UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~SECURITIES~~For ~~EXCHANGE~~the ~~ACT~~fiscal OFyear ~~1934~~ended FEBRUARY 29, 2012

~~For~~o ~~the~~TRANSITION ~~fiscal~~REPORT ~~year~~PURSUANT ~~ended~~TO ~~FEBRUARY~~SECTION ~~28,~~13 ~~2011~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-17741

EPOLIN, INC.

(Exact Name of Registrant as Specified in Its Charter)

New Jersey (State or other jurisdiction of incorporation or organization) 22-2547226 (I.R.S. Employer Identification Number)

New Jersey		22-2547226
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

358-364 Adams Street Newark, New Jersey (Address of principal executive offices) 07105 (Zip Code)

358-364 Adams Street Newark, New Jersey		07105
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (973) 465-9495

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock (no par value)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

~~Yes~~Indicate oby Nocheck mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x

Indicate by check mark ifwhether the registrant is(1) ~~not~~has ~~required~~filed toall ~~file~~ reports ~~pursuant~~required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

~~Yes~~The oaggregate Nomarket xvalue of the voting and non-voting common equity held by non-affiliates of the registrant (8,484,310 shares) as of August 31, 2012, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $2,036,000. The number of shares outstanding of the Common Stock (no par value) of the registrant as of the close of business on May 25, 2012 was 12,366,355.

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (8,484,310 shares) as of August 31, 2011, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $3,224,000. The number of shares outstanding of the Common Stock (no par value) of the registrant as of the close of business on May 25, 2011 was 12,266,355.

Documents Incorporated by Reference: None

EPOLIN, INC.

TABLE OF CONTENTS

		Page
PART I
PART I
		Page
Item 1.	Business	3	3
Item 1A.	Risk Factors	6	9
Item 1B.	Unresolved Staff Comments	9	12
Item 2.	Properties	9	12
Item 3.	Legal Proceedings	9	13
Item 4.	~~[Removed~~Mine ~~and~~Safety ~~Reserved]~~Disclosures	9	13
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10	13
Item 6.	Selected Financial Data	12	16
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12	16
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	18	23
Item 8.	Financial Statements and Supplementary Data	18	23
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	18	23
Item 9A.	Controls and Procedures	18	23
Item 9B.	Other Information	19	24
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	19	25
Item 11.	Executive Compensation	22	28
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	25	32
Item 13.	Certain Relationships and Related Transactions, and Director Independence	25	34
Item 14.	Principal Accountant Fees and Services	26	34
PART IV
Item 15.	Exhibits and Financial Statement Schedules	27	35
	Signatures	28	36

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 in Part I, Item 1A “Risk Factors”. The Company does not intend to update these forward-looking statements.

PART I

Item 1. Business.

Introduction

Epolin, Inc. (referred to herein as “Epolin”, the “Company”, “we”, “us” and “our”), which was incorporated in the State of New Jersey in May 1984, is a specialized chemical company primarily engaged in the manufacturing, marketing, research and development of dyes and dye formulations. Our business is heavily weighted towards the development, manufacture and sale of near infrared dyes. Applications for these dyes cover several markets that include laser protection, welding, sunglasses, optical filters, glazing and imaging and security inks and tagants.

Our wholly-owned subsidiary, Epolin Holding Corp. (“Epolin Holding”), was incorporated in the State of New Jersey as a real estate holding company. Epolin Holding became a wholly-owned subsidiary in January 1998.

Following completion of Epolin’s public offering in 1989, our revenues were then primarily generated through the synthesis and sale of specialty organic chemical products. Building upon this base, Epolin singled out near infrared dye technology as a most promising product line and since 1991 has emphasized the development, manufacture and sale of these dyes.

Paralleling the growth of the dye business, we maintain a level of production and sales of specialty products made on a custom basis. These include additives for plastics, thermochromic materials for use in paints as well as other specialty chemicals made in low volume to sell at prices that reflect the value of the product. However, unlike the dye business, we do not expect our specialty chemical business to grow.

We sell our products to the manufacturers of plastics/resins, credit cards, electronics, glass, and other basic materials primarily in the United States, Asia, and Europe.

Our principal offices are located at 358-364 Adams Street, Newark, New Jersey 07105 and our telephone number is (973) 465-9495. Epolin’s web-site can be accessed at www.epolin.com.

Unless the context otherwise requires, all references herein to “Epolin” or the “Company” refer to Epolin, Inc. and its consolidated subsidiary, Epolin Holding Corp.

Infrared Dyes

Based upon our years of experience in the specialty dye business, we believe that Epolin possesses the largest offering of near infrared (NIR) dyes in the world. Our Epolight™ NIR dyes absorb in the near infrared region of the electromagnetic light spectrum which is 700nm to 1600nm. However, we are unaware of any statistical evidence available to support or contradict the belief that Epolin is the largest NIR dye producer.

Epolight™ dyes are sold as pure crystalline dyes or formulated mixtures. We also incorporate our dyes into liquid inks and thermoplastics pellets. We have approximately 275 to 300 product formulations and have created a more vertically integrated product line over the past three years to address more applications.

Our products can be divided into five distinct product groups: dyes, dye blends, inks and coatings, laminate pellets and other.

We sell our products into three primary market segments. Any product that does not fall into any of the three primary markets is characterized as Custom.

Eye Protection

Our eye protection products are used in plastic lenses, eyeglasses, goggles, windows and shields that protect eyes from high energy ultraviolet (UV), visible and near infrared radiation. Typical end-users include welders, military, industrial and medical laser users. The eye protection market is concentrated with several major and medium-sized customers in the United States, Asia and Europe.

We believe our products are important because our dyes protect the eyes by absorbing the harmful wavelengths of light while simultaneously allowing visible light transmission. Consumers are increasingly aware of the risk of macular degeneration due to long term exposure to the sun’s harmful NIR light waves. This concern has generated interest in the Company’s products for use in sunglasses.

Security Ink

Our inks and coatings are used on credit cards as well as security inks for documents and packaging. Typical end-users include banks, printers, publishers and consumer goods companies. The ink and coatings market is worldwide with several security ink makers in the United States, Europe and Asia. Our products make transparent ATM cards readable by ATM machines. Our near infra-red (NIR) dyes are almost invisible and mask important data or otherwise tag products by code as genuine. Our products are viable tools to thwart counterfeiting and fraud.

Light Management

Our light Management products are used in laser equipment, electronic displays, night vision systems, solar heat shields, heat and light sensors, imaging systems, plasma televisions and data storage discs. Typical end-users include a large variety of industrial, automotive, aerospace, construction and electronic users. The light Management market includes many diverse market niches worldwide. Our light Management dyes allow for the filtering and manipulation of visible light and NIR light for many applications.

Specialty Chemical Products

We also maintain a level of production and sales of specialty products made on a custom basis. These include additives for plastics, thermochromic materials for use in paints as well as other specialty chemicals made in low volume to sell at prices that reflect the value of the product. The production and sale of these products represents less than 10% of the overall business.

Effect of Compliance with Government Regulation

Manufacturers of chemical products are subject to extensive federal and state environmental regulations. Although we believe that our manufacturing processes do not result in the emission of volatile organic vapors into the atmosphere, and that we are not in violation of any state or federal environmental regulations, Epolin is required to comply with such regulations with respect to manufacture, storage and/or disposal of toxic materials. Our facilities are also subject to inspection to ascertain whether we have complied with State environmental regulations. To our knowledge, we are in compliance with present regulations. However, no assurances can be given that future regulations will not be adopted, compliance with which will result in substantial expense to, and otherwise adversely affect our business. We also register all new and proprietary products with the Toxic Substances Control Agency (TSCA) which is required in order for us to offer for sale any new chemical product. No assurances can be given that such registrations will be approved for any new product.

During the years ended February 2829, ~~2011~~2012 and February 28, ~~2010~~2011, we expended approximately $2535,000 and 23$25,000, respectively, to maintain compliance with certain federal, state and city government regulations relative to the production of near infrared dyes and specialty chemicals. Actual costs to be incurred in future periods may vary from the foregoing costs, given inherent uncertainties in evaluating such costs. Subject to the imprecision in estimating such future costs, we do not expect that any sum we may have to pay in connection with such matters will have a materially adverse effect on our financial condition or results of operations in any one year.

4The New Jersey Industrial Site Recovery Act, N.J.S.A. 13:1k-6 et seq. (“ISRA”) requires an environmental investigation and remediation of properties prior to the sale of most manufacturing businesses or properties. In anticipation of a potential sale or similar transaction involving the Company, we engaged a Licensed Site Remediation Professional (“LSRP”) and special environmental counsel in the State of New Jersey. Pursuant to ISRA, LSRPs will be responsible for the oversight of the environmental investigation and remediation on a site subject to ISRA compliance. In anticipation of triggering ISRA, we have conducted certain testing to date, including but not limited to obtaining soil and groundwater samples, and further testing and other related actions are expected to be done as part of this ongoing process. Future remediation costs estimated for the year ended February 28, 2013 approximate $70,000. Our 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. Due to the execution of the Merger Agreement (see "Recent Events" below), we became subject to ISRA which requires that our facility be remediated or that we submit a Remediation Certification to the New Jersey Department of Environmental Protection pursuant to N.J.A.C. 7:26B prior to the transfer of ownership. Accruals for estimated losses from environmental remediation and to obtain the necessary approvals in conjunction with the potential sale of our company in the amount of $74,111 were charged to selling, general and administrative expenses as of February 29, 2012.

In order to facilitate the environmental approvals which will be necessary in conjunction with any potential sale or similar transaction involving the Company, we have engaged a licensed site remediation professional and special environmental counsel in the State of New Jersey. Under the New Jersey Site Recovery Act (ISRA), the Company will be responsible for certain environmental investigations and remediation, if any, which requirements to comply are triggered by certain transaction including the sale of property or the sale of a business. Pursuant to the New Jersey Site Remediation Reform Act enacted in 2009, licensed site remediation professionals will be responsible for the oversight of the environmental investigation and remediation on a site subject to ISRA compliance. In anticipation of triggering ISRA, we have conducted certain testing to date, including but not limited to obtaining soil and groundwater samples, and further testing and other related actions are expected to be done as part of this ongoing process. Our 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 the financial statements included with the report. During the year ended February 28, 2011 and 2010, we incurred costs of approximately $66,000 and $17,000 related to these activities. Although the Company cannot estimate with certainty future costs of environmental compliance with ISRA, we do not presently anticipate such costs will have a material effect on our liquidity, results from operations or our financial condition in future periods. In this regard, we have estimated future remediation costs for the year ended February 29, 2012 to be approximately $69,000. Should such facts and circumstances change, however, based upon results of future testing, we may have to revise our outlook.

Sources and Availability of Raw Materials

We purchase chemicals from several large chemical manufacturers and then further processes them into our saleable products. Although we limit ourselves to a relatively small number of suppliers, we are not restricted to such suppliers, and Management believes the availability to such raw materials is widespread. During the year ended February 2829, ~~2011~~2012, no significant difficulties were encountered in obtaining adequate supplies of raw materials. We typically purchase materials in large quantities and volumes to provide up to a two year supply of certain raw materials.

Research and Development

Our research and development efforts are devoted to (i) developing new or improved products to satisfy defined market needs, (ii) providing quality technical services to assure the success of our products for our customers’ applications, (iii) providing technology for improvements to our products, processes and applications, and (iv) providing support to our manufacturing plant for cost reduction, productivity and quality improvement programs.

We have committed resources to research and development of new dyes and to our capability to provide technical services to customers. New applications are supported by a Director of Research with contributions from his staff including Murray S. Cohen, Ph.D., our Chief Scientist.

During the years ended February 2829, ~~2011~~2012 and February 28, ~~2010~~2011, the amounts spent on research and development activities were approximately $~~374~~340,000 inand ~~each~~$374,000, ~~year~~respectively. All research and development costs are borne by Epolin.

Sales and Distribution

Our internal sales team sells directly to customers on a worldwide basis. We also hire independent distributors and have sales agents in North America, Europe and Asia. In total, we currently sell to customers in twenty nations. We also use our customer-centric website to develop new customers and marketing opportunities at www.epolin.com.

Competition

We experience, in management’s opinion, limited competition in all areas of our business. Management believes that other dye companies do not offer the broad range of dyes nor provide the level of technical service as provided by Epolin. We believe that our extensive product portfolio, technical expertise and customer support are the key factors in our competitiveness.

Technological Obsolescence

The major portion of our product line has been used in protective eyewear since 1976. Yet the field has proven to be an active one and we must anticipate competition to develop.

Epolin has committed itself to make capital investments to maintain its position as a key supplier in this field. There can be no assurance that our dye technology will not be rendered less competitive, or obsolete, by the development of new methods to achieve laser safety and other forms of eye protection. We therefore devote a portion of our R&D effort to new areas of light manipulation which may assume importance in the future.

Patents and Proprietary Protection

We have not generally in the past relied upon patents for protection of our dye business or to provide us with any significant competitive advantage as it relates to our existing product lines. There can be no assurance that others may not independently develop the same, similar or alternative technologies or otherwise obtain access to our proprietary technologies. However, we ~~recently~~ filed a patent application in the United States and Canada for a new class of IR dye ~~compound~~compounds. We ~~Even~~have ifrecently ~~this~~been informed by the U.S. Patent Office that the patent application, isincluding our list of claims, have been granted. However, we cannot guaranty that such will be of commercial benefit to the Company or otherwise offer the Company protection from competing products.

Dependence on Certain Customers

A material portion of our business is dependent on certain domestic customers, the loss of which could have a material effect on operations. During the year ended February 2829, ~~2011~~2012, approximately 2822.7% of sales were to three customers. During the year ended February 28, ~~2010~~2011, approximately 3328.47% of sales were to three customers.

Employees

We presently employ ~~nine~~ten persons on a full time basis. Our employees are not represented by labor unions. We believe that relations with our employees are good.

Available Information

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Such reports, proxy statements and other information may be inspected at the public reference room of the SEC at 100 F Street, N.E., Washington D.C. 20549. Copies of such material can be obtained from the facility at prescribed rates. Please call the SEC toll free at 1-800-SEC-0330 for information about its public reference room. Because we file documents electronically with the SEC, you may also obtain this information by visiting the SEC’s Internet website at http://www.sec.gov.

Recent Events

Merger Agreement

On March 14, 2012, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Polymathes Holdings I LLC, a New Jersey limited liability company (the “Parent”), and Polymathes Acquisition I Inc., a New Jersey corporation and wholly owned subsidiary of the Parent (the “Purchaser”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, Parent has agreed to cause the Purchaser to commence a tender offer (the “Offer”) to purchase all of the outstanding shares of common stock, no par value per share, of the Company (the “Shares”), at a price of $0.22 per Share (the “Offer Price”), paid to the seller in cash, without interest thereon and subject to applicable withholding taxes.

The Merger Agreement provides that the Offer will commence as promptly as practicable (and in any event within 45 days) after the date of the Merger Agreement, and will remain open for at least 20 business days (including the day on which the Offer is commenced). Pursuant to the Merger Agreement, after the consummation of the Offer, and subject to certain conditions set forth in the Merger Agreement, the Parent shall cause the Purchaser to be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and as a wholly owned subsidiary of Parent. Upon completion of the Merger, each Share that is not tendered and accepted pursuant to the Offer (excluding those Shares that are owned by the Company as treasury stock, any Shares owned by the Parent or Purchaser and Shares held by any shareholders who perfect their statutory dissenters rights under New Jersey law) will be canceled and converted into the right to receive the Offer Price in cash (without interest and subject to applicable withholding taxes). If the Purchaser holds 90% or more of the outstanding Shares immediately prior to the Merger, it may effect the Merger as a short-form merger pursuant to the New Jersey Business Corporation Act. Otherwise, the Company may hold a special shareholders’ meeting to obtain shareholder approval of the Merger.

Subject to the terms and conditions of the Merger Agreement, the Company has granted the Purchaser an irrevocable one-time option (the “Top-Up Option”) which provides that if the Purchaser acquires at least 51% of the outstanding Shares in the Offer after the Purchaser’s acceptance of and payment for Shares pursuant to the Offer, the Purchaser will have the option, subject to certain limitations, to purchase from the Company at a price per Share equal to the Offer Price up to the number of additional shares sufficient to cause the Purchaser to own one share more than 90% of the Shares then outstanding on a fully diluted basis, subject to applicable regulatory requirements and there being sufficient authorized Shares available for issuance, to enable the Purchaser to effect a short-form merger under New Jersey law (the “Top-Up Option Shares”), provided that the aggregate purchase price payable for the Top-Up Option Shares shall be paid by the Parent or the Purchaser as follows: (a) the portion of the aggregate purchase price equal to the par value of the Top-Up Option Shares shall be paid in cash and (b) the balance of the remaining aggregate purchase price may be paid in cash or by executing and delivering to the Company a promissory note having a principal amount equal to the balance of the aggregate purchase price for the Top-Up Option Shares, or some combination thereof. The Top-Up Option is exercisable only after the Shares have been accepted for payment pursuant to the Offer.

Completion of the Offer is subject to there being validly tendered in the Offer and not properly withdrawn that number of Shares which, together with the number of Shares, if any, then owned of record by the Parent or the Purchaser or with respect to which the Parent or the Purchaser has, directly or indirectly, voting power, representing at least 51% of all outstanding Shares (determined on a fully diluted basis). In addition, the Offer is subject to other conditions set forth in the Merger Agreement including, but not limited to, the Company having certain minimum amounts of “Adjusted Cash” and “Adjusted Net Working Capital” (as such terms are defined in the Merger Agreement) as of the time the Shares are accepted for payment.

The Merger Agreement contains representations, warranties and covenants of the parties customary for transactions of this type. The Company has also agreed not to solicit or initiate discussions with third parties regarding other proposals to acquire the Company and it has agreed to certain restrictions on its ability to respond to such proposals, subject to the fulfillment of certain fiduciary requirements of the Company’s board of directors. The Merger Agreement also contains customary termination provisions for the Company and Parent and provides that, in connection with the termination of the Merger Agreement under specified circumstances involving competing transactions or a change in the Company’s board of directors’ recommendation, the Company may be required to pay Parent a termination fee of $150,000.

Voting and Tender Agreements

On March 14, 2012, Murray S. Cohen (the Company’s Chairman of the Board) and James Ivchenko (the Company’s President) each entered into a Tender and Voting Agreement (the “Tender and Voting Agreements”) with the Parent and the Purchaser in connection with the Offer and the Merger. Pursuant to the Tender and Voting Agreements, each of Dr. Cohen and Mr. Ivchenko have agreed, among other things, to tender the shares of common stock beneficially owned by each of them in the Offer, and have granted irrevocable proxies to the Parent to vote such shares in favor of the Merger if such vote is required, provided, however, that Dr. Cohen and Mr. Ivchenko may withdraw any tendered Shares at any time following a change in recommendation or the termination or expiration of the Offer without the Purchaser purchasing all of the Shares tendered pursuant to the Offer in accordance with its terms, in which event the proxy shall also terminate. An aggregate of 3,515,545 shares of the Company’s common stock are subject to the Tender and Voting Agreements, representing approximately 28.4% of the Company’s outstanding shares of common stock.

