOME

                                           Epolin           Epolin
                                             Inc.        Holding, Corp.     Eliminations      Consolidated
                                       --------------    --------------    --------------    --------------
<S>                                    <C>                      <C>           <C>                 <C>
Sales                                  $      842,001                --                --           842,001
Other revenue                                      --            24,435           (24,435)               --
                                       --------------    --------------    --------------    --------------
       Total                                  842,001            24,435           (24,435)          842,001
                                       --------------    --------------    --------------    --------------

Cost of sales                                 328,656                --                --           328,656
Selling, general and administrative           313,704             6,730           (24,435)          295,999
                                       --------------    --------------    --------------    --------------

       Total                                  642,360             6,730           (24,435)          624,655
                                       --------------    --------------    --------------    --------------

Operating income                              199,641            17,705                --           217,346

Other income - interest                        10,757             4,183                --            14,940
                                       --------------    --------------    --------------    --------------

Income before taxes                           210,398            21,888                --           232,286

Income taxes                                   78,060             1,450                --            79,510
                                       --------------    --------------    --------------    --------------

Net income                             $      132,338            20,438                --           152,776
                                       ==============    ==============    ==============    ==============
</TABLE>

                                        8
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006

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 current 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.

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.

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 $19,315 and $13,669 for
the three months ended May 31, 2007 and 2006, 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.

                                       9
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006

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 $9,702 through May 31, 2007 and
$3,826 through May 31, 2006, 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 $1,769 and $4,476 for the
three months ended May 31, 2007 and 2006, respectively.

                                       10
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006

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

Stock-based Compensation - Prior to March 1, 2006 the Company accounted for
stock based compensation under Statement of Financial Accounting Standards No.
123 Accounting for Stock-Based Compensation (FAS 123). As permitted under this
standard, compensation cost was recognized using the intrinsic value method
described in Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25). Effective March 1, 2006, the Company has adopted
Statement of Financial Accounting Standards ("SFAS") No. 123(R), "Share-Based
Payment". SFAS 123R revises SFAS No. 123 and supersedes APB 25 to require
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. As a result of the adoption of
FAS 123R, stock-based compensation expense recognized for the period ended May
31, 2007 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.

         During the three months ended May 31, 2007 and 2006, the Company
recognized stock-based compensation expenses of $5,688 and $5,214, respectively,
related to outstanding stock options according to the provisions of FAS 123R,
using the modified-prospective transition method.

         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 three months ended May 31, 2007 and 2006 was $.18 and
$.10, 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:

Three months ended May 31,                               2007          2006
                                                      ----------    ----------
         Weighted average expected life in years               4             3
         Dividends per share                                0.04          0.02
         Volatility                                          6.0%          6.0%
         Risk-free interest rate                             4.9%          4.5%


                                       11
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006

Note C - Inventories:
                                                          May 31,
                                                 -------------------------
                                                    2007           2006
                                                 ----------     ----------
  Raw materials and supplies                     $   66,132         62,756
  Work in process                                   217,501        191,472
  Finished goods                                    372,616        427,052
                                                 ----------     ----------

  Total                                          $  656,249        681,280
                                                 ==========     ==========

Note D - Income Taxes:

1. Federal and State deferred tax assets include:

                                                    2007           2006
                                                 ----------     ----------
    Temporary differences:
       Accelerated amortization                  $   24,990         50,546
       Deferred compensation                        129,217        119,360
       Stock based compensation                       2,446          2,242
                                                 ----------     ----------
          Total                                     156,653        172,148

    Current portion                                  10,542          6,016
                                                 ----------     ----------

    Non-current portion                          $  146,111        166,132
                                                 ==========     ==========

2. Income tax expense:
                                                    2007           2006
                                                 ----------     ----------
    Current:
       Federal                                   $   59,300        110,241
       State                                         14,150         28,764
                                                 ----------     ----------

          Total current                              73,450        139,005
                                                 ----------     ----------
    Deferred:
       Federal                                        4,460          3,300
       State                                          1,600            874
                                                 ----------     ----------

          Total deferred                              6,060          4,174
                                                 ----------     ----------

                 Total                           $   79,510        143,179
                                                 ==========     ==========

                                       12
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006

Note E - Treasury Stock:

         Consists of 948,645 shares as of May 31, 2007 at a net cost of and
923,645 shares as of May 31, 2006 at a net cost of $330,082, respectively.

         The Company purchased 5,000 shares during the three months ended May
31, 2006.

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 three months ended May 31, 2007, approximately 37.4% of
sales were to three customers. Two of these customers, located in the Eastern
United States, accounted for 30.5% of sales. During the three months ended May
31, 2006, approximately 40.6% of sales were to four customers, two of these
customers, located in the Eastern United States, accounted for 29.6% of sales.

Note G - 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. Under the terms
of the agreement, the tenant is to pay a base rent of $18,000 per year.

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 $11,750 and
$12,683 for the three months ended May 31, 2007 and 2006, respectively.


                                       13
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006

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 May 31, 2007.

         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 May 31, 2007
totaled 686,000. Options cancelled or expired for all years totaled 240,000. All
cancelled options are available for future grants.