The foregoing descriptions of the Merger Agreement and the Tender and Voting Agreements do not purport to be complete and are qualified in their entirety by reference to the full text of each such agreement, which are filed as Exhibits 2.1, 10.1 and 10.2, respectively, to this report and incorporated herein by reference.

Additional Information

The description of the tender offer described herein is neither an offer to purchase nor a solicitation of an offer to sell securities. The tender offer is being made pursuant to a Tender Offer Statement (including an Offer to Purchase, Letter of Transmittal, and related tender offer documents), which has been filed by Polymathes Acquisition I Inc. and Polymathes Holdings I LLC with the U.S. Securities and Exchange Commission (“SEC”) on May 8, 2012. In addition, on May 11, 2012, Epolin, Inc. filed a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC related to the tender offer. These documents have been mailed to all Company shareholders of record. These documents, as they may be amended or supplemented from time to time, contain important information about the tender offer and the Company’s shareholders are urged to read them carefully before any decision is made with respect to the tender offer. The tender offer materials may be obtained at no charge by directing a request by mail to Epolin, Inc. at 358-364 Adams Street, Newark, New Jersey 07105, or by calling toll-free at (888) 777-1188, and may also be obtained at no charge at the website maintained by the SEC at www. sec.gov.

This Annual Report on Form 10-K has been prepared and filed with the SEC prior to the completion of the Offer and the Merger, and the Company cannot assure that the Offer and subsequent Merger will be completed. Further, this Annual Report on Form 10-K does not consider potential material changes that may occur to the Company as a result of the change in ownership of the Company.

Item 1A. Risk Factors.

Our business involves a high degree of risk. In addition to other information in this report, potential investors should carefully consider the risks and uncertainties described below and the other information in this report before deciding whether to invest in shares of our common stock. Each of the following risks may materially and adversely affect our business, results of operations and financial condition. These risks may cause the market price of our common stock to decline, which may cause you to lose all or a part of the money you paid to buy our common stock.

OPERATING RESULTS MAY FLUCTUATE. Our operating results may fluctuate because of a number of factors, many of which are beyond our control. Some of these factors that affect our results but which are difficult to control or predict are: the reduction, rescheduling or cancellation of orders by customers whether as a result of slowing demand for our products, stockpiling of our products or otherwise; fluctuations in the timing and amount of customer requests for product shipments; fluctuations in product life cycles; changes in the mix of products that our customers buy; competitive pressures on selling prices; the ability of our customers to obtain products from their other suppliers; and general economic conditions.

6DEPENDENCE ON KEY CUSTOMERS. Our customers are concentrated, so the loss of one or more key customers could significantly reduce our revenues. During the year ended February 29, 2012, approximately 22.7% of sales were to three customers. During the year ended February 28, 2011, approximately 28.7% of sales were to three customers.

~~DEPENDENCE~~CONCENTRATION ONOF ~~KEY~~CREDIT ~~CUSTOMERS~~RISKS. At ~~Our~~February ~~customers~~29, ~~are concentrated~~2012, sothree ~~the~~of ~~loss~~our customers represented 43.5% of ~~one~~our ortrade ~~more~~receivables. Such ~~key~~accounts ~~customers~~receivable ~~could~~subject ~~significantly~~us ~~reduce~~to ~~our~~a ~~revenues~~significant concentration of risk. There ~~During~~can ~~the~~be ~~year~~no ~~ended~~assurance ~~February~~that ~~28,~~such ~~2011,~~clients ~~approximately~~will ~~28.7%~~not ofexperience ~~sales~~financial ~~were~~difficulties toor ~~three~~other problems which could delay such customers. ~~During~~in ~~the~~paying ~~year~~for ~~ended~~product ~~February~~on ~~28,~~a ~~2010,~~timely ~~approximately~~basis 33or at all.4% Any ofproblems ~~sales~~with ~~were~~such customers can be expected to ~~three~~have ~~customers~~a material adverse effect on our business.

CONCENTRATION OF CREDIT RISKS. At February 28, 2011, three of our customers represented 29.2% of our trade receivables. Such accounts receivable subject us to a significant concentration of risk. There can be no assurance that such clients will not experience financial difficulties or other problems which could delay such customers in paying for product on a timely basis or at all. Any problems with such customers can be expected to have a material adverse effect on our business.

TECHNOLOGICAL CHANGES. The major portion of our product line has been used in protective eyewear since 1976. Yet the field has proven to be an active one and we must anticipate competition to develop. Epolin has committed itself to make capital investments to maintain its position as a key supplier in this field. There can be no assurance that our dye technology will not be rendered less competitive, or obsolete, by the development of new methods to achieve laser safety and other forms of eye protection.

COMPETITION. We experience, in management’s opinion, limited competition in all areas of our business. Management believes that other dye companies do not offer the broad range of dyes nor provide the level of technical service as provided by Epolin. We believe that our extensive product portfolio, technical expertise and customer support are the key factors in our competitiveness. However, as mentioned above, there can be no assurance that we will be able to maintain our competitive position in the event new methods to achieve laser safety and other forms of eye protection are developed.

ENVIRONMENTAL REGULATION. Manufacturers of chemical products are subject to extensive Federal and State environmental regulations. While we believe Epolin has complied with such regulations, there can be no assurance that we will not be required to incur expenses to remedy any future environmental violations discovered. In addition, no assurances can be given that future regulations will not be adopted, compliance with which will result in substantial expense to, and otherwise adversely affect our business.

PATENTS AND PROPRIETARY PROTECTION. We have not generally in the past relied upon patents for protection of our dye business or to provide us with any significant competitive advantage as it relates to our existing product lines. There can be no assurance that others may not independently develop the same, similar or alternative technologies or otherwise obtain access to our proprietary technologies. However, we ~~recently~~ filed a patent application in the United States and Canada for a new class of IR dye ~~compound~~compounds. We ~~Even~~have ifrecently ~~this~~been informed by the U.S. Patent Office that the patent application, isincluding our list of claims, have been granted. However, we cannot guaranty that such will be of commercial benefit to the Company or otherwise offer the Company protection from competing products.

SOURCES AND AVAILABILITY OF RAW MATERIALS. We purchase chemicals from several large chemical manufacturers and then further process them into its saleable products. Although we limit ourselves to a relatively small number of suppliers, we are not restricted to such suppliers, and Management believes the availability to such raw materials is widespread. Nevertheless, there can be no assurance that raw materials will continue to be easily obtainable. Any difficulty in obtaining raw materials would have a material adverse effect on our business.

THE LOSS OF OUR CHIEF EXECUTIVE OFFICER, PRESIDENT OR CHAIRMAN OF THE BOARD WOULD DISRUPT OUR BUSINESS. Our success depends in substantial part upon the services our three principal executive officers. Although our Chairman of the Board presently works only on a part-time basis, a loss of one or more of our current officers could severely and negatively impact our operations. In addition, we do not maintain key-man life insurance on any of our three principal executive officers and we have no plans to obtain this insurance.

WE ARE DEPENDENT ON KEY PERSONNEL. Due to the specialized nature of our business, our success depends in part upon attracting and retaining the services of qualified managerial and technical personnel. The market for such persons remains competitive and the relative small size of Epolin may make it more difficult for us to recruit and retain qualified persons.

DIVIDENDS. During fiscal 2007, Epolin approved the adoption of a dividend policy under which Epolin 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. As a result, any such future dividends will depend on earnings, other financial requirements and other factors, many of which may be beyond the control of Epolin.

MAINTAINING AND IMPROVING OUR FINANCIAL CONTROLS MAY STRAIN OUR RESOURCES AND DIVERT MANAGEMENT’S ATTENTION. We are subject to the requirements of the Securities Exchange Act of 1934, including the requirements of the Sarbanes-Oxley Act of 2002. The requirements of these rules and regulations have increased, and we expect will continue to increase, our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may also place undue strain on our personnel, systems and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. This can be difficult to do. As a result of this and similar activities, management’s attention may be diverted from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations.

THE CONTINUING GLOBAL ECONOMIC DOWNTURN AND UNCERTAINTIES MAY HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS AND FINANCIAL CONDITION THAT WE CURRENTLY CANNOT PREDICT. The global economy remains in a prolonged economic downturn which has caused disruptions and extreme volatility in global financial markets, increased rates of default and bankruptcy, and declining consumer and business confidence. As a result of these conditions and uncertainties, our suppliers and customers might experience deterioration of their businesses, cash flow shortages and difficulty obtaining financing which could result in interruptions or delays in our suppliers’ or customers’ performance of any contracts, reductions and delays in customer purchases, delays in or the inability of customers to obtain financing to purchase our products, and bankruptcy of customers. While we cannot predict the duration or severity of the global economic downturn, it could materially affect our business and financial condition.

OUR STOCK PRICE MAY EXPERIENCE VOLATILITY. The market price of the Common Stock, which currently is listed in the OTC Bulletin Board, has, in the past, fluctuated over time and may in the future be volatile. We believe that there are a small number of market makers that make a market in our Common Stock. The actions of any of these market makers could substantially impact the volatility of our Common Stock.

POTENTIAL FUTURE SALES PURSUANT TO RULE 144. Many of the shares of Common Stock presently held by management and others are “restricted securities” as that term is defined in Rule 144, promulgated under the Securities Act. Under Rule 144, a person (or persons whose shares are aggregated) who has satisfied a certain holding period, may, under certain circumstances sell such shares or a portion of such shares. Effective as of February 15, 2008, the holding period for the resale of restricted securities of reporting companies was shortened from one year to six months. Additionally, the SEC substantially simplified Rule 144 compliance for non-affiliates by allowing non-affiliates of reporting companies to freely resell restricted securities after satisfying a six-month holding period (subject only to the Rule 144(c) public information requirement until the securities have been held for one year) and by allowing non-affiliates of non-reporting companies to freely resell restricted securities after satisfying a 12-month holding period. Therefore, actual sales or the prospect of sales of such shares under Rule 144 in the future may depress the prices of the Company’s securities.

OUR COMMON STOCK IS A PENNY STOCK. Our Common Stock is classified as a penny stock, which is traded on the OTCBB. As a result, an investor may find it more difficult to dispose of or obtain accurate quotations as to the price of the shares of the Common Stock. In addition, the “penny stock” rules adopted by the Securities and Exchange Commission subject the sale of the shares of the Common Stock to certain regulations which impose sales practice requirements on broker-dealers. For example, broker-dealers selling such securities must, prior to effecting the transaction, provide their customers with a document that discloses the risks of investing in such securities. Furthermore, if the person purchasing the securities is someone other than an accredited investor or an established customer of the broker-dealer, the broker-dealer must also approve the potential customer’s account by obtaining information concerning the customer’s financial situation, investment experience and investment objectives. The broker-dealer must also make a determination whether the transaction is suitable for the customer and whether the customer has sufficient knowledge and experience in financial matters to be reasonably expected to be capable of evaluating the risk of transactions in such securities. Accordingly, the Commission’s rules may result in the limitation of the number of potential purchasers of the shares of the Common Stock. In addition, the additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in the Common Stock, which could severely limit the market of our Common Stock.

LIMITATIONS OF THE OTCBB CAN HINDER COMPLETION OF TRADES. Trades and quotations on the OTCBB involve a manual process that may delay order processing. Price fluctuations during a delay can result in the failure of a limit order to execute or cause execution of a market order at a price significantly different from the price prevailing when an order was entered. Consequently, one may be unable to trade in our Common Stock at optimum prices.

THE OTCBB IS VULNERABLE TO MARKET FRAUD. OTCBB securities are frequent targets of fraud or market manipulation, both because of their generally low prices and because OTCBB reporting requirements are less stringent than those of the stock exchanges or NASDAQ.

INCREASED DEALER COMPENSATION COULD ADVERSELY AFFECT STOCK PRICE. OTCBB dealers’ spreads (the difference between the bid and ask prices) may be large, causing higher purchase prices and less sale proceeds for investors.

Except as required by the Federal Securities Law, Epolin does not undertake any obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-K or for any other reason.

Item 1B. Unresolved Staff Comments.

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

Item 2. Properties.

We presently occupy approximately 19,500 square feet of manufacturing, warehouse and administrative space in Newark, New Jersey which property the Company has occupied since June 1989. The property is currently owned by Epolin Holding Corp. (“Epolin Holding”), our wholly-owned subsidiary. We presently occupy the property pursuant to a lease, effective November 1, 1996, which was for an initial term of five years with three five years options with annual rent of $97,740, subject to annual adjustments based on increases in the Consumer Price Index which adjustments have been waived by Epolin Holding. Such rent includes real estate taxes and insurance expenses. Generally, we expect that the lease will be renewed in the normal course of business. We believe that the current facility is adequate for the foreseeable future.

We entered into a sublease with a non-related party effective September 2005 for an initial term ending October 31, 2007 pursuant to which we were subleasing approximately 2,500 square feet of our space for the subtenant to operate a laboratory at an annual rental of $18,000. Following the end of the initial term, the subtenant remained in the premises on a month-to-month basis until May 2009 at which time the premises were abandoned by the subtenant.

Item 3. 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 4. Mine ~~[Removed~~Safety ~~and Reserved~~Disclosures.]

9Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

The Company’s Common Stock is presently being traded in the over-the-counter market under the symbol “EPLN” and is listed on the OTC Bulletin Board. The following chart sets forth the range of the high and low sales prices per share for the Company’s Common Stock for each period indicated. The quotations represent prices between dealers and do not include retail markups, markdowns, commissions or other adjustments and may not represent actual transactions.

Fiscal year ended February 29, 2012	High		Low

March 1, 2011 to May 31, 2011	$	0.42	$	0.15
June 1, 2011 to Aug. 31, 2011	$	0.28	$	0.15
Sept. 1, 2011 to Nov. 30, 2011	$	0.28	$	0.20
Dec. 1, 2011 to Feb. 29, 2012	$	0.31	$	0.19

Fiscal year ended February 28, 2011	High		Low

March 1, 2010 to May 31, 2010	$	0.45	$	0.36
June 1, 2010 to Aug. 31, 2010	$	0.47	$	0.36
Sept. 1, 2010 to Nov. 30, 2010	$	0.45	$	0.30
Dec. 1, 2010 to Feb. 28, 2011	$	0.40	$	0.30

Fiscal year ended February 28, 2010	High		Low
March 1, 2009 to May 31, 2009	$	0.66	$	0.35
June 1, 2009 to Aug. 31, 2009	$	0.65	$	0.45
Sept. 1, 2009 to Nov. 30, 2009	$	0.52	$	0.30
Dec. 1, 2009 to Feb. 28, 2010	$	0.48	$	0.30

Holders

As of May 25, ~~2011~~2012, there were approximately 260 stockholders of record of the Company’s Common Stock. This does not reflect persons or entities that hold their stock in nominee or “street name”.

Dividends

Subsequent to the end of fiscal 2006, the Board of Directors approved the adoption of a dividend policy under which we will issue a regular annual cash dividend on shares of our Common Stock. The amount of the dividend, record date and payment date will be subject to approval every year by the Board of Directors. In accordance with the dividend policy, a regular annual cash dividend of $0.02 per share was paid in each of May 2006, May 2007 and May 2008. In addition, since of the adoption of the dividend policy in fiscal 2007, a special cash dividend of $0.02 per share was paid in each of January 2007 and January 2008, and a supplemental special cash dividend of $0.04 per share was paid in August 2008. No further dividends were paid in fiscal 2009. In addition, no dividends were paid in fiscal 2010 and fiscal 2011 primarily due to the Company’s decision to seek strategic alternatives.

Subsequent to the end of fiscal 2011 and in May 2011, the Board of Directors declared a special cash dividend of $0.12 per share which was paid on May 12, 2011 to shareholders of record at the close of business on April 28, 2011. The aggregate amount of payment made in connection with this special cash dividend was approximately $1,472,000. No further dividends were paid in fiscal 2012.

Recent Sales of Unregistered Securities

During the fiscal years ended February 28, ~~2010~~2011 and February 2829, ~~2011~~2012, we issued or sold the following equity securities that were not registered under the Securities Act of 1933, as amended (the “Securities Act”):

Pursuant to the Epolin, Inc. 2008 Stock Incentive Plan, each director shall receive a stock award annually of 25,000 shares of Common Stock. On October 215, ~~2009~~2010, a total of 100,000 shares of Common Stock were granted to the Company’s four directors, and similarly, on October 524, ~~2010~~2011, a total of 100,000 shares of Common Stock were granted to the Company’s four directors, all of which shares were issued under the 2008 Stock Incentive Plan.

All of such securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act for “transactions by the issuer not involving any public offering”.

Equity Compensation Plan Information

2008 Stock Incentive Plan

On June 18, 2008, our Board of Directors approved and adopted the Epolin, Inc. 2008 Stock Incentive Plan (the “2008 Plan”), and authorized us to issue up to 1,500,000 shares of our Common Stock under the 2008 Plan (subject to adjustment to take account of stock dividends, stock splits, recapitalizations and similar corporate events). The 2008 Plan was approved by the stockholders on August 18, 2008. The purpose of the 2008 Plan is to provide officers, other employees and directors of, and consultants to, us an incentive to (a) enter into and remain in our service or that of our subsidiaries or to provide services to us or our subsidiaries, (b) enhance our long term performance and that of our subsidiaries, and (c) acquire a proprietary interest in us. Under the 2008 Plan, we will have the right to issue stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares or performance units, and stock or stock-based awards. Pursuant to the 2008 Plan, each director shall receive a stock award annually of 25,000 shares of Common Stock. As of February 2829, ~~2011~~2012, ~~300~~400,000 shares of Common Stock have been granted under the 2008 Plan. No options or any other awards have been granted to date under the 2008 Plan.

Prior Stock Option Plan

In December 1998, the Company adopted the 1998 Stock Option Plan (the “1998 Plan”) for employees, officers, consultants or directors of the Company to purchase up to 750,000 shares of Common Stock of the Company (the “1998 Plan Option Pool”). In September 2001, the Board of Directors increased the size of the 1998 Plan Option Pool to 1,500,000 shares. Options granted under the 1998 Plan shall be non-statutory stock options which do not meet the requirements of Section 422 of the Code. Under the terms of the 1998 Plan, participants may receive options to purchase Common Stock in such amounts and for such prices as may be established by the Board of Directors or a committee appointed by the Board to administer the 1998 Plan. From ~~Options~~inception ~~exercised~~ through February 2829, ~~2010~~2012, ~~total~~options granted totaled 1,242,000; options exercised totaled 686,000.; ~~Options~~and, options cancelled or expired for all years totaled ~~311~~461,000,. As ~~which under the 1998 Plan were available for future grant, and as~~ of February 2829, ~~2010~~2012, there are options outstanding to acquire ~~245~~95,000 shares. With the approval of the 2008 Plan by our stockholders, the 1998 Plan terminated and therefore we are no longer able to grant options under it. However, options that have already been granted under the 1998 Plan will continue to be outstanding.

Information regarding equity compensations plans, as of February 2829, ~~2011~~2012, is set forth in the table below:

Plan category

Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)

~~Weighted-average Exercise price of Outstanding options, Warrants and rights (b)~~

Weighted-average Exercise price of Outstanding options, Warrants and rights (b)

~~Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)~~

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)

Equity compensation plans approved by security holders

~~-0-~~

-0-

~~-0-~~

-0-

~~1,200,000~~

1,100,000

Equity compensation plans not approved by security holders

~~95,000~~

95,000

~~0.41~~$

0.41

~~-0-~~

-0-

Total

~~95,000~~

95,000

~~0.41~~$

0.41

~~1,200,000~~

1,100,000

Small Business Issuer Purchases of Equity Securities

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. There have been no repurchases made by the Company under the repurchase program since the fiscal year ended February 28, 2007. Since the adoption of the program and through the fiscal year ended February 28, 2007, a total of 331,500 shares were repurchased at a cumulative cost of $195,766.

1115

Item 6. Selected Financial Data.

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

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

Executive Overview

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

We sell our products to manufacturers of plastics/resins, credit cards, electronics, glass and other basic materials. Our customers are located in all regions of the world, although a material portion of our business is dependent on certain domestic customers, the loss of which could have a material effect on operations. During the year ended February 2829, ~~2011~~2012, approximately 2822.7% of sales were to three customers. During the year ended February 28, ~~2010~~2011, approximately 3328.47% of sales were to three customers. The loss of one or more key customers could have a material adverse effect on the Company.

Results of Operations

The following tables set forth operations data for the year ended February 2829, ~~2011~~2012 and year ended February 28, ~~2010~~2011.

	2011			2010			% change
	2012			2011			% change
Sales	$	3,~~065~~410,~~554~~695		$	23,~~944~~065,~~628~~554		~~4.1~~	%11.3	%
Gross profit		1,~~612~~654,~~048~~934			1,~~670~~612,~~860~~048		~~-3.5~~	%2.7	%
Gross profit percentage		5248.65	%		5652.76	%	~~-4.1~~	%-4.1	%
Selling, general & administrative		1,~~598~~423,~~029~~086			1,~~118~~598,~~622~~029		~~42.9~~	%-10.9	%
Operating income		14231,~~019~~848			~~552~~14,~~238~~019		~~-97.5~~	%1553.8	%
Other Income		1059,~~494~~687			3010,~~335~~494		~~-65.4~~	%468.8	%
Income before taxes		24291,~~513~~535			~~582~~24,~~573~~513		~~-95.8~~	%1089.3	%
Income taxes		~~(14~~115,~~727~~375	)		~~113~~(14,~~503~~727	)	~~-113.0~~	%883.4	%
Net income (after taxes)	$	39176,~~240~~160		$	~~469~~39,~~070~~240		~~-91.6~~	%348.9	%

Sales

For the year ended February 2829, ~~2011~~2012, sales were $3,~~066~~411,000 as compared to $23,~~945~~066,000 for the year ended February 28, ~~2010~~2011, an increase of $~~121~~345,000 or 411.13%.

Such increase in sales for the year ended February 2829, ~~2011~~2012 versus the prior year ~~are~~is primarily due to increased sales in the eye protection market, a modest increase in sales in the custom market and ~~light~~a ~~management~~slight increase in sales in the ink and coating market, partially offset by a ~~continuing~~ decrease in sales in the ~~ink~~light ~~and~~management ~~coating~~ market.

In both fiscal ~~2010~~2012 and fiscal 2011, the eye protection market represented our largest market with sales in the eye protection representing ~~50.0~~approximately 59% and 53.4% of sales in fiscal ~~2010~~2012 and fiscal 2011, respectively. Sales in the eye protection market ~~were~~increased ~~$1,637,000~~by ~~for~~approximately ~~the year ended February 28, 2011 and~~ $1400,~~467,~~000 for the year ended February 2829, ~~2010,~~2012 ancompared ~~increase~~to ofthe ~~$170,000.~~prior year. This increase versus the prior year is due to growth in the laser and welding eye protection ~~segment and due to the Company’s expanded product offerings~~segments.

For the light management market, ~~sales~~which ~~were~~is ~~$996~~our next largest market,~~000~~ ~~and~~sales decreased by approximately $~~803~~180,000 for the ~~years~~year ended February 29, 2012 compared to the year ended February 28, 2011. Such ~~and~~sales ~~2010,~~represented anapproximately ~~increase~~23% of ~~$193~~sales for the year ended February 29,~~000.~~ ~~The~~2012 ~~increase~~compared ~~versus~~to approximately 32% of sales for the prior year. This decrease is primarily due to ~~new~~weakness ~~sales~~in to the ~~automotive~~aerospace and ~~digital~~automotive ~~electronic market~~ segments.

With regard to the ink and coating market, sales ~~were~~increased by approximately $~~329~~30,000 for the year ended February 2829, ~~2011~~2012 compared to ~~$576,000 for~~ the prior year. Such ~~ended~~sales ~~February~~represented ~~28,~~approximately ~~2010,~~10% ~~a decrease~~ of ~~$247,000.~~our ~~Sales~~sales infor ~~this~~each ~~market~~of ~~have~~fiscal ~~been~~2012 ~~decreasing~~and ~~since~~fiscal ~~2008~~2011. This ~~because~~slight ofincrease ~~the~~was ~~lower~~primarily ~~demand~~due ~~for~~a ~~inks~~small ~~used~~resurgence toin ~~print~~the credit ~~cards~~card market.

For the ~~year~~custom ~~ended February 28~~market, ~~2011,~~ sales inincreased ~~the~~by ~~custom~~approximately ~~market were~~ $9885,000 ~~which represents a small percentage of our total sales~~ compared to ~~$93,000 for~~ the ~~year~~prior ~~ended February 28, 2010~~year. Such ~~While~~ sales inrepresented ~~this~~approximately ~~market~~5% ~~remained~~of ~~relatively~~our ~~constant~~sales infor fiscal ~~2011~~2012 ~~and~~compared ~~fiscal~~to ~~2010, sales were~~ approximately ~~$60,000~~3% ~~greater~~of inour ~~the~~sales ~~prior~~for fiscal ~~year of 2009~~2011. This ~~Such~~increase ~~reduction~~was ~~has been~~ primarily due to ~~the~~a ~~continued~~credit ~~product~~for ~~obsolescence~~sending ofspent ~~the~~catalyst ~~mature~~to ~~products~~a ~~used~~vendor byfor ~~customers~~recycling.

Categorized by geographic area, sales in the United States decreased for the year ended February 28, 2011 while sales increased in Asia and Europe compared to the prior year. For the year ended February 28, 2011 compared to the prior year, sales decreased in the United States to $2,168,000 from $2,402,000 primarily because of reduced demand for military eye protection, while in Asia sales increased to $469,000 from $290,000 primarily due to sales rebound in welding eye protection and new sales to laser eye protection customers, and in Europe sales increased to $420,000 from $247,000 primarily because of growth in laser eye protection and digital electronic markets.17

Categorized by geographic area, sales in the United States and Europe increased for the year ended February 29, 2012 while sales in Asia slightly decreased in fiscal 2012 compared to the prior year. For the year ended February 29, 2012 compared to the prior year, sales increased in the United States to $2,322,000 from $2,168,000 primarily due to strong demand for industrial and military eye protection, and sales in Europe increased to $611,000 from $420,000 primarily due to growth in the laser filter, security ink and digital electronic segments, while sales in Asia slightly decreased and were $449,000 for the year ended February 29, 2012 compared to $469,000 for the year ended February 28, 2011. Sales in other nations increased to $29,000 for fiscal 2012 from $9,000 in fiscal 2011.

Gross Profit

Gross profit, defined as sales less cost of sales, was $1,~~612~~655,000 or 5248.65% of sales for the year ended February 2829, ~~2011~~2012 compared to $1,~~671~~612,000 or 5652.76% of sales for the year ended February 28, ~~2010~~2011, a decrease of 4.1%. Such percentage decrease was primarily due to an increase in cost of materials. In terms of absolute dollars, gross profit ~~decreased~~increased $5943,000 in fiscal ~~2011~~2012 compared to the prior year~~, a decrease of 3~~.~~5%.~~

Cost of sales was $1,~~454~~756,000 for the year ended February 2829, ~~2011~~2012 which represented 4751.45% of sales compared to $1,~~274~~454,000 for the year ended February 28, ~~2010~~2011 which represented 4347.34% of sales. In terms of absolute dollars, cost of sales increased $~~180~~302,000 for fiscal ~~2011~~2012 compared to the prior year. The cost of sales increase was primarily due to ~~raw~~increased ~~material~~ cost ~~increases~~of materials.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ~~increased~~decreased to $1,~~598~~423,000 or 5241.17% of sales for the year ended February 2829, ~~2011~~2012 compared to $1,~~119~~598,000 or 3852.01% of sales for the year ended February 28, ~~2010~~2011, ana ~~increase~~decrease of $~~479~~175,000. Such ~~increase~~decrease in absolute dollars was primarily due to a ~~substantial~~decrease ~~increase~~ in professional fees offset by small increases in salaries, ~~primarily~~commissions ~~due~~and toconsulting ~~services~~fees, ~~which~~and ~~are~~increased ~~not~~environmental ~~regularly~~remediation ~~incurred~~costs. Such bydecrease ~~the~~in ~~Company~~professional ~~and~~fees ~~which~~was ~~were~~primarily due to certain non-recurring services incurred in fiscal 2011 in connection with the strategic alternatives being pursued by the Company as previously disclosed and described below~~, as well as small increases in officers’ and administrative salaries and commission and consulting fees~~.

Operating Income

~~Operating~~We had operating income of $232,000 infor ~~terms~~the ofyear ~~absolute~~ended ~~dollars~~February 29, ~~decreased~~2012 compared to operating income of $14,000 infor ~~fiscal~~the ~~2011~~year ~~from~~ended ~~$552,000~~February ~~in fiscal 2010~~28, a2011. Such ~~decrease~~operating ofincome ~~$538,000.~~for ~~While~~fiscal ~~there~~2012 was ~~small~~primarily ~~increase~~due into ~~total~~increased sales ~~from~~of ~~period to period~~$345,000 ~~cost~~combined ofwith ~~sales~~a ~~and~~decrease in selling, general and administrative expenses ~~increased~~of at$175,000, aoffset ~~much~~by ~~greater~~the ~~ratio~~percentage increase in ~~fiscal~~cost ~~2011~~of ~~compared to the prior year~~sales. As a percentage of sales, operating income was 06.58% of sales for the year ended February 2829, ~~2011~~2012 compared to 180.85% of sales for the year ended February 28, ~~2010~~2011.

Other Income

Total other income for the year ended February 2829, ~~2011~~2012 was $1060,000 compared to $3010,000 for the year ended February 28, ~~2010~~2011. During Wefiscal 2012, we had miscellaneous income of $57,000 due to proceeds from an insurance claim for which there was no ~~rental~~comparable ~~income~~item in fiscal 2011. Interest ~~compared~~income decreased in fiscal 2012 primarily due to ~~rental~~less ~~income~~cash ofon ~~$4,500~~hand. We ~~for~~have not had any rental income since fiscal 2010. In May 2009, our then subtenant abandoned the premises which it had been subleasing since September 2005. InThe ~~addition,~~Company ~~our~~has ~~interest~~since ~~income~~used ~~was~~this ~~$10,000~~space ~~for~~as ~~fiscal~~a ~~2011~~productive ~~compared~~R&D tofacility ~~$26,000~~ for ~~fiscal~~the ~~2010~~development of new markets.

Net Income

During fiscal ~~2011~~2012, we reported income before taxes of $25292,000 as compared to income before taxes of $~~583~~25,000 for fiscal ~~2010~~2011, aan ~~decrease~~increase of $~~558~~267,000. Income taxes were $~~(15~~115,000) for fiscal ~~2011~~2012 compared to $~~114~~(15,000) for fiscal ~~2010~~2011. Changes in income taxes are generally attributed to changes from period to period in sales and expenses. Net income after taxes was $39176,000 or $0.0001 per share for the year ended February 2829, ~~2011~~2012 as compared to $~~469~~39,000 or $0.0400 per share for the year ended February 28, ~~2010~~2011. As a percentage of sales, net income after taxes was 15.32% of sales for the year ended February 2829, ~~2011~~2012 compared to 151.93% of sales for the year ended February 28, ~~2010~~ 2011.

Net income in the future will be dependent upon our ability to maintain revenues in excess of our cost of sales and other expenses. Prior to fiscal 2007, sales had grown for a number of consecutive years. However, from fiscal 2007 through fiscal 2010, we ~~have now~~ had four consecutive years of decreased sales compared to sales in the immediate prior year. A ~~One~~ positive sign, however, is that sales increased, though modestly, in fiscal 2011 compared to fiscal 2010 by $121,000. ~~Nevertheless,~~and ~~net~~sales ~~income~~continued ~~did~~to ~~significantly~~increase ~~decrease~~ in fiscal ~~2011~~2012 by $345,000 compared to ~~the~~fiscal ~~prior~~2011. In ~~year~~addition, ~~primarily~~net ~~due~~income toincreased ~~large increases~~ in ~~cost~~fiscal of2012 ~~sales~~by ~~and selling~~$137,000 ~~general~~compared ~~and~~to ~~administrative~~the ~~expenses~~prior year period.

Operations Outlook

Following a period of readjustment in our business priorities, we were able to ~~achieved~~achieve $3,701,000 in sales for fiscal 2006 which was ~~$821,000~~an orall ~~28.5%~~time ~~greater~~high ~~than~~for the ~~prior fiscal year~~Company. Nevertheless, we have not since then been able to achieve comparable sales levels as achieved in fiscal 2006. Beginning in fiscal 2007 and through fiscal 2010, sales ~~have~~ decreased from year to year with fiscal 2009 being the year with the most dramatic change in sales compared to the immediate prior year. In ~~While~~fiscal ~~sales~~2011, ~~continued~~however, tosales ~~decrease~~increased inmodestly ~~fiscal 2010~~ compared to ~~fiscal~~the ~~2009,~~prior ~~such~~year ~~decrease~~which ~~was~~we ~~not~~find ~~nearly~~to asbe ~~dramatic~~an asencouraging ~~the change between fiscal 2008 and 2009~~sign. Sales ~~During fiscal 2010 sales~~ were $23,~~945~~065,000 in fiscal 2011 compared to sales of $32,~~092~~945,000 ~~for~~achieved ~~fiscal~~in ~~2009, a decrease of $147,000~~fiscal 2010. This ~~There~~increase ishas ancontinued ~~encouraging~~into ~~sign,~~fiscal ~~however,~~2012 inwith ~~that~~ sales ~~increased~~increasing ~~in fiscal 2011~~ to $3,~~065~~411,000, ~~increasing~~in ~~to almost~~ the ~~same level of sales achieved in~~ fiscal ~~2009~~2012. During these periods of reduced sales, we had a major decline in sales of security inks for the credit card market which had been a key area of our growth from 2005 to 2007. While this market remains a source of business for us, we will likely not be able to achieve the same level of sales in the future which we achieved from 2005 to 2007 in the security inks market. Nevertheless, we are confident that with our core group of products, we will be able to maintain sales in our principal markets, such as the eye protection market and the light management market, while always seeking new areas for the use of our dyes.

As previously disclosed, Millburn Capital Group was retained in February 2009 as the Company’s financial advisor in connection with the Board’s decision to explore strategic alternatives for the Company, including the potential sale of the Company. On ~~The~~March 14, 2012, the Company ~~continues~~entered tointo ~~pursue~~an ~~such~~Agreement ~~strategic~~and ~~alternatives~~Plan of Merger (the “Merger Agreement”) with Polymathes Holdings I LLC, a New Jersey limited liability company (the “Parent”), and Polymathes Acquisition I Inc., ~~There~~a ~~can~~New beJersey corporation and wholly owned subsidiary of the Parent (the “Purchaser”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, Parent has agreed to cause the Purchaser to commence a tender offer (the “Offer”) to purchase all of the outstanding shares of common stock, no ~~assurance~~par ~~that~~value ~~any~~per ~~such~~share, ~~transaction~~of ~~can~~the orCompany ~~will~~(the be“Shares”), ~~completed~~at a price of $0.22 per Share (the “Offer Price”), paid to the seller in cash, without interest thereon and subject to applicable withholding taxes. Pursuant to the Merger Agreement, after the consummation of the Offer, and subject to certain conditions set forth in the Merger Agreement, the Parent shall cause the Purchaser to be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and as a wholly owned subsidiary of Parent. The tender offer is being made pursuant to a Tender Offer Statement (including an Offer to Purchase, Letter of Transmittal, and related tender offer documents), which has been filed by Polymathes Acquisition I Inc. and Polymathes Holdings I LLC with the U.S. Securities and Exchange Commission (“SEC”) on May 8, 2012. In addition, on May 11, 2012, Epolin, Inc. filed a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC related to the tender offer. These documents have been mailed to all Company ~~does~~shareholders ~~not~~of ~~currently~~record. These ~~intend~~documents, as they may be amended or supplemented from time to ~~publicly~~time, ~~disclose~~contain ~~additional~~important information about the ~~status~~tender offer and the Company’s shareholders are urged to read them carefully before any decision is made with respect to the tender offer. The discussion herein has been prepared prior to the completion of ~~this~~the ~~process~~Offer ~~but~~and ~~will~~the ~~publicly~~Merger, ~~report~~and ~~all~~the ~~required~~Company ~~information~~cannot onassure athat ~~timely~~the ~~basis~~Offer and subsequent Merger will be completed.