         A summary of the status of the Company's 1998 stock option plan as of
May 31, 2007, and the changes during the three months ended May 31, 2007 is
presented below:

                                                             Weighted-Average
Fixed Options:                                     Shares      Exercise Price
--------------                                   ---------     --------------
Balance - March 1, 2006                            457,000         $.42
         Granted                                        --           --
         Cancelled and expired                     (85,000)         .25
         Exercised                                 (56,000)         .28
                                                 ---------

Balance - February 28, 2007                        316,000          .37
          Granted                                       --           --
          Cancelled and expired                         --           --
          Exercised                                     --           --
                                                 ---------

Balance - May 31, 2007                             316,000         $.46
                                                 =========

Exercisable at May 31, 2007                        155,000

                                       14
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006

Note H - Employee Benefits (continued):

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. In connection
         with this agreement, compensation in the amount of $33,000 was charged
         to selling, general and administrative expenses for the three months
         ended May 31, 2006.


Stock Option Plans - The following table summarizes information about fixed
stock options outstanding at May 31, 2007:
<TABLE>
<CAPTION>

                 Outstanding Options                          Exercisable Options
---------------------------------------------------    -------------------------------
                      Number       Weighted-average       Number
  Range of         Outstanding        Remaining         Exercisable    Weighted-average
Exercise Price     at 5/31/07      Contractual Life     at 5/31/07      Exercise Price
--------------     -----------     ----------------    ------------     --------------
<S>                    <C>               <C>                 <C>            <C>
    $.41               116,000           6.7                 55,000         .41
     .51               100,000           2.4                100,000         .51
     .54               200,000           3.1                100,000         .54
</TABLE>

There are 498,000 options attributable to future grants.

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.

                                       15
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006


Note I - Segment Reporting (continued):

Sales by geographic area are as follows:


                                                  Three Months Ended May 31,
                                                 ----------------------------
                                                     2007            2006
                                                 ------------    ------------
         United States                           $    661,267         816,459
         Asia                                         154,946         215,835
         Europe                                        22,288          56,618
         Other nations                                  3,500           5,158
                                                 ------------    ------------

         Total                                   $    842,001       1,094,070
                                                 ============    ============

         One customer, located in the Southeastern United States, accounted for
more than 10% of revenues from continuing operations. This customer accounted
for 16.4% of sales of which 4.6% was near infrared dyes and 11.8% was security
inks.

         Long-lived assets include net property and equipment. The Company had
long-lived assets of $846,138 and $788,401 located in the United States at May
31, 2007 and 2006, respectively.


Note J - Accrued Expenses:

Accrued expenses consisted of the following as of May 31, 2007 and 2006,
respectively:


                                                     2007            2006
                                                 ------------    ------------
         Salaries and wages                            16,104          23,462
         Employment agreement                         273,150         271,585
         Professional fees                             19,068          19,100
         Property taxes                                    --           8,138
                                                 ------------    ------------

         Total accrued expenses                  $    308,322         322,285
                                                 ============    ============

                                       16
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006

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:

                                                  Three Months Ended May 31,
                                                 ----------------------------
                                                     2007            2006
                                                 ------------    ------------
 Basic Earnings Per Common Share:

Net income                                       $    152,776         225,899

Average common shares
  outstanding                                      11,964,806      11,959,942
                                                 ============    ============

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

Diluted Earnings Per Common Share:

Net income                                       $    152,776         225,899
                                                 ============    ============

Average common shares
outstanding                                        11,964,806      11,959,942

Common shares issuable with respect
to options issued to employees
with a dilutive effect                                 38,618          93,618
                                                 ------------    ------------

Total diluted common shares
  outstanding                                      12,003,424      12,053,560
                                                 ============    ============

Diluted earnings per
  common share                                   $       0.01            0.02
                                                 ============    ============

                                       17
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006

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 $24,435 for the three months ended May 31, 2007 and 2006,
respectively.

Future minimum payments for the current option period:

              Fiscal years ending February:
              -----------------------------
                             2008                     $     73,305
                             2009                           97,740
                             2010                           97,740
                             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 $2,586 and $6,020 was charged to selling, general and administrative expenses
for the three months ended May 31, 2007 and 2006, 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.

                                       18
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006

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 - 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 May 31, 2007 and 2006 was $63,150 and $76,585, respectively.

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.

                                       19
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2007 AND 2006

Note M - Dividends:

         In April 2007, the Company's Board of Directors declared a cash
dividend of two cents per share on all common shares outstanding. The dividend,
in the amount of $239,327 was paid on May 14, 2007 to shareholders of record on
April 30, 2007.

         In April 2006, the Company's Board of Directors declared a cash
dividend of two cents per share on all common shares outstanding. The dividend,
in the amount of $239,327 was paid on May 1, 2006 to shareholders of record on
April 20, 2006.

Note N - 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 $79,594 and
$127,237 were included in cost of sales for the three months ended May 31, 2007
and 2006, respectively. Expenditures for fiscal year 2008 are projected to
remain at approximately the same level as in fiscal 2007.

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.

                                       20