1419

InThe ~~order~~New toJersey ~~facilitate~~Industrial ~~the~~Site ~~environmental~~Recovery ~~approvals~~Act, ~~which~~N.J.S.A. ~~will~~13:1k-6 beet ~~necessary~~seq. (“ISRA”) inrequires ~~conjunction~~an ~~with~~environmental ~~any~~investigation ~~potential~~and ~~sale~~remediation orof ~~similar~~properties ~~transaction~~prior ~~involving~~to the ~~Company,~~sale weof ~~have~~most ~~engaged~~manufacturing abusinesses ~~licensed~~or ~~site~~properties. In ~~remediation~~anticipation ~~professional~~of ~~and~~a ~~special~~potential ~~environmental~~sale ~~counsel~~or insimilar ~~the~~transaction ~~State~~involving ofthe ~~New~~Company, ~~Jersey.~~we ~~Under~~engaged ~~the~~a ~~New~~Licensed ~~Jersey~~ Site ~~Recovery~~Remediation ~~Act~~Professional (~~ISRA~~“LSRP”), ~~the~~and ~~Company~~special ~~will be responsible for certain~~ environmental ~~investigations~~counsel ~~and~~in ~~remediation, if any, which requirements to comply are triggered by certain transaction including~~ the ~~sale~~State of ~~property~~New ~~or the sale of a business~~Jersey. Pursuant to ~~the New Jersey Site Remediation Reform Act enacted in 2009~~ISRA, ~~licensed~~LSRPs ~~site remediation professionals~~ will be responsible for the oversight of the environmental investigation and remediation on a site subject to ISRA compliance. In anticipation of triggering ISRA, we have conducted certain testing to date, including but not limited to obtaining soil and groundwater samples, and further testing and other related actions are expected to be done as part of this ongoing process. Future remediation costs estimated for the year ended February 28, 2013 approximate $70,000. Our 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. Due Noto ~~such~~the ~~amounts~~execution ~~have~~of ~~been accrued in~~ the ~~financial~~Merger ~~statements~~Agreement, ~~included~~we ~~with~~became ~~the~~subject ~~report.~~to ~~During~~ISRA ~~the~~which ~~year~~requires ~~ended~~that ~~February~~our ~~28,~~facility ~~2011~~be ~~and~~remediated ~~2010,~~or that we ~~incurred~~submit ~~costs~~a ofRemediation ~~approximately~~Certification ~~$66,000 and $17,000 related~~ to ~~these activities. Although~~ the ~~Company~~New ~~cannot~~Jersey ~~estimate~~Department ~~with certainty future costs~~ of ~~environmental~~Environmental ~~compliance~~Protection ~~with~~pursuant ~~ISRA,~~to weN.J.A.C. do7:26B ~~not~~prior ~~presently~~to ~~anticipate~~the ~~such~~transfer ~~costs~~of ~~will~~ownership. Accruals ~~have~~for aestimated ~~material~~losses ~~effect~~from onenvironmental ~~our~~remediation ~~liquidity,~~and ~~results~~to ~~from~~obtain ~~operations~~the ornecessary ~~our~~approvals ~~financial condition~~ in ~~future~~conjunction ~~periods.~~with Inthe ~~this~~potential sale ~~regard,~~of weour ~~have~~company ~~estimated~~in ~~future remediation costs for~~ the ~~year~~amount ~~ended~~of ~~February 29~~$74,111 ~~2012~~were charged to ~~be approximately $69~~selling,~~000.~~ ~~Should~~general ~~such facts~~ and ~~circumstances~~administrative ~~change,~~expenses ~~however,~~as ~~based upon results~~ of ~~future~~February ~~testing~~29, ~~we may have to revise our outlook~~2012.

The Company maintained a Simplified Employee Pension Plan which was adopted in 1994 for its employees as a retirement and income tax reduction facility. The Weplan ~~have~~has ~~recently~~not ~~tested~~met ~~all~~the ~~years~~Internal ofRevenue ~~the~~Service ~~Plan~~requirements toof ~~insure~~Section ~~compliance~~416 ~~with~~and ~~Internal~~Section ~~Revenue~~408(k)(6) ~~Service~~regarding ~~regulations~~contribution limits and, ~~during~~employee ~~the~~deferral ~~quarter~~amounts. ~~ended~~We ~~August~~have ~~31,~~tested ~~2010,~~all weyears ~~received~~of the ~~test~~plan ~~results~~to ~~for~~insure ~~all~~our ~~years~~compliance itwith ~~was~~Internal inRevenue ~~effect~~Service regulations. In accordance with the results, we have accrued a contribution to the ~~Plan~~plan in the amount of $284,955. ~~which~~As isof ~~reflected~~February in29, 2012, we have paid all accrued amounts to the ~~financial~~plan ~~statements~~through ~~included~~the ~~with~~date ~~this~~of ~~report~~testing. In addition, as a result of contributions paid to the plan subsequent to the testing date, additional interest was accrued to the plan in the amount of $41,952 which was paid May 1, 2012. In August 2010, the Company adopted a 401(k) Plan to replace the Simplified Employee Pension Plan.

Liquidity and Capital Resources

Our primary source of funds is cash flow from operations in the normal course of selling products. On February 2829, ~~2011~~2012, we had working capital of $31,~~025~~801,000, a debt to equity ratio of 0.0714 to 1, and stockholders’ equity of $32,~~876~~595,000 compared to working capital of $3,~~099~~025,000, a debt to equity ratio of 0.0607 to 1, and stockholders’ equity of $43,~~038~~876,000 ~~on February 28, 2010~~. On February 2829, ~~2011~~2012, we had $1749,~~881,~~000 in cash and cash equivalents, total assets of $42,~~145~~970,000 and total liabilities of $~~270~~375,000, compared to $1,~~909~~881,000 in cash and cash equivalents, total assets of $4,~~299~~145,000 and total liabilities of $~~261~~270,000 on February 28, ~~2010~~2011.

Net cash ~~used~~provided by operating activities for the year ended February 2829, ~~2011~~2012 was $~~191~~367,000 which was primarily the result of net income of $39176,000 plus a decrease in ~~inventories~~prepaid taxes of $73189,000 and anprepaid ~~increase in accrued~~ expenses of $~~195~~45,000, ~~offset~~and by an increase in ~~accounts~~taxes ~~receivable~~payable of $3384,000, ~~prepaid expenses of $41,000~~ and ~~prepaid~~accrued ~~taxes~~expenses of $~~155~~40,000, ~~and~~offset aby ~~prior~~an ~~period~~increase ~~adjustment~~in ~~for~~accounts ~~pension~~receivable ~~contribution~~ of $~~200~~124,000 ~~net~~primarily ~~of taxes and an adjustment of $195,000~~ due to ~~obligations~~increased ~~under~~billings ~~deferred~~during ~~compensation agreements. The adjustment of $200,000 represents~~ the ~~liability~~fourth wequarter ~~have~~and ~~incurred~~inventories ~~to correct the Simplified Employee Pension Plan as described above. The adjustment~~ of $~~195~~132,000 primarily ~~represents the aggregate of the amount paid to the Company’s President for the remaining balance~~ due to ~~him~~increased ~~under~~purchases ~~a deferred compensation agreement~~ and anproduction. The ~~amount~~decrease ~~paid~~in toprepaid ~~the~~taxes ~~Company’s~~was ~~Chairman~~primarily ~~for a deferred compensation accrual remaining~~ due to ~~him, each of which was paid in~~ the ~~second~~carryback ~~quarter~~and receipt of ~~fiscal~~tax ~~2011.~~benefits ~~Net~~arising ~~cash~~from ~~provided by~~ operating ~~activities~~losses we ~~for~~incurred during the year ended February 28, 2010 was $403,000 which was primarily the result of net income of $469,000, plus non-cash items including depreciation of $104,000 and a deferred tax expense of $14,000, plus a decrease in prepaid taxes of $194,000, offset by increase in accounts receivable of $98,000 and inventories of $17,000, and a decrease in accrued expenses of $237,000 and accounts payable of $22,0002011.

~~Other~~Net ~~than~~cash ~~the~~used ~~prior~~by ~~period~~operating ~~adjustment~~activities for ~~pension~~the ~~contribution~~year ofended February 28, 2011 was $~~200~~191,000 which was primarily the result of net income of ~~taxes~~$39,000 ~~and~~plus ~~the~~a ~~adjustment~~decrease in inventories of $~~195~~73,000 ~~due~~and toan ~~the~~increase ~~obligations~~in ~~under~~accrued ~~deferred~~expenses ~~compensation~~of ~~arrangements~~$195,000, aoffset ~~significant~~by ~~factor~~an ~~contributing~~increase toin ~~the~~accounts ~~use~~receivable of ~~cash~~$33,000, inprepaid ~~fiscal~~expenses ~~2011~~of ~~was~~$41,000 ~~the~~and ~~increase in~~ prepaid taxes of $155,000, ~~primarily~~and ~~due~~a toprior ~~the~~period ~~net~~adjustment ~~operating~~for ~~loss~~pension ~~carryback~~contribution toof ~~prior~~$200,000 ~~years.~~net ~~Significant~~of ~~factors~~taxes ~~contributing~~and toan ~~the~~adjustment ~~use~~ of ~~cash~~$195,000 indue ~~fiscal~~to ~~2010~~obligations ~~were~~under ~~increases~~deferred incompensation ~~accounts~~agreements. The ~~receivable~~adjustment of $98200,000, ~~primarily~~represents ~~due~~the toliability we ~~increased~~have ~~billings~~incurred atto ~~the~~correct ~~end of~~ the ~~year,~~Simplified ~~and~~Employee ~~decreases~~Pension inPlan ~~accrued~~as ~~expenses~~described ~~for~~above. The ~~payment~~adjustment of $~~237~~195,000 ~~for~~represents ~~executive~~the ~~employment~~aggregate ~~agreement~~of ~~additional~~the ~~compensation~~amount ~~for~~paid ~~two~~to ofthe ~~our~~Company’s ~~executive~~President ~~officers.~~for ~~Such~~the ~~officers~~remaining ~~were~~balance ~~entitled~~due to ~~additional~~him under a deferred compensation ~~per~~agreement ~~year~~and ~~based~~an onamount paid to the Company’s ~~sales.~~Chairman ~~Such~~for ~~agreements~~a ~~expired~~deferred oncompensation ~~February~~accrual ~~28,~~remaining ~~2009~~due ~~and,~~to ~~therefore~~him, noeach ~~additional~~of ~~accruals~~which ~~for~~was ~~compensation~~paid ~~were~~in ~~made for~~ the ~~period~~second ~~ended~~quarter ~~February~~of ~~28,~~fiscal ~~2009~~2011.

15Net cash used in investing activities for the year ended February 29, 2012 was $28,000 due to payments for plant, property and equipment compared to net cash provided by investing activities for the year ended February 28, 2011 which was $163,000 due to a decrease in cash value of a life insurance policy of $189,000 (resulting from the surrender of a life insurance policy for its net surrender value maintained in connection with the deferred compensation agreement with the Company’s President) offset by payments of plant, property and equipment of $25,000.

Net cash provided by investing activities for the year ended February 28, 2011 was $163,000 due to a decrease in cash value of a life insurance policy of $189,000 (resulting from the surrender of a life insurance policy for its net surrender value maintained in connection with the deferred compensation agreement with the Company’s President) offset by payments of plant, property and equipment of $25,000. Net cash used by investing activities for year ended February 28, 2010 was $39,000 due to property and equipment purchases of $64,000 offset by a decrease in the cash value of a life insurance policy of $25,000.20

~~For~~Net cash used in financing activities for the ~~years~~year ended February 2829, ~~2011~~2012 ~~and~~was ~~2010~~$1,472,000 ~~there~~due ~~was~~to noa ~~net~~$0.12 cash ~~from~~dividend paid to stockholders during the first quarter of fiscal 2012 compared to no cash provided by or used byin financing activities for the year ended February 28, 2011.

We anticipate, based on currently proposed plans and assumptions relating to our operations, that our current cash and cash equivalents together with projected cash flows from operations and projected revenues will be sufficient to satisfy its contemplated cash requirements for more than the next 12 months. Our contemplated cash requirements for the balance of fiscal ~~2012~~2013 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 2 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.

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

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.21

~~Revenue~~Income ~~Recognition~~taxes –- We ~~recognize~~provide ~~revenue~~for ~~consistent~~income ~~with~~taxes under ASC Topic 740-10. ASC Topic 740-10 requires the ~~provisions~~use of ~~SEC~~an ~~Staff~~asset ~~Accounting~~and ~~Bulletin~~liability Noapproach in accounting for income taxes. ~~104,~~Deferred ~~“Revenue~~tax ~~Recognition”,~~assets ~~which~~and ~~sets~~liabilities ~~forth~~are ~~guidelines~~recorded inbased on the ~~timing~~differences between the financial statement and tax bases of ~~revenue~~assets ~~recognition~~and ~~based~~liabilities ~~upon~~and ~~factors~~the ~~such~~tax asrates ~~passage~~in ofeffect ~~title,~~when ~~payments~~these ~~and~~differences ~~customer~~are ~~acceptance~~expected to reverse. ~~Any~~Temporary ~~amounts~~differences ~~received~~relate ~~prior~~primarily to ~~satisfying~~different ~~our~~accounting ~~revenue~~methods ~~recognition~~used ~~criteria~~for ~~will~~depreciation beand ~~recorded~~amortization asof property and equipment and deferred ~~revenue~~compensation. ASC inTopic 740-10 requires the reduction ~~accompanying~~of ~~balance~~deferred ~~sheet.~~tax Weassets ~~recognize~~by ~~revenue~~a ~~from~~valuation ~~product~~allowance ~~sales~~if, ~~when~~based ~~there~~on isthe ~~persuasive~~weight of available evidence, it is more likely than not that ansome ~~arrangement~~or ~~exists,~~all ~~when~~of ~~title~~the ~~has~~deferred ~~passed,~~tax assets will not be realized. ASC Topic 740-10 clarifies the ~~price~~accounting isfor ~~fixed~~uncertainty orin ~~determinable~~income tax positions, ~~and~~as defined. It requires, among other matters, that we ~~are~~recognize ~~reasonably~~in ~~assured~~our offinancial ~~collecting~~statements, the ~~resulting~~impact ~~receivable.~~of ~~Our~~a ~~policy~~tax isposition, toif ~~replace~~that ~~certain~~position ~~products~~is ~~that~~more dolikely than not ~~conform~~of tobeing ~~customer~~sustained ~~specifications~~on audit, ~~however~~based ~~replacements~~on ~~are~~the ~~made~~technical atmerits ~~our~~of ~~discretion~~the ~~subject~~position. toWe inanalyze ~~house~~the ~~product~~filing ~~lab~~positions ~~analysis.~~in ~~There~~all ~~are~~of nothe ~~terms~~federal orand ~~conditions~~state ~~set~~jurisdictions ~~forth~~where ~~within~~we ~~our~~are ~~sales~~required ~~contracts~~to ~~that~~file ~~provide~~income ~~for~~tax ~~product~~returns, ~~replacements.~~as Wewell ~~expense~~as ~~replacement~~all ~~costs~~open astax ~~incurred~~years in these jurisdictions.

16Revenue Recognition – We recognize revenue based upon factors such as passage of title, payments and customer acceptance. Any amounts received prior to satisfying our revenue recognition criteria will be recorded as deferred revenue in the accompanying balance sheet. We recognize revenue from product sales when there is persuasive evidence that an arrangement exists, when title has passed, the price is fixed or determinable, and we are reasonably assured of collecting the resulting receivable. Our policy is to replace certain products that do not conform to customer specifications; however, replacements are made at our discretion subject to in house product lab analysis. There are no terms or conditions set forth within our sales contracts that provide for product replacements. We expense replacement costs as incurred.

Stock-based Compensation – ~~Effective~~We ~~March~~rely 1,on ~~2006,~~the weguidance ~~have~~provided ~~adopted~~by ~~Statement~~ASC of718, ~~Financial Accounting Standards~~ (“~~SFAS”) No. 123(R), “~~Share- Based ~~Payment~~Payments”). ASC ~~SFAS~~718 ~~123R~~ requires companies to ~~measure~~expense ~~and recognize in operations~~ the ~~cost~~value of employee ~~services~~stock ~~received~~options inand ~~exchange~~similar ~~for~~awards anand ~~award~~applies ofto ~~equity~~all ~~instruments~~outstanding and vested stock-based onawards. In computing the ~~grant-date~~impact, the fair value. Inof ~~accordance~~each ~~with~~option is estimated on the ~~provisions~~date of grant based on the ~~Securities~~Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and ~~Exchange~~expected ~~Commission~~remaining ~~Staff~~lives ~~Accounting~~of ~~Bulletin~~the Noawards. ~~107,~~The weassumptions ~~have~~used ~~adapted~~in calculating the ~~modified~~fair value of share-~~prospective~~based ~~transition~~payment ~~method.~~awards ~~Prior~~represent management’s ~~periods~~best ~~were~~estimates, ~~not~~but ~~restated~~these toestimates ~~reflect~~involve inherent uncertainties and the ~~impact~~application of ~~adopting~~management ~~the~~judgment. ~~new~~As ~~standard.~~a Weresult, ~~determine~~if ~~the~~factors ~~fair~~change ~~value~~and ofwe use different assumptions, our stock-based compensation ~~using~~expense could be materially different in the ~~Black-Scholes~~future. ~~option-pricing~~In ~~model~~addition, ~~which~~we ~~requires~~are usrequired to ~~make~~estimate ~~assumptions~~the ~~regarding~~expected ~~future~~forfeiture ~~dividends,~~rate ~~expected~~and ~~volatility~~only ofrecognize ~~our~~expense ~~stock,~~for ~~and~~those ~~the~~shares expected ~~lives~~to ~~of the options~~vest. In ~~Under~~estimating ~~SFAS~~our ~~123R~~forfeiture rate, we ~~also~~analyze ~~make~~our ~~assumptions~~historical ~~regarding~~forfeiture rate, the ~~number~~remaining lives of unvested options, and the ~~number~~amount of ~~shares~~vested options as a percentage of ~~restricted~~total ~~stock~~options ~~and~~outstanding. ~~performance~~If ~~shares~~our ~~that~~actual ~~will~~forfeiture ~~ultimately~~rate ~~vest.~~is Asmaterially adifferent ~~result~~from ofour estimate, or if we reevaluate the ~~adoption~~forfeiture ofrate ~~FAS~~in ~~123R~~the future, the stock-based compensation expense ~~recognized~~could ~~includes~~be ~~compensation~~significantly ~~expense~~different ~~for~~from ~~all~~what ~~share-based~~we ~~payments~~have ~~granted~~recorded onin orthe ~~prior~~current ~~to,~~period. The ~~but~~fair value concepts were not ~~yet~~changed ~~vested~~significantly asin ofASC ~~March~~718; 1however, ~~2006~~in adopting this Standard, ~~based~~companies onwere given the ~~grant~~option ~~date~~to ~~fair~~choose ~~value~~among ~~estimated~~alternative invaluation ~~accordance~~models ~~with~~and ~~the~~amortization ~~original~~assumptions. ~~provisions~~We ofelected ~~FAS~~to ~~123,~~continue to use the Black-Scholes option pricing model and expense the options as compensation ~~cost~~over ~~for~~the ~~all~~requisite ~~share~~service period of the grant. We will reconsider use of the Black-~~based~~Scholes ~~payments~~model ~~granted~~if onadditional orinformation ~~subsequent~~becomes toavailable ~~March~~in 1,the ~~2006~~future that indicates another model would be more appropriate, ~~based~~or onif ~~the~~grants ~~grant~~issued ~~date~~in future periods have characteristics that cannot be reasonably estimated using this model. Deferred charges for options granted to non-employees are determined as the fair value ~~estimated~~of inthe ~~accordance~~consideration ~~with~~or the ~~provisions~~fair value of ~~FAS~~the ~~123R~~equity instruments issued, whichever is more reliably measured.

Recently Adopted Accounting Standards

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

Also, effective March 1, 2008, we adopted SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”) which allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. As of February 28, 2010, we have not elected the fair value option for any additional financial assets and liabilities beyond those already prescribed by accounting principles generally accepted in the United States.

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

Other Information

Off-Balance Sheet Arrangements

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 8. Financial Statements and Supplementary Data.

See the Financial Statements annexed to this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure 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, the Principal Executive Officer and Principal Financial Officer have concluded that, as of February 2829, ~~2011~~2012, 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 material changes in internal control over financial reporting that occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Principal Executive Officer and Principal Financial Officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our evaluation of internal control over financial reporting includes using the COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment.

Based on our evaluation under the frameworks described above, our management has concluded that our internal control over financial reporting was effective as of February 2829, ~~2011~~2012.

Management now recognizes that there was a significant deficiency in our internal control over financial reporting during the year ended February 28, 2011 related to our Simplified Employee Pension Plan which deficiency has been remedied prior to the fiscal year end. A material weakness in internal control over financial reporting is defined by the Public Company Accounting Oversight Board’s Audit Standard No. 5 as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting. During the fiscal year ended February 28, 2011, we tested all years of the Simplified Employee Pension Plan to insure compliance with Internal Revenue regulations. During the quarter ended August 31, 2010, we received the test results for all years it was in effect which results reflected that the Plan has not met the requirements of Section 416 and Section 408(k)(6) regarding contribution limits and employee deferral amounts. The liability we incurred to correct the Plan has been presented as a prior period adjustment in the financial statements as an increase in accrued expenses and a corresponding reduction to retained earnings.

Management has mitigated the risk of such deficiency going forward by adopting a 401(k) Plan to replace the Simplified Employee Pension Plan, which 401(k) Plan will be annually tested to insure Internal Revenue compliance. Our Principal Financial Officer and other personnel will continue to work with our auditors and other outside advisors to ensure that our control processes and procedures are adequate and effective.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation requirements by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.

Item 9B. Other Information.

Not applicable.

PART III

Item 10. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act.

Set forth below are our present directors and executive officers. Note that there are no other persons who have been nominated or chosen to become directors nor are there any other persons who have been chosen to become executive officers. There are no arrangements or understandings between any of the directors, officers and other persons pursuant to which such person was selected as a director or an officer. Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and have qualified. Officers serve at the discretion of the Board of Directors.

Name	Age	Present Position and Offices	Has Served as Director Since

Murray S. Cohen	87	Chairman of the	1984
		Board, Chief Scientist,
		Secretary and Director

James Ivchenko	72	President and Director	1993

Greg Amato	55	Chief Executive Officer	--

James R. Torpey, Jr.	62	Director	2001

Herve A. Meillat	56	Director	2005

Name	Age	Present Position and Offices	Has Served as Director Since
Murray S. Cohen	86	Chairman of the Board, Chief Scientist, Secretary and Director	1984
James Ivchenko	71	President and Director	1993
Greg Amato	54	Chief Executive Officer	—
James R. Torpey, Jr.	61	Director	2001
Herve A. Meillat	55	Director	2005

None of the directors and officers is related to any other director or officer of the Company.

Set forth below are brief accounts of the business experience during the past five years of each director and executive officer of the Company and each significant employee of the Company.

MURRAY S. COHEN has served as Director and Chairman of the Board of the Company since June 1984 and Secretary since March 2001. From June 1984 to January 2006, Dr. Cohen was Chief Executive Officer, and from June 1984 to August 1994, he was also President. Dr. Cohen also currently serves as Chief Scientist. From January 1978 through May 1983, Dr. Cohen was the Director of Research and Development for Apollo Technologies Inc., a company engaged in the development of pollution control procedures and devices. Dr. Cohen was employed as a Vice President and Technical Director of Borg-Warner Chemicals from 1973 through January 1978, where his responsibilities included the organization, project selection and project director of a 76 person technical staff which developed materials for a variety of plastic products. He received a Bachelor of Science Degree from the University of Missouri in 1949 and a Ph.D. in Organic Chemistry from the same institution in 1953.

JAMES IVCHENKO has served as Director of the Company since September 1993, President since August 1994, and from February 1992 to August 1994, he was Technical Director and Vice President of Operations. Prior thereto, Mr. Ivchenko was employed by Ungerer & Co. as Plant Manager for the Totowa, New Jersey and Bethlehem, Pennsylvania facilities from May 1988 to May 1991. Mr. Ivchenko has over 30 years of experience in the flavor, fragrance and pharmaceutical intermediate industry. He received his Bachelor of Arts Degree, Masters of Science and Masters of Business Administration from Fairleigh Dickinson University in New Jersey.

GREG AMATO has been employed by the Company since November 2004 and has been Chief Executive Officer since January 2006. From, January 2005 to January 2006, he was Vice President of Sales and Marketing. From 1993 to 2004, Mr. Amato was with Elementis, PLC and certain of its subsidiaries, divisions and predecessors, which company is a specialty chemical manufacturer. During such period, Mr. Amato was Vice President, Specialty Markets of Elementis Specialties, Inc., located in Hightstown, New Jersey from 2000 to 2004; President and CEO of Elementis Performance Polymers, located of Belleville, New Jersey from 1998 to 2000; and from 1993 to 1998, Sales Manager of Rheox, which was acquired by Elementis in 1998. Mr. Amato received a Bachelor of Chemical Engineering from Georgia Institute of Technology in 1978.

JAMES R. TORPEY, JR. has served as Director of the Company since July 2001. Mr. Torpey is Director of Market Development for SunPower Corporation, a major world wide supplier of solar electric equipment and systems. From 2002 to 2007, he was President of Madison Energy Consultants, a consulting firm in the energy industry. From 1995 to 2002, he was Director of Technology Initiatives at First Energy/GPU, Chairman of the Solar Electric Power Association, and President and member of the Board of Directors of GPU Solar, Inc. He was a member of the U.S. Department of Energy Solar Industry Advisory Board from 2001 to 2005. Mr. Torpey received his Masters of Business Administration from Rutgers University in 1991.

HERVE A. MEILLAT has served as Director of the Company since July 2005. Since September 2006, Mr. Meillat has been the CEO of Christian Dalloz Sunoptics (“CDS”), a company located in France, focused on sun lenses for high-end luxury, fashion, and sport sunglasses. In April 2010, CDS emerged from bankruptcy protection after 14 months under this status and was allowed to operate under same management and ownership as before. Mr. Meillat is a former Senior Vice President of the Bacou-Dalloz Group, that became Sperian Protection and lately Honeywell. He received his Master and Bachelor of Science Engineering Degree from ENSAM, Ecole Nationale Superieure des Arts et Metiers, France in 1979.

To the knowledge of the Company, and except as described above, none of the officers or directors has been personally involved in any bankruptcy or insolvency proceedings. To the knowledge of the Company, none of the directors or officers have been convicted in any criminal proceedings (excluding traffic violations and other minor offenses) or are the subject of a criminal proceeding which is presently pending, nor have such persons been the subject of any order, judgment, or decree of any court of competent jurisdiction, permanently or temporarily enjoining them from acting as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director or insurance company, or from engaging in or continuing in any conduct or practice in connection with any such activity or in connection with the purchase or sale of any security, nor were any of such persons the subject of a federal or state authority barring or suspending, for more than 60 days, the right of such person to be engaged in any such activity, which order has not been reversed or suspended.

Audit Committee Financial Expert

We do not have an audit committee financial expert, as such term is defined in Item 407(d)(5) of Regulation S-K, serving on our audit committee because we have no audit committee and are not required to have an audit committee because we are not a listed security.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who own more than ten percent of the Company’s Common Stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes of ownership of Common Stock of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

Based solely on the Company’s review of such forms received by it, or written representations from certain of such persons, the Company believes that, with respect to the fiscal year ended February 2829, ~~2011~~2012, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with.

Code of Ethics

The Board of Directors has adopted a Code of Ethics applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, which is designed to promote honest and ethical conduct; full, fair, accurate, timely and understandable disclosure; and compliance with applicable laws, rules and regulations. A copy of the Code of Ethics will be provided to any person without charge upon written request to the Secretary of the Company at its executive offices, 358-364 Adams Street, Newark, New Jersey 07105.

21Schedule 14D-9 Information Statement

On May 11, 2012, the Company filed a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC related to the tender offer (as described in Part I, Item 1 “Recent Events”), which included an Information Statement as Annex A to the Schedule 14D-9. The Information Statement includes information on Parent’s right to designate directors upon the consummation of the Offer. The information contained in said Information Statement pertaining to these potential designees follows this paragraph.

Right to Designate Directors

The Merger Agreement provides that after the acceptance of and payment for the Shares tendered in the Offer (the “Acceptance Time”), the Parent shall be entitled to designate up to such number of directors, rounded up to the next whole number, on the Company Board as is equal to the product of (i) the total number of directors on the Company Board (giving effect to the election or appointment of any additional directors pursuant to this provision) and (ii) the percentage that the number of Shares beneficially owned by the Parent and/or the Purchaser (including Shares accepted for payment in the Offer and the purchased Top-Up Option Shares, if any) bears to the total number of Shares outstanding, and Company shall, upon request by the Purchaser, promptly increase the size of the Company Board or use its reasonable best efforts to secure the resignations of such number of directors as is necessary to provide the Purchaser with such level of representation and shall cause the Purchaser’s designees to be so elected or appointed.

Following the election or appointment of the Parent’s designees to Company’s Board pursuant to the above and until the Effective Time of the Merger, Company’s Board shall at all times include, and Company, the Parent and the Purchaser shall use their reasonable best efforts to cause Company’s Board to at all times include, at least two Continuing Directors and each committee of the Company Board and the board of directors (or similar body) of each Subsidiary of Company shall at all times include, and Company, the Parent and the Purchaser shall use their reasonable best efforts to cause each committee of the Company Board and the board of directors (or similar body) of each Subsidiary of Company to at all times include, at least one Continuing Director. A “Continuing Director” shall mean a person who is a member of the Company as of the date of the Merger Agreement or a person selected by the Continuing Directors then in office; provided, however that if the number of Continuing Directors is reduced to less than two prior to the Effective Time of the Merger, any remaining Continuing Directors (or Continuing Director, if there shall be only one remaining) shall be entitled to designate a person who is not an officer, director, stockholder or designee of Parent or any of its Affiliates to fill such vacancy, and such person shall be deemed to be a Continuing Director for all purposes of the Merger Agreement, or, if no Continuing Directors then remain, the other directors shall designate three persons who are not officers, directors, stockholders or designees of Parent or any of its Affiliates to fill such vacancies, and such persons shall be deemed to be Continuing Directors for all purposes of the Merger Agreement.

Information with respect to the Board Designees

As of the date of this report, Parent has not determined who it will designate to the Board. However, such designees will be selected from the list of potential designees provided below (the “Potential Designees”). The Potential Designees have consented to serve as directors of the Company if so designated. None of the Potential Designees currently is a director of, or holds any position with, the Company. To our knowledge, none of the Potential Designees beneficially owns any equity securities, or rights to acquire any equity securities of the Company, has a familial relationship with any director or executive officer of the Company or has been involved in any transactions with the Company or any of its directors, executive officers or affiliates that are required to be disclosed pursuant to the rules of the SEC. To our knowledge, there are no material pending legal proceedings to which any Potential Designee listed below is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries. To our knowledge, none of the Potential Designees listed below has, during the past five years, (1) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (2) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

The following sets forth information with respect to the Potential Designees (including age as of the date hereof, business address, current principal occupation or employment and five-year employment history). Unless otherwise noted, the business address of each Potential Designee is c/o Polymathes Holdings I LLC, 20 Nassau Street, Suite M, Princeton, New Jersey 08542.

WILLIAM J. GOLDEN, age 35, is one of the founders of Polymathes Capital LLC (“Polymathes Capital”) and has been a managing partner since its inception in 2009. Polymathes Capital is an investment manager of limited partnerships and separately managed accounts located in Princeton, New Jersey. Mr. Golden is an attorney admitted to practice law in the States of New York and New Jersey. From 2006 to 2008, he was a lawyer with Cadwalader, Wickersham & Taft (“Cadwalader”), an international law firm based in New York, New York. At Cadwalader, Mr. Golden worked in the Financial Restructuring department. Mr. Golden is a graduate of Princeton University, the London School of Economics and Political Science and the Fordham University School of Law.

JOHN F. WACHTER, age 30, is also one of the founders of Polymathes Capital LLC (“Polymathes Capital”) and has been a managing partner since its inception in 2009. Prior to the founding of Polymathes Capital, Mr. Wachter worked on a team that developed a strategic plan for Catholic schools of the Archdiocese of New York. From 2006 to 2007, Mr. Wachter was an equity investment analyst for a hedge fund. Mr. Wachter is a graduate of Princeton University.

WILLIAM S. WALSH, age 50, has been a partner of McGuggan LLC, since 1998 to the present. McGuggan LLC is an investment firm, based on Morristown, New Jersey which specializes in private equity venture capital. Mr. Walsh has over 25 years of private equity investing and investment banking/financial advisory services experience. Over this time period, Mr. Walsh has participated in over 20 private equity investments through several partnerships. In addition, he has represented numerous companies in the areas of investment banking/financial advisory services in a number of capacities (mergers, acquisitions, sales, refinancing, restructuring). In 1988, Mr. Walsh co-founded South Street Capital Partners, a private equity firm. In 1992, he co-founded South Street Advisory Partners. In l994, he was a founding partner of Emptor Capital, a private equity firm. Mr. Walsh is a graduate of the University of Richmond.

Item 11. Executive Compensation.

The following summary compensation tables set forth information concerning the annual and long-term compensation for services in all capacities to the Company for the fiscal years ended February 2829, ~~2011~~2012 and February 28, ~~2010~~2011 of those persons who were, at February 2829, ~~2011~~2012, (i) the chief executive officer and (ii) the other most highly compensated executive officers of the Company, whose total compensation was in excess of $100,000 (the named executive officers):

Summary Compensation Table

Name and Principal Position	Year	Salary ($)		~~Bonus ($)~~	Bonus ($)		~~Stock Awards ($)~~		Stock Awards ($)		~~Option Awards ($)~~		Option Awards ($)	~~Non-Equity Incentive Plan Compensation ($)~~			Non-Equity Incentive Plan Compensation ($)	~~Nonqualified Deferred Compensation Earnings ($)~~			Nonqualified Deferred Compensation Earnings ($)	~~All Other Compensation ($)~~		~~Total~~All Other Compensation ($)		Total
Greg Amato	~~2011~~2012	$	~~173~~186,~~400~~309	$	0$	0	$	0	$	0	$	0	$	$0	0		$	$0	0		$	$0	0	$	~~173,400~~0	$	186,309
Chief Executive Officer	~~2010~~2011	$	~~165~~173,~~000~~400	$	0$	0	$	0	$	0	$	0	$	$0	0		$	$0	0		$	$0	0	$	~~165,000~~0	$	173,400
Murray S. Cohen	~~2011~~2012	$	5961,~~093~~226	$	0$	0	$	~~5,000~~	~~(1)~~$	3,750	$(1)	0	$	$0	0		$	$0	~~79,041~~	~~(2)~~	$	$0	0	$	~~143,134~~0	$	64,976
Chairman of the Board	~~2010~~2011	$	5059,~~827~~093	$	0$	0	$	~~5,000~~	~~(1)~~$	5,000	$(1)	0	$	$0	~~127,500~~	~~(3)~~	$	$0	0		$	$79,041	0(2)	$	~~183,327~~0	$	143,134
James Ivchenko	2011	$	203,878	$	0		$	5,000	(1)		$	0		$	0			$	128,000	(4)		$	0	$	336,878
	2012	$	201,878		$	0			$	3,750	(1)		$	0			$	0			$	0		$	0	$	205,628
President	2010	$	195,478	$	0		$	5,000	(1)		$	0		$	112,500	(5)		$	32,000	(6)		$	0	$	344,978
James Ivchenko President	2011	$	203,878		$	0			$	5,000	(1)		$	0			$	0			$	128,000	(3)	$	0	$	336,878

(1)	Represents the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year in accordance with SFAS 123R.
(2)	Represents the amount paid to Dr. Cohen for a deferred compensation accrual remaining due to him which was paid in the second quarter of fiscal 2011. See “Deferred Compensation/Employment Contracts and Change in Control Arrangements” below.
(3)	Dr. Cohen received additional compensation of $127,500 in fiscal 2010 based upon the Company’s sales for fiscal 2009, as determined under his employment contract which expired as of February 28, 2009. As a result, no such additional compensation was paid in fiscal 2011.
(4)	Represents the amount paid to Mr. Ivchenko for the remaining balance due to him under his deferred compensation agreement which was paid in the second quarter of 2011 following the Company’s surrender of a certain life insurance policy owned by the Company on Mr. Ivchenko’s life. See “Deferred Compensation/Employment Contracts and Change in Control Arrangements” below.
(5)	Mr. Ivchenko received additional compensation of $112,500 in fiscal 2010 based upon the Company’s sales for fiscal 2009, as determined under his employment contract which expired as of February 28, 2009. As a result, no such additional compensation was paid in fiscal 2011.
(6)	Represents the amount paid to Mr. Ivchenko in fiscal 2010 pursuant to his deferred compensation agreement. See “Deferred Compensation/Employment Contracts and Change in Control Arrangements” below.

(1)	Represents the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year in accordance with SFAS 123R.

(2)	Represents the amount paid to Dr. Cohen for a deferred compensation accrual remaining due to him which was paid in the second quarter of fiscal 2011. See “Deferred Compensation/Employment Contracts and Change in Control Arrangements” below.

(3)

Represents the amount paid to Mr. Ivchenko for the remaining balance due to him under his deferred compensation agreement which was paid in the second quarter of 2011 following the Company’s surrender of a certain life insurance policy owned by the Company on Mr. Ivchenko’s life. See “Deferred Compensation/Employment Contracts and Change in Control Arrangements” below.

Equity Awards

The following table provides certain information concerning equity awards held by the named executive officers as of February 2829, ~~2011~~2012.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

	Option Awards								Stock Awards
Name	No. of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Equity Incentive Plan Awards: Number of Unearned Shares, Units Or Other Rights That Have Not Vested(#)
Greg Amato		-0-		-0-		N/A		N/A		-0-		-0-
Murray S. Cohen		20,000		-0-	$	0.41	2/9/2014			-0-		-0-
James Ivchenko		20,000		-0-	$	0.41	2/9/2014			-0-		-0-

Compensation of Directors

Since fiscal 2002, the Company has paid directors $750 for each board meeting attended. Commencing in fiscal 2007, only non-employee directors are paid such amount. In addition, commencing in fiscal 2007, non-employee directors are also paid $750 for each committee meeting attended. Directors have always been and will continue to be reimbursed for reasonable expenses incurred on behalf of the Company.

In addition to the foregoing, pursuant to Epolin, Inc. 2008 Stock Incentive Plan (the “2008 Plan”), adopted by the Board of Directors on June 18, 2008 and approved by the stockholders on August 18, 2008, each director shall receive a stock award annually of 25,000 shares of Common Stock.

The following table provides certain summary information concerning the compensation paid to non-employee directors during fiscal ~~2011~~2012. All compensation paid to Dr. Cohen and Mr. Ivchenko is set forth in the table under “Executive Compensation”.

Director Compensation

Name	Fees Earned or Paid in Cash ($)		~~Stock Awards (S)~~	Stock Awards (S)			~~Option Awards ($)(1)~~	Option Awards ($)(1)	~~All Other Compensation ($)~~	~~Total ($)~~	All Other Compensation ($)		Total ($)
James R. Torpey, Jr.	$	31,~~000~~500	$	~~5,000~~$	~~(1)~~3,750	(1)	~~-0-~~		-0-	$	~~8,000~~	-0-	$	5,250
Herve A. Meillat	$	31,~~000~~500	$	~~5,000~~$	~~(1)~~3,750	(1)	~~-0-~~		-0-	$	~~8,000~~	-0-	$	5,250

(1) Represents the dollar amount recognized in fiscal ~~2011~~2012 for financial reporting purposes of stock awarded computed in accordance with Financial Accounting Standards 123R.

Deferred Compensation/Employment Contracts and Change in Control Arrangements

Effective as of November 1, 2004, the Company entered into an employment agreement with Greg Amato. Such agreement provided that Mr. Amato would be employed “at-will” and that such employment can be terminated by either party at any time without reason or cause provided at least six months prior written notice is given. The employment agreement also provides that Mr. Amato would receive bonus compensation for 2004 based upon a formula and would be entitled to receive, following the fiscal year ending February 28, 2006, bonus compensation equal to 10% of the increase in the Company’s net income for the fiscal year ending February 28, 2006 compared to February 28, 2005. For subsequent fiscal years, Mr. Amato shall be entitled to receive annual cash bonuses as the Compensation Committee shall determine with performance objectives determined prior to the start of the applicable year. Pursuant to the employment agreement, the Company also agreed to grant Mr. Amato an option to purchase 100,000 shares of Common Stock of the Company at an exercise price equal to the fair market value of the Company’s Common Stock on November 1, 2004 which option shall be exercisable only after the completion of Mr. Amato’s second year of employment under his employment agreement. Such option expired as of November 1, 2009. In addition, pursuant to the employment agreement, the Company agreed to grant to Mr. Amato, one year from the date of his employment agreement provided he is then employed by the Company, 100,000 shares of restricted Common Stock of the Company.

Pursuant to a deferred compensation agreement, as amended, entered into with James Ivchenko, President of the Company, the Company has agreed to pay Mr. Ivchenko $32,000 per year for ten consecutive years commencing the first day of the month following Mr. Ivchenko reaching the age of 65. The obligations to Mr. Ivchenko under his deferred compensation agreement were partially funded with a life insurance policy owned by the Company. Through February 28, 2010, six payments of $32,000 each had been paid to Mr. Ivchenko, leaving four remaining payments owing to Mr. Ivchenko which in the aggregate amounted to $128,000 (the “Deferred Compensation Remaining Balance”). Subsequent to the year ended February 28, 2010, and as of May 14, 2010, the Board of Directors agreed to surrender the life insurance policy for its net surrender value (approximately $168,000) and pay Mr. Ivchenko the Deferred Compensation Remaining Balance which amount was paid in the second quarter of 2011.

Effective as of March 1, 1999, the Company entered into a ten year employment agreement with Mr. Ivchenko. Pursuant thereto, Mr. Ivchenko shall 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. In addition thereto, Mr. Ivchenko shall receive as additional compensation a certain percentage (as set forth below) of the Company’s annual gross sales up to but not exceeding annual gross sales of $3 million. Such percentage starts at 1.50% for the fiscal year ended February 29, 2000 and increases by 0.25% per year during the term of the agreement. In the event of death or disability, the agreement provides that Mr. Ivchenko or his estate will receive 100% of his annual salary and additional compensation as described above for the fiscal year during which he died or became disabled, and 50% of his annual salary and annual additional compensation which he would have received (if not for his death or disability) for the remainder of the ten year term. Such agreement expired as of February 28, 2009.

2330

Effective as of March 1, 1999, the Company also entered into a ten year employment agreement with Murray S. Cohen, Chairman of the Board of the Company. Pursuant thereto, Dr. Cohen shall 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. In addition thereto, Dr. Cohen shall receive as additional compensation a certain percentage (as set forth below) of the Company’s annual gross sales up to but not exceeding annual gross sales of $3 million. Such percentage starts at 2.00% for the fiscal year ended February 29, 2000 and increases by 0.25% per year during the term of the agreement. Pursuant to an amendment to the employment agreement entered into on March 30, 2006, Dr. Cohen shall have the option to partially retire pursuant to which Dr. Cohen will devote approximately 50% of his time to the Company in which event he will be paid 50% of his annual base salary and 100% of the additional compensation for the remainder of the term. He shall also have the option to either (i) substantially retire pursuant to which Dr. Cohen will devote approximately 25% of his time to the Company in which event he will be paid 25% of his annual base salary and 100% of the additional compensation for the remainder of the term, or (ii) fully retire in which event he will be paid no annual base salary and 50% of the additional compensation for the remainder of the term. In the event of death or disability, the amendment provides that Dr. Cohen or his estate will receive 100% of his annual salary and additional compensation as described above for the fiscal year during which he died or became disabled, and 50% of his annual salary and annual additional compensation which he would have received (if not for his death or disability) for the remainder of the ten year term, provided at the time of death or disability Dr. Cohen was a full-time employee. If at the time of death or disability Dr. Cohen was fully, partially or substantially retired, then other percentage rates are provided in the amendment for the payment of the annual salary and annual additional compensation to Dr. Cohen or his estate for the balance of the term. Such agreement expired as of February 28, 2009.

The Company had previously entered into a deferred compensation agreement in June 1998 with Dr. Cohen which provided for the payment of certain funds to Dr. Cohen for a period of ten years beginning two weeks after the date of his retirement. Such agreement was terminated in connection with the execution of the employment agreement with Dr. Cohen. In addition to the foregoing, pursuant to a deferred compensation agreement entered into in January 1996 which was terminated in June 1998, there were unfunded accruals of $79,041 (the “Deferred Compensation Accrual”) due to Dr. Cohen which the parties previously agreed would be paid to Dr. Cohen upon retirement either in equal consecutive monthly payments for a period not exceeding 60 months or a single payment which will be at the discretion of the Company. Subsequent to the year ended February 28, 2010, and as of May 14, 2010, the Board of Directors agreed to pay Dr. Cohen the Deferred Compensation Accrual which was paid in the second quarter of 2011.

The Company does not have any termination or change in control arrangements with any of its named executive officers.

Indebtedness of Management

No member of management was indebted to the Company during its last fiscal year.

2431

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth, as of May 25, ~~2011~~2012, certain information with regard to the record and beneficial ownership of the Company’s Common Stock by (i) each stockholder owning of record or beneficially 5% or more of the Company’s Common Stock, (ii) each director of the Company, (iii) the Company’s Chief Executive Officer and other executive officers, if any, of the Company whose total compensation was in excess of $100,000 (the “named executive officers”), and (iv) all officers and directors of the Company as a group:

Name of Beneficial Owner	Amount and Nature of Beneficial Ownership		~~Percent of Class~~	Percent of Class
Murray S. Cohen(1)*	~~1,965,958~~	1,990,958	~~16.0~~	%	16.10	%
James Ivchenko(2)*	~~1,564,587~~	1,589,587	~~12.7~~	%	12.80	%
James R. Torpey, Jr.(3)*	~~122,500~~	147,500	~~1.0~~	%	1.20	%
Herve A. Meillat*	~~79,000~~	104,000	**		**
Greg Amato*	~~100,000~~	100,000	**		**
Claire Bluestein*	~~970,155~~	970,155	~~7.9~~	%	7.80	%
Santa Monica Partners, L.P.(4)	~~825,900~~	825,900	~~6.7~~	%	6.70	%
Sandra Lifschitz(5)	~~605,000~~	605,000	~~5.0~~	%	4.90	%
Hummingbird Management, LLC(6)	~~1,029,119~~	1,029,119	~~8.4~~	%	8.30	%
All Executive Officers and Directors as a Group (5 persons)	~~3,832,045~~	3,932,045	~~31.1~~	%	31.70	%

*	The address for each is 358-364 Adams Street, Newark, New Jersey 07105.
**	Less than 1%.
(1)	Includes 1,920,958 shares held by Dr. Cohen and 25,000 shares held by the wife of Dr. Cohen. Also, includes 20,000 shares which Dr. Cohen has the right to acquire within 60 days pursuant to the exercise of options granted under the 1998 Plan.
(2)	Includes 1,080,000 shares held by Mr. Ivchenko and 464,587 held by Mr. Ivchenko and his wife, as joint tenants. Also, includes 20,000 shares which Mr. Ivchenko has the right to acquire within 60 days pursuant to the exercise of options granted under the 1998 Plan.
(3)	Includes 10,000 shares which Mr. Torpey has the right to acquire within 60 days pursuant to the exercise of options granted under the 1998 Plan.
(4)	This information is based solely upon information reported in filings made to the SEC on behalf of Santa Monica Partners, L.P. Its address is 1865 Palmer Avenue, Larchmont, New York.
(5)	This information is based solely upon information reported in filings made to the SEC on behalf of Sandra Lifschitz. Her address is 7 Tulane Drive, Livingston, New Jersey.
(6)	This information is based solely upon information reported in filings made to the SEC on behalf of Hummingbird Management, LLC. Its address is 145 East 57th Street, New York, New York.

_________________

*	The address for each is 358-364 Adams Street, Newark, New Jersey 07105.

**	Less than 1%.

(1)	Includes 1,945,958 shares held by Dr. Cohen and 25,000 shares held by the wife of Dr. Cohen. Also, includes 20,000 shares which Dr. Cohen has the right to acquire within 60 days pursuant to the exercise of options granted under the 1998 Plan.

(2)	Includes 1,130,000 shares held by Mr. Ivchenko and 439,587 held by Mr. Ivchenko and his wife, as joint tenants. Also, includes 20,000 shares which Mr. Ivchenko has the right to acquire within 60 days pursuant to the exercise of options granted under the 1998 Plan.

(3)	Includes 10,000 shares which Mr. Torpey has the right to acquire within 60 days pursuant to the exercise of options granted under the 1998 Plan.

(4)	This information is based solely upon information reported in filings made to the SEC on behalf of Santa Monica Partners, L.P. Its address is 1865 Palmer Avenue, Larchmont, New York.

(5)	This information is based solely upon information reported in filings made to the SEC on behalf of Sandra Lifschitz. Her address is 7 Tulane Drive, Livingston, New Jersey.

(6)	This information is based solely upon information reported in filings made to the SEC on behalf of Hummingbird Management, LLC. Its address is 145 East 57th Street, New York, New York.

Tender and Voting Agreements

The following summary of certain provisions of the Tender and Voting Agreements is qualified in its entirety by reference to the actual agreements, copies of which are filed as Exhibits 10.1 and 10.2 to this report, and are incorporated by reference herein.

Each of Dr. Cohen and Mr. Ivchenko (each, a “Supporting Stockholder”) has irrevocably appointed Parent as proxy for the Supporting Stockholder to vote the Shares as to which the Supporting Stockholder has voting power and in the Supporting Stockholder’s name, place and stead, at any annual, special or other meeting or action of the shareholders of Epolin Inc., as applicable, or at any adjournment thereof, whether before or after the time we first accept any Shares for payment pursuant to the Offer, solely for the adoption of the Merger Agreement and the approval of the Merger.

In addition, each Supporting Stockholder has agreed to tender the Shares held by the Supporting Stockholder to the Purchaser in the Offer not later than ten business days following the commencement of the Offer, provided that the Supporting Stockholder may withdraw any Shares tendered pursuant to the Tender and Voting Agreement at any time following the termination or expiration of the Offer without Purchaser purchasing all Shares tendered pursuant to the Offer in accordance with its terms. However, each Supporting Stockholder is not required, for purposes of the Tender and Voting Agreement, to tender any Shares if that tender would cause any Supporting Stockholder to incur liability under Section 16(b) of the Exchange Act. During the term of the Tender and Voting Agreement, except as otherwise provided therein, each Supporting Stockholder agrees not to:

·	Directly or indirectly, sell, transfer, assign, pledge, hypothecate, tender, encumber or otherwise dispose of or limit its right to vote in any manner any of the Shares held by the the Supporting Stockholder, or agree to do any of the foregoing; or

·	Take any action which would have the effect of preventing or disabling the Supporting Stockholder from performing his obligations under the Tender and Voting Agreement.

The Tender and Voting Agreement, and all rights and obligations of the Purchaser, Parent and the Supporting Stockholders will terminate on the earlier of: (i) Effective Time, (ii) the End Date, (iii) the date of any modification, waiver, change or amendment to the Merger Agreement in a manner that reduces the amount or changes the form of consideration payable thereunder to the Stockholder, and (iv) the termination of the Merger Agreement pursuant to the termination provisions thereof.

The Stockholders Agreement

Pursuant to a Stockholders Agreement executed in October 2002, each of the then members of the Board of Directors (Dr. Cohen and Messrs. Ivchenko and Torpey, as well as Morris Dunkel, Claire Bluestein and Peter Kenny) has provided the Company with certain rights of refusal in the event any of such individuals desire to sell any of the shares of the Company’s ~~Common~~common ~~Stock~~stock which any of them hold of record or beneficially. Excluded from such restrictions are gifts in which the proposed donee agrees to be bound to the Stockholders Agreement and transfers by will or the laws of descent, provided the shares remain subject to said restrictions. In addition, shares may be transferred by such individuals with the prior approval of the Board of Directors of the Company (or any committee authorized by the Board to give such approval), which approval has been given in connection with the Offer.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

~~See~~Since ~~“Deferred~~March ~~Compensation/Employment~~1, ~~Contracts~~2011, ~~and~~there ~~Change~~has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party: (i) in ~~Control~~which ~~Arrangements”~~the ~~above~~amount ~~for~~involved ~~information~~exceeds onthe lesser of $120,000 or one percent of the ~~transactions~~average ~~described~~of ~~therein~~our total assets at year-end for the last three completed fiscal years; and (ii) in which any director, executive officer, shareholder who beneficially owns 5% or more of our common stock or any member of their immediate family had or will have a direct or indirect material interest.

Other than described therein, since March 1, 2010, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party: (i) in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last three completed fiscal years; and (ii) in which any director, executive officer, shareholder who beneficially owns 5% or more of our common stock or any member of their immediate family had or will have a direct or indirect material interest.

Director Independence

We have determined that two of our four directors are independent directors. Messrs. Torpey and Meillat are our independent directors. We have determined their independence using the general independence criteria set forth in the Nasdaq Marketplace Rules.

Item 14. Principal Accountant Fees and Services.

The following is a summary of the fees billed to us by the principal accountants to the Company for professional services rendered for the fiscal years ended February 2829, ~~2011~~2012 and February 28, ~~2010~~2011:

	Fiscal 2011		Fiscal 2010
	Fiscal 2012		Fiscal 2011
Fee Category	Fees		Fees
Audit Fees	$	51,000	$	51,000
Audit Related Fees	$	0	$	0
Tax Fees	$	3,500	$	3,500
All Other Fees	$	32,~~300~~120	$	43,~~000~~300
Total Fees	$	5756,~~800~~620	$	5857,~~500~~800

Audit Fees. Consists of fees billed for professional services rendered for the audit of our financial statements and review of interim consolidated financial statements included in quarterly reports and services that are normally provided by the principal accountants in connection with statutory and regulatory filings or engagements.

Audit Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees”.

Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include preparation of federal and state income tax returns.

All Other Fees. Consists of fees for product and services other than the services reported above.

Pre-Approval Policies and Procedures

Prior to engaging its accountants to perform a particular service, the Company’s Board of Directors obtains an estimate for the service to be performed. All of the services described above were approved by the Board of Directors in accordance with its procedures.

2634

PART IV

Item 15. Exhibits and Financial Statement Schedules.

The following documents are filed as part of this report:

(1)	Financial Statements
	Financial Statements are listed in the Contents to Consolidated Financial Statements included with this report.
(2)	Financial Statement Schedules
	No financial statement schedules are included because such schedules are not applicable, are not required, or because required information is included in the financial statements or notes thereto.
(3)	Exhibits

(1)	Financial Statements Financial Statements are listed in the Contents to Consolidated Financial Statements included with this report.

	3.1	Epolin Inc.’s certificate of incorporation as amended (1)
	3.2	Epolin Inc.’s by-laws(1)
	4.1	Specimen certificate for common stock(1)
	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)

(2)	Financial Statement Schedules No financial statement schedules are included because such schedules are not applicable, are not required, or because required information is included in the financial statements or notes thereto.

(3)

Exhibits

2.1		Agreement and Plan of Merger dated as of March 14, 2012 by and among Epolin, Inc., Polymathes Holdings I LLC and Polymathes Acquisition I Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Epolin, Inc. filed with the SEC on March 16, 2012).
3.1		Epolin Inc.’s certificate of incorporation as amended (1)
3.2		Epolin Inc.’s by-laws(1)
4.1		Specimen certificate for common stock(1)
10.1		Tender and Voting Agreement dated as of March 14, 2012 between Polymathes Holdings I LLC, Polymathes Acquisition I Inc. and Murray S. Cohen (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Epolin, Inc. filed with the SEC on March 16, 2012).
10.2		Tender and Voting Agreement dated as of March 14, 2012 between Polymathes Holdings I LLC, Polymathes Acquisition I Inc. and James Ivchenko (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Epolin, Inc. filed with the SEC on March 16, 2012).
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)
101*		The following financial information from our Annual Report on Form 10-K for the year ended February 29, 2012 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Stockholder’s Equity, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements

_____________________

In accordance with Rule 406T of Regulation S-T, the XBRL information in Exhibit 101 to this annual report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

(1)	Filed with the Company’s Form S-18 Registration Statement SEC File 33-25405-NY.

2735

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		EPOLIN, INC.
	EPOLIN, INC. (Registrant)
		(Registrant)
Dated: May 28, 2012	By:	/s/ Murray S. Cohen
	By:	/s/ Murray S. Cohen
		Murray S. Cohen,
		Chairman of the Board
	Dated:	May 31, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, and in the capacities and on the dates indicated:

Signature	Title	Date
/s/ Greg Amato	Chief Executive Officer	May 3128, ~~2011~~2012
Greg Amato	(Principal Executive Officer)
/s/ Murray S. Cohen	Chairman of the Board,	May 3128, ~~2011~~2012
Murray S. Cohen	Secretary and Director
/s/ James Ivchenko	President and Director	May 3128, ~~2011~~2012
James Ivchenko	(Principal Financial Officer)
/s/ James R. Torpey, Jr.	Director	May 3128, ~~2011~~2012
James R. Torpey, Jr.
/s/ Herve A. Meillat	Director	May 3128, ~~2011~~2012
Herve A. Meillat

2836

EPOLIN, INC. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED

FEBRUARY 2829, ~~2011~~2012 AND ~~2010~~FEBRUARY 28, 2011

CONTENTS

	Page
Independent Auditor’s Report	1	F-1
Consolidated Financial Statements:
Consolidated Balance Sheets	~~2 - 3~~	F-2
Consolidated Statements of Income	4	F-4
Consolidated Statements of Stockholders’ Equity	5
Consolidated Statements of Stockholder’s Equity		F-5
Consolidated Statements of Cash Flows	6	F-6
Notes to Consolidated Financial Statements	~~7 - 22~~	F-7 to F-23

~~INDEPENDENT AUDITOR’S REPORT~~ 38

INDEPENDENT AUDITOR'S REPORT

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

EPOLIN, INC. AND SUBSIDIARY

Newark, New Jersey

We have audited the accompanying Consolidated Balance Sheets of Epolin, Inc. and it’'s wholly owned Subsidiary as of February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011 and the related Consolidated Statements of Income, Stockholders’' Equity and Cash Flows for each of the two years in the periods ended February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011. These financial statements are the responsibility of the Company’'s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’'s internal control over financial reporting. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Epolin Inc. and Subsidiary as of February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011, and the results of its operations and its cash flows for each of the two years in the periods ended February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011, in conformity with accounting principles generally accepted in the United States of America.

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

~~May~~Weismann ~~25,~~Associates ~~2011~~LLC

1Branchburg, NJ 08876

~~EPOLIN~~May 21, ~~INC. AND SUBSIDIARY~~2012

~~CONSOLIDATED BALANCE SHEETS~~F-1

EPOLIN, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS ASSETS

	February 28,
	February 29,		February 28,
	2011		2010
	2012		2011
Current assets:
Cash and cash equivalents	$	1748,~~881,219~~583		1,~~908~~881,~~752~~219
Accounts receivable		~~502~~626,~~475~~317		~~469~~502,~~035~~475
Inventories		~~611~~743,~~061~~445		~~683~~611,~~995~~061
Prepaid expenses		9651,~~446~~020		5596,~~094~~446
Prepaid taxes		~~188,962~~421		33188,~~870~~962
Deferred tax assets-current portion		145,~~433~~829		14,~~698~~433
Total current assets		32,~~294~~175,~~596~~615		3,~~165~~294,~~444~~596
Plant, property and equipment - at cost:
Land		81,000		81,000
Building and improvements		~~791~~793,~~242~~448		~~770~~791,~~537~~242
Laboratory equipment		~~213~~230,~~242~~639		~~210~~213,~~555~~242
Furniture and office equipment		~~275~~284,~~856~~189		~~273~~275,~~863~~856
Leasehold improvements		532,129		532,~~131~~129
Total		1,~~893~~921,~~469~~405		1,~~868~~893,~~086~~469
Less: Accumulated depreciation and amortization		1,~~094~~163,~~240~~249		1,~~008~~094,~~372~~240
Net plant, property and equipment		~~799~~758,~~229~~156		~~859~~799,~~714~~229
Other assets:
Other assets - Deferred tax assets - non current portion		35,795		51,527
Deferred tax assets-non current portion		51,527		85,460
Total	$	2,969,566		4,145,352
Cash value - life insurance policy		—		188,641
Total other assets		51,527		274,101
Total	$	4,145,352		4,299,259

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

F-2

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

CONSOLIDATED BALANCE SHEETS (CONTINUED)

	February 29,		February 28,
	2012		2011
Current liabilities:
Accounts payable	$	6,731		25,596
Accrued expenses		282,144		242,525
Taxes payable:
Income		84,263		-
Payroll		1,570		1,570

Total current liabilities		374,708		269,691

Commitments and Contingencies

Stockholders' equity:
Preferred stock, $2.50 par value; 940,000 shares authorized;
none issued
Preferred stock, series A convertible non-cumulative,
$2.50 par value; redemption price and liquidation preference;
60,000 shares authorized; 5,478 shares issued and redeemed
Common stock, no par value; 20,000,000 shares authorized;
13,315,000 and 13,215,000 shares issued, and 12,366,355 and
12,266,355 shares outstanding at February 29, 2012 and
February 28, 2011 respectively.		2,364,693		2,364,693
Additional paid-in capital		138,125		123,125
Retained earnings		443,122		1,738,925

Total		2,945,940		4,226,743
Less: Treasury stock - at cost		351,082		351,082

Total stockholders' equity		2,594,858		3,875,661

Total	$	2,969,566		4,145,352

LIABILITIES AND STOCKHOLDERS’ EQUITY

	February 28,
	2011		2010
Current liabilities:
Accounts payable	$	25,596		16,777
Accrued expenses		242,525		47,145
Taxes payable:
Payroll		1,570		2,208
Total current liabilities		269,691		66,130
Other liabilities - Deferred compensation		—		195,082
Total liabilities		269,691		261,212
Commitments and Contingencies
Stockholders’ equity:
Preferred stock, $2.50 par value; 940,000 shares authorized; none issued
Preferred stock, series A convertible non-cumulative, $2.50 par value; redemption price and liquidation preference; 60,000 shares authorized; 5,478 shares issued and redeemed
Common stock, no par value; 20,000,000 shares authorized; 13,215,000 and 13,115,000 shares issued, and 12,266,355 and 12,166,355 shares outstanding at February 28, 2011 and February 28, 2010, repectively		2,364,693		2,364,693
Additional paid-in capital		123,125		124,820
Retained earnings		1,738,925		1,899,616
Total		4,226,743		4,389,129
Less: Treasury stock - at cost		351,082		351,082
Total stockholders’ equity		3,875,661		4,038,047
Total	$	4,145,352		4,299,259

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

F-3

EPOLIN, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED FEBRUARY 29, 2012 AND FEBRUARY 28, 2011

CONSOLIDATED STATEMENTS OF INCOME

	2012		2011

Sales	$	3,410,695		3,065,554

Cost of sales and expenses:
Cost of sales		1,755,761		1,453,506
Selling, general and administrative		1,423,086		1,598,029

Total		3,178,847		3,051,535

Operating income		231,848		14,019

Other income:
Interest		3,088		10,494
Miscellaneous income		56,599		-

Total		59,687		10,494

Income before taxes		291,535		24,513

Income taxes		115,375		(14,727	)

Net income	$	176,160		39,240

Per share data:

Basic earnings per common share	$	0.01		-

Fully diluted earnings per common share	$	0.01		-

Weighted average number of common shares outstanding		12,324,894		12,185,992
cu
Fully diluted number of common shares outstanding		12,324,894		12,203,092

YEARS ENDED FEBRUARY 28, 2011 AND 2010

	2011			2010
Sales	$	3,065,554			2,944,628
Cost of sales and expenses:
Cost of sales		1,453,506			1,273,768
Selling, general and administrative		1,598,029			1,118,622
Total		3,051,535			2,392,390
Operating income		14,019			552,238
Other income:
Rental income		—			4,500
Interest		10,494			25,835
Total		10,494			30,335
Income before taxes		24,513			582,573
Income taxes		(14,727	)		113,503
Net income	$	39,240			469,070
Per share data:
Basic earnings per common share	$	—			0.04
Fully diluted earnings per common share	$	—			0.04
Weighted average number of common shares outstanding		12,205,807			12,101,972
Fully diluted number of common shares outstanding		12,205,807			12,104,872

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

F-4

EPOLIN, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED FEBRUARY 29, 2012 AND FEBRUARY 28, 2011

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

					Additional
	Number of		Common		Paid-in-			Retained			Treasury		Treasury			Stockholders'
	Shares Issued		Stock		Capital			Earnings			Shares		Stock			Equity

Balance - March 1, 2010		13,115,000	$	2,364,693		124,820			1,899,616			948,645		(351,082	)		4,038,047

Prior period adjustment-
pension contribution		-		-		-			(199,931	)		-		-			(199,931	)

Stock-based compensation		100,000		-		(1,695	)		-			-		-			(1,695	)

Net income		-		-		-			39,240			-		-			39,240

Balance - February 28, 2011		13,215,000	$	2,364,693		123,125			1,738,925			948,645		(351,082	)		3,875,661


Balance - March 1, 2011		13,215,000	$	2,364,693		123,125			1,738,925			948,645		(351,082	)		3,875,661

Dividends paid		-		-		-			(1,471,963	)		-		-			(1,471,963	)

Stock-based compensation		100,000		-		15,000			-			-		-			15,000

Net income		-		-		-			176,160			-		-			176,160

Balance - February 29, 2012		13,315,000	$	2,364,693		138,125			443,122			948,645		(351,082	)		2,594,858

YEARS ENDED FEBRUARY 28, 2011 AND 2010

	Number of Shares Issued		Common Stock		Additional Paid-in- Capital			Retained Earnings			Treasury Shares		Treasury Stock			Stockholders’ Equity
Balance - March 1, 2009		13,015,000	$	2,364,693		104,820			1,430,546			948,645		(351,082	)		3,548,977
Stock-based compensation		100,000		—		20,000			—			—		—			20,000
Net income		—		—		—			469,070			—		—			469,070
Balance - February 28, 2010		13,115,000	$	2,364,693		124,820			1,899,616			948,645		(351,082	)		4,038,047
Balance - March 1, 2010		13,115,000	$	2,364,693		124,820			1,899,616			948,645		(351,082	)		4,038,047
Prior period adjustment - pension contribution - net of income taxes		—		—		—			(199,931	)		—		—			(199,931	)
Stock-based compensation		100,000		—		(1,695	)		—			—		—			(1,695	)
Net income		—		—		—			39,240			—		—			39,240
Balance - February 28, 2011		13,215,000	$	2,364,693		123,125			1,738,925			948,645		(351,082	)		3,875,661

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

F-5

EPOLIN, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED FEBRUARY 29, 2012 AND FEBRUARY 28, 2011

CONSOLIDATED STATEMENTS OF CASH FLOWS

	2012			2011
Cash flows from operating activities:
Net income	$	176,160			39,240
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		69,009			85,868
Prior period adjustment - pension contribution		-			(199,931	)
Stock-based compensation		15,000			(1,695	)
Deferred tax expense		24,336			34,197
Obligation under deferred compensation agreement		-			(195,082	)
(Increase) decrease in:
Accounts receivable		(123,842	)		(33,440	)
Inventories		(132,384	)		72,934
Prepaid expenses		45,426			(41,352	)
Prepaid taxes		188,541			(155,092	)
Increase (decrease) in:
Accounts payable		(18,865	)		8,819
Accrued expenses		39,619			195,380
Taxes payable		84,263			(637	)

Net cash provided (used) by operating activities		367,263			(190,791	)

Cash flows from investing activities:
Decrease in cash value - life insurance policy		-			188,641
Payments for plant, property and equipment		(27,936	)		(25,383	)

Net cash provided by (used in) investing activities		(27,936	)		163,258

Cash used from financing activities - Dividends paid		(1,471,963	)		-

Increase (decrease) in cash		(1,132,636	)		(27,533	)

Cash and cash equivalents:
Beginning		1,881,219			1,908,752

Ending	$	748,583			1,881,219

Supplemental disclosures of cash flows:
Income taxes paid	$	6,050			70,500

YEARS ENDED FEBRAURY 28, 2011 AND 2010

	2011			2010
Cash flows from operating activities:
Net income	$	39,240			469,070
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		85,868			104,432
Prior period adjustment - pension contribution		(199,931	)		—
Stock based compensation		(1,695	)		20,000
Deferred tax expense		34,197			13,723
Obligation under deferred compensation agreement		(195,082	)		(26,306	)
(Increase) decrease in:
Accounts receivable		(33,440	)		(97,592	)
Inventories		72,934			(16,811	)
Prepaid expenses		(41,352	)		1,204
Prepaid taxes		(155,092	)		194,476
Increase (decrease) in:
Accounts payable		8,819			(21,921	)
Taxes payable		(637	)		—
Accrued expenses		195,380			(237,279	)
Net cash provided (used) by operating activities		(190,791	)		402,996
Cash flows from investing activities:
Decrease in cash value - life insurance policy		188,641			24,811
Payments for plant, property and equipment		(25,383	)		(64,021	)
Net cash provided (used) in investing activities		163,258			(39,210	)
Increase (decrease) in cash		(27,533	)		363,786
Cash and cash equivalents:
Beginning		1,908,752			1,544,966
Ending	$	1,881,219			1,908,752
Supplemental disclosures of cash flows:
Income taxes paid	$	70,500			129,700

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

F-6

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – Organization:

We are 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.

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

NOTE 2 – Summary of Significant Accounting Policies:

Basis of Presentation – The Consolidated Financial Statements presented herein reflect all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the consolidated balance sheets, consolidated operating results and consolidated cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America. All significant intercompany accounts and transactions have been eliminated.

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 – We have 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, we periodically evaluate the stability of the financial institution and brokerage house.

Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of accounts receivable. Generally, we do not require collateral or other securities to support its accounts receivable. Three customers represented 2943.25% of our trade receivables at February 2829, ~~2011~~2012.

Source of Raw Materials – We purchase chemicals from several large chemical manufacturers, further processing them into its saleable products. Although we limit ourselves to a relatively small number of suppliers, it is not restricted to such suppliers, and availability of such raw materials is widespread.

F-7

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - 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 February 2829, ~~2011~~2012 and for the year then ended are:

CONDENSED CONSOLIDATING BALANCE SHEET

Epolin

Inc.

Holding, Corp.

Eliminations

Consolidated

Current assets

21,~~769~~967,~~940~~370

~~524~~208,~~656~~245

—-

32,~~294~~175,~~596~~615

Non-current assets

1,~~375~~002,~~412~~196

~~635~~608,~~623~~464

(1816,~~160,279~~709

)

~~850~~793,~~756~~951

Total

42,~~145~~969,~~352~~566

1816,~~160,279~~709

(1816,~~160,279~~709

)

42,~~145~~969,~~352~~566

Total liabilities

~~269~~374,~~691~~708

24,435

(24,435

)

~~269~~374,~~691~~708

Stockholders’ equity:

Stockholders' equity:

Common stock

2,364,693

—-

2,364,693

Additional paid-in capital

~~123~~138,125

—-

~~123~~138,125

Retained earnings

1443,~~738,925~~122

1792,~~135,844~~274

(1792,~~135,844~~274

)

1443,~~738,925~~122

Treasury stock

(351,082

)

—-

(351,082

)

Total stockholders' equity

32,~~875~~594,~~661~~858

1792,~~135,844~~274

(1792,~~135,844~~274

)

32,~~875~~594,~~661~~858

Total

42,~~145~~969,~~352~~566

1816,~~160,279~~709

(1816,~~160,279~~709

)

42,~~145~~969,~~352~~566

CONDENSED CONSOLIDATING STATEMENT OF INCOME

	Epolin			Epolin
	Inc.			Holding, Corp.		Eliminations			Consolidated
Sales	$	3,~~065~~410,~~554~~695			—-		—-			3,~~065~~410,~~554~~695
Rental income		—-			97,740		(97,740	)		—-
Total		3,~~065~~410,~~554~~695			97,740		(97,740	)		3,~~065~~410,~~554~~695
Cost of sales		1,~~453~~755,~~506~~761			—-		—-			1,~~453~~755,~~506~~761
Selling, general and administrative		1,~~664~~487,~~879~~715			3033,~~890~~111		(97,740	)		1,~~598~~423,~~029~~086
Total		3,~~118~~243,~~385~~476			3033,~~890~~111		(97,740	)		3,~~051~~178,~~535~~847
Operating income		~~(52~~167,~~831~~219	)		6664,~~850~~629		—-			14231,~~019~~848
Other income - interest		8,388			2,106		—			10,494
Other income		58,734			953		-			59,687
Income before taxes		~~(44~~225,~~443~~953	)		6865,~~956~~582		—-			24291,~~513~~535
Income taxes		~~(20~~110,~~457~~649	)		54,~~730~~726		—-			~~(14~~115,~~727~~375	)
Net income	$	~~(23~~115,~~986~~304	)		6360,~~226~~856		—-			39176,~~240~~160

F-8

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – 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 our plant, property and equipment are as follows:

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

Estimated Years

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

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

Depreciation and amortization expense totaled $8569,~~868~~009 and $~~104~~85,~~432~~868 for the years ended February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011, respectively.

Income Taxes - The Company provides for income taxes under ASC Topic 740-10. ASC Topic 740-10 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Temporary differences relate primarily to different accounting methods used for depreciation and amortization of property and equipment and deferred compensation.

ASC Topic 740-10 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

~~FASB~~ASC ~~Interpretation~~Topic ~~No.~~740-10 ~~48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (FIN 48),~~ clarifies the accounting for uncertainty in income tax positions, as defined. ~~FIN~~It 48 requires, among other matters, that we recognize in our financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. We ~~became~~analyze ~~subject to~~ the ~~provisions of FIN 48 as of March 1, 2007, the beginning of fiscal year ended 2008, and analyzed the~~ filing positions in all of the federal and state jurisdictions where itwe isare required to file income tax returns, as well as all open tax years in these jurisdictions. The adoption of ~~FIN~~ASC 48Topic 740-10 had no impact on our financial statements for fiscal year ended ~~2011~~2012. As of February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011, we did not record any unrecognized tax benefits. Our policy, if itwe had unrecognized benefits, is to recognize accrued interest and penalties related to unrecognized tax benefits as interest expense and other expense, respectively.

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.

F-9

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – Summary of Significant Accounting Policies (continued):

Use of Estimates – The preparation of our 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. We base our 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 – 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 are in nonconformity with 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. Replacement costs are expensed as incurred.

Regulations – We have expended approximately $2434,~~752~~787 and $2224,~~872~~752 through February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011, respectively, to maintain compliance with certain Federal, State and City government regulations relative to the production of near infrared dyes and specialty chemicals.

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.

Advertising Costs – Advertising costs, included in operating expenses, are expensed as incurred. Advertising expenses amounted to $2830,~~892~~855 and $1928,~~031~~892 for the years ended February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011, respectively.

F-10

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – Summary of Significant Accounting Policies (continued):

Stock-Based Compensation - We rely on the guidance provided by ASC 718, (“Share Based Payments”). ASC 718 requires companies to expense the value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards.

In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating our forfeiture rate, we analyze our historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If our actual forfeiture rate is materially different from our estimate, or if we reevaluate the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period.

The fair value concepts were not changed significantly in ASC 718; however, in adopting this Standard, companies were given the option to choose among alternative valuation models and amortization assumptions. We elected to continue to use the Black-Scholes option pricing model and expense the options as compensation over the requisite service period of the grant. We will reconsider use of the Black-Scholes model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model.

Deferred charges for options granted to non-employees are determined as the fair value of the consideration or the fair value of the equity instruments issued, whichever is more reliably measured.

The weighted average fair value per option at the date of grant for the years ended ~~Ferbuary~~February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011 using the Black-Scholes Option-Pricing Model were not applicable as no new stock options were granted during those periods.

F-11

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – Summary of Significant Accounting Policies (continued):

Fair Value Measurements - We follow the provisions of ASC 820, Fair Value Measurements and Disclosures, for financial assets and liabilities that are measured and reported at fair value on a recurring basis. ASC 820 establishes a hierarchy for inputs used in measuring fair value. Disclosures of the fair value of certain financial instruments are required, whether or not recognized in the Consolidated Balance Sheets. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. There is a three-level valuation hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The statement requires that each asset and liability carried at fair value be classified into one of the following categories:

Level 1:	Quoted market prices in active markets for identical assets or liabilities

Level 2:	Observable market based inputs or unobservable inputs that are corroborated by market data

Level 3:	Unobservable inputs that are not corroborated by market data

Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability.

F-12

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – Income Taxes:

1. Federal and State deferred tax assets include:

	February 28,
	February 29,		February 28,
	2011		2010
	2012		2011
Temporary differences:
Accelerated amortization	$	1310,~~526~~926		~~219~~13,526
Deferred compensation		—		83,885
Net operating loss carryforward		23,973		45,709
Net operating loss carryforward		45,709		—
Stock-based compensation		6,725		6,725
Stock-based compensation		6,725		16,054
Total		41,624		65,960
Total		65,960		100,158
Less: Current portion		5,829		14,433
Less: Current portion		14,433		14,698
Non-current portion		35,795		51,527
Non-current portion	$	51,527		85,460
2. Income tax:
	February 29,		February 28,
	2012		2011
Current:
Federal		84,313		(56,713	)
State		6,726		7,789
Total current		91,039		(48,924	)
Deferred:
Federal		1,211		61,395
State		23,125		(27,198	)
Total deferred		24,336		34,197
Total		115,375		(14,727	)

2We had at February 29, 2012 state net operating losses of $266,360. The ~~Income~~state ~~tax:~~net operating loss carryover is available to offset future taxable income which expires beginning in 2022.

	February 28,
	2011			2010
Current:
Federal	$	(56,713	)		79,000
State		7,789			20,780
Total current		(48,924	)		99,780
Deferred:
Federal		61,395			10,140
State		(27,198	)		3,583
Total deferred		34,197			13,723
Total	$	(14,727	)		113,503

F-13

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – Income Taxes (continued):

3. Reconciliation of income tax at the statutory rate to the Company’s effective rate:

	February 28,
	2011			2010
Computed at the statutory rate	$	8,334			198,075
State income taxes (net)		7,789			20,780
Decrease in deferred tax asset		34,197			13,723
General business credits		—			(12,740	)
Employment agreement		—			(95,964	)
Deferred compensation		(33,577	)		—
Prior years pension deduction		(39,460	)		—
Other reconciling items		7,990			(10,371	)
Effective tax	$	(14,727	)		113,503

We had at February 28, 2011 federal net operating losses of $436,030 and state net operating losses of $482,937. The federal losses were fully utilized as carryback offsets to prior years taxable income. The state net operating loss carryover is available to offset future taxable income which expires beginning in 2022.

NOTE 4 – Treasury Stock:

Consists of 948,645 shares at a net cost of $351,082 as of February 2829, ~~2011~~2012 and February 28, ~~2010~~2011, respectively. There were no purchases of treasury shares made during the years ended February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011, respectively.

NOTE 5 – Economic Dependency:

A material portion of our business is dependent on certain domestic customers, the loss of which could have a material effect on operations. During the ~~years~~year ended February 2829, ~~2011~~2012, approximately 2822.7% of sales were to three customers. During the ~~years~~year ended February 28, ~~2010~~2011, approximately 3328.47% of sales were to three customers.

NOTE 6 – ~~Rental~~Research ~~Income~~and ~~Under Sublease~~Development:

We ~~entered~~have ~~into~~developed ansubstantial ~~agreement~~research ~~with~~and adevelopment ~~non-related~~capability. ~~party~~Our ~~effective~~efforts ~~September~~are 1devoted to (i) developing new products to satisfy defined market needs, ~~2005~~(ii) providing ~~for~~quality atechnical ~~term~~services ~~ending~~to ~~October~~assure 31the continued success of its products for its customers’ applications, ~~2007~~(iii) providing technology for improvements to its products, processes and ~~continuing~~applications, onand a(iv) providing ~~month-~~support to~~-month~~ ~~basis~~its ~~thereafter~~manufacturing ~~through~~plant ~~May~~for 31cost reduction, ~~2009~~productivity and quality improvement programs. Expenditures ~~Under~~for ~~the~~our ~~terms~~sponsored product research and product development of ~~the~~$340,388 ~~agreement~~and $373,752 ~~the~~were ~~tenant~~included isin tocost ~~pay~~of asales ~~base~~for ~~rent~~the ofyears ~~$18,000~~ended ~~per~~February ~~year.~~29, On2012 ~~May~~and 31February 28, ~~2009~~2011, respectively. Expenditures for the ~~tenant~~fiscal ~~abandoned~~year ended 2013 are projected to remain at approximately the ~~property~~same level as in fiscal 2012.

14NOTE 7 – Employee Benefits:

Simplified Employee Pension Plan – Effective June 1, 1994, we maintained a SAR/SEP plan to our employees as a retirement and income tax reduction facility. Full time employees were eligible to participate immediately. Employees were able make pre-tax and after-tax contributions subject to Internal Revenue Service limitations. We made contributions ranging from three to five percent. Employer contributions totaled $41,952 and $69,629 and for the years ended February 29, 2012 and February 28, 2011, respectively. The plan has not met the Internal Revenue Service requirements of Section 416 and Section 408(k)(6) regarding contribution limits and employee deferral amounts. We have tested all years of the plan to insure our compliance with Internal Revenue Service regulations. In accordance with the results, we have accrued a contribution to the plan in the amount of $284,955. As of February 29, 2012, we have paid all accrued amounts to the plan through the date of testing. In addition, as a result of contributions paid to the plan subsequent to the testing date, additional interest was accrued to the plan in the amount of $41,952 which was paid May 1, 2012. See Note 15 - Prior Period Adjustment. On August 20, 2010 we adopted a 401K plan to replace our SAR/SEP plan.

F-14

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – ~~Research~~Employee ~~and~~Benefits ~~Development~~( continued):

We401K ~~have~~Plan ~~developed~~– ~~substantial~~Effective ~~research~~August ~~and~~20, ~~development~~2010, ~~capability.~~we ~~Our~~provide ~~efforts~~a ~~are~~401K ~~devoted~~plan to ~~(i)~~our ~~developing~~employees ~~new~~as ~~products~~a toretirement ~~satisfy~~and ~~defined~~income ~~market~~tax ~~needs,~~reduction ~~(ii)~~facility. ~~providing~~Full ~~quality~~time ~~technical~~employees ~~services~~are eligible to ~~assure~~participate ~~the~~after ~~continued~~completing ~~success~~one year of ~~its~~eligibility ~~products~~service. ~~for~~Employees ~~its~~may ~~customers’~~make ~~applications,~~pre-tax ~~(iii) providing technology for improvements to its products, processes~~ and ~~applications,~~after-tax ~~and~~contributions ~~(iv)~~subject ~~providing support~~ to ~~its~~Internal ~~manufacturing~~Revenue ~~plant~~Service ~~for cost reduction, productivity and quality improvement programs~~limitations. ~~Expenditures~~We ~~for~~make ~~our~~contributions ~~sponsored~~ranging ~~product~~from ~~research~~three ~~and~~to ~~product~~five percent. ~~development~~Employer ofcontributions totaled $~~373~~54,~~752~~119 and $~~373~~18,~~948~~659 ~~were included in cost of sales~~ for the years ended February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011 respectively. ~~Expenditures for the fiscal year ended 2012 are projected to remain at approximately the same level as in fiscal 2011.~~

~~NOTE~~Stock 8Option Plan – We ~~Employee~~adopted ~~Benefits~~the 1998 Stock Option Plan on December 1, 1998. Under the terms of the plan, we have 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 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 become exercisable as to 50% of the shares underlying the option on each of the second and fourth anniversaries of the date granted. From inception through February 29, 2012, options granted totaled 1,242,000, options exercised totaled 686,000; options cancelled or expired for all years totaled 461,000.

~~Simplified~~A ~~Employee~~summary ~~Pension~~of ~~Plan~~the –status ~~Effective~~of ~~June~~our 1,1998 ~~1994,~~stock weoption ~~provide a SAR/SEP~~ plan ~~to our employees~~ as aof ~~retirement~~Febraury ~~and~~29, 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. We make contributions ranging from three to five percent. Employer contributions totaled $692012,~~629~~ and ~~$47,503~~the ~~for~~changes during the years ended February 2829, ~~2011~~2012 and ~~2010,~~February respectively. The plan has not met the requirements of Section 416 and Section 408(k) (6) regarding contribution limits and employee deferral amounts. We have tested all years of the plan to insure our compliance with Internal Revenue Service regulations. In accordance with the results28, we2011 ~~have~~is ~~accrued~~presented ~~a contribution to the plan in the amount of $284,955. See Note 16 - Prior Period Adjustment.~~below:

401K Plan – Effective August 20, 2011, we provide a 401K plan to our employees as a retirement and income tax reduction facility. Full time employees are eligible to participate after completing one year of eligibility service. Employees may make pre-tax and after-tax contributions subject to Internal Revenue Service limitations. We make contributions ranging from three to five percent. Employer contributions totaled $18,659 for the year ended February 28, 2011.

Fixed Options:	Shares		Weighted-Average Exercise Price

Balance – March 1, 2010		245,000	$	0.49

Options cancelled		150,000

Balance – February 29, 2012 and 2011		95,000	$	0.41

Exercisable at February 29, 2012		95,000	$	0.41

Stock Option Plan – We adopted the 1998 Stock Option Plan on December 1, 1998. Under the terms of the plan, we have 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 F-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 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 become exercisable as to 50% of the shares underlying the option on each of the second and fourth anniversaries of the date granted. From inception through February 28, 2011, options granted totaled 1,242,000, options exercised totaled 686,000; options cancelled or expired for all years totaled 461,000.

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 87 – Employee Benefits (continued):

AStock ~~summary~~Option ofPlans ~~the~~- ~~status~~The offollowing ~~our~~table ~~1998~~summarizes ~~stock~~information ~~option~~about ~~plan~~fixed asstock ofoptions ~~February~~outstanding ~~28,~~at ~~2011, and the changes during the years ended~~ February 2829, ~~2011 and 2010 is presented below~~2012:

						Weighted-Average
Outstanding Options										Exercisable Options
Fixed Options:		Shares				Exercise Price
				Number				Weighted-Average		Number
Balance – February 28, 2010			245,000			$	.49
Range of				Outstanding				Remaining		Exercisable		Weighted-Average
Options cancelled			150,000
Exercise Price				at 2/29/12				Contractual Life		at 2/29/12		Exercise Price
Balance – February 28, 2011			95,000			$	.41
$	0.41				95,000				1.9		95,000		0.41
Exercisable at February 28, 2011			95,000			$	.41

Stock Option ~~Plans~~and Stock-Based ~~The~~Compensation ~~following~~Plan ~~table~~- ~~summarizes~~On ~~information~~June ~~about~~18, ~~fixed~~2008, our Board of Directors approved and adopted the Epolin, Inc. 2008 Stock Incentive Plan (the “2008 Plan”), and authorized us to issue up to 1,500,000 shares of our Common Stock under the 2008 Plan (subject to adjustment to take account of stock dividends, stock splits, recapitalizations and similar corporate events). Under the 2008 Plan, we will have the right to issue stock options, stock appreciation rights, restricted stock, Common Stock or convertible securities that may or may not be subject to restrictions or forfeiture, restricted stock units, performance shares and performance units. With the adoption of the new 2008 Plan, the 1998 Plan terminated, and we will no longer be able to grant options under it. However, options that have already been granted under the 1998 Plan will continue to be outstanding. atAs of February 2829, ~~2011:~~2012, 400,000 shares of Common Stock have been granted and 1,100,000 shares remain to be granted.

Outstanding Options				Exercisable Options
Range of Exercise Price		Number Outstanding at 2/28/11	Weighted-Average Remaining Contractual Life	Number Exercisable at 2/28/11	Weighted-Average Exercise Price
$	.41	95,000	3.0	95,000	.41

Stock Option and Stock-Based Compensation Plan - On June 18, 2008, our Board of Directors approved and adopted the Epolin, Inc. 2008 Stock Incentive Plan (the “2008 Plan”), and authorized us to issue up to 1,500,000 shares of our Common Stock under the 2008 Plan (subject to adjustment to take account of stock dividends, stock splits, recapitalizations and similar corporate events). Under the 2008 Plan, we will have the right to issue stock options, stock appreciation rights, restricted stock, Common Stock or convertible securities that may or may not be subject to restrictions or forfeiture, restricted stock units, performance shares and performance units. With the adoption of the new 2008 Plan, the 1998 Plan terminated, and we will no longer be able to grant options under it. However, options that have already been granted under the 1998 Plan will continue to be outstanding. As of February 28, 2011, 300,000 shares of Common Stock have been granted and 1,200,000 shares remain to be granted.

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – Employee Benefits (continued):

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

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

The 2008 Plan provides that each year, commencing September 1, 2008, each person who serves as a Director during the current year shall automatically receive a stock award of 25,000 shares of Common Stock. The dollar value of the shares of Common Stock granted each year is calculated based upon the fair market value of our Common Stock at the date of grant. Stock-based compensation in the amount of $15,000 and $20,000 was charged to selling, general and administrative expenses for the years ended February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011 respectively.

~~NOTE 9 – Segment Reporting:~~F-16

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – Segment Reporting:

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

Sales by geographic area are as follows:

	Years Ended February 28,
	February 29,		February 28,
	2011		2010
	2012		2011
United States	$	2,~~168~~321,~~027~~954		2,~~402~~168,~~128~~027
Asia		~~469~~448,~~143~~832		~~290~~469,~~358~~143
Europe		~~419,~~610,987		~~246~~419,~~731~~610
Other nations		828,~~774~~922		58,~~411~~774
Total	$	3,~~065~~410,~~554~~695		23,~~944~~065,~~628~~554

~~Two~~Long-lived ~~customers,~~assets ~~located~~include innet ~~the~~plant, ~~United~~property ~~States,~~and ~~accounted~~equipment. ~~for~~We ~~more~~had ~~than~~long-lived ~~10%~~assets of ~~revenues~~$758,156 ~~from~~and ~~continuing~~$799,229 ~~operations.~~located ~~These~~in ~~customers~~the ~~accounted~~United ~~for~~States ~~20.7%~~at ofFebruary ~~sales~~29, of2012 ~~infrared~~and ~~dies~~February 28, 2011, respectively.

~~Long-lived~~NOTE ~~assets~~9 ~~include~~– ~~net~~Environmental ~~plant, property and equipment. We had long-lived assets of $799,229 and $859,714 located in the United States at February 28, 2011 and February 28, 2010, respectively.~~Matters:

Our 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 do we expect such compliance to have, any material effect upon expected capital expenditures, net income, financial condition, or competitive position. We believe that our current practices and procedures comply with applicable regulations. We have engaged a licensed site remediation professional and special environmental counsel in order to facilitate the environmental approvals which will be necessary in conjunction with any potential sale or similar transaction of our company. Future remediation costs estimated for the year ended February 28, 2013 approximate $70,000. Our 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. Due to the execution of the Merger Agreement (See Note 17), we became subject to the Industrial Site Recovery Act (ISRA) which requires that our facilities be remediated or that we submit a Remediation Certificate to the New Jersey Department of Environmental Protection pursuant to NJAC 7:26B prior to transfer of ownership. We have undergone soil and water sample collection and monitoring. Evaluation of current data indicates the likely course of action will include implementing institutional and engineering controls. Accruals for estimated losses from environmental remediation and to obtain the necessary approvals in conjunction with the potential sale of our company in the amount of $74,111 were charged to selling, general and administrative expenses as of February 29, 2012.

F-17

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - Accrued Expenses:

Accrued expenses consisted of the following as of February 2829, ~~2011~~2012 and February 28, ~~2010~~2011, respectively:

	February 28,
	February 29,		February 28,
	2011		2010
	2012		2011
Salaries and wages	$	312,~~821~~203		—3,821
Purchases		420,~~933~~097		34,~~455~~933
Pension contribution		~~146~~50,~~629~~366		—146,629
Commissions		—		10,545
Environmental fees		76,876		-
Commissions		18,352		-
Rent		8,145		8,145
Professional fees		7896,~~997~~105		2578,~~000~~997
Total accrued expenses	$	~~242~~282,~~525~~144		47242,~~145~~525

NOTE 11 - Inventories:

	February 28,
	February 29,		February 28,
	2011		2010
	2012		2011
Raw materials and supplies	$	~~179~~178,~~800~~460		~~160~~179,~~387~~800
Work in process		74227,~~684~~981		9274,~~421~~684
Finished goods		~~356~~337,~~577~~004		~~431~~356,~~187~~577
Total	$	~~611~~743,~~061~~445		~~683~~611,~~995~~061

F-18

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - 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:

	Years Ended February 28,
	Years Ended
	2011		2010
	February 29,		February 28,
	2012		2011
Basic Earnings Per Common Share:
Net income (loss)		39,240		469,070
Net income		176,160		39,240
Average common shares outstanding		12,~~205~~324,~~807~~894		12,~~101~~185,~~972~~992
Basic earnings per common share		—0.01		~~0.04~~-
Diluted Earnings Per Common Share:
Net income		39176,~~240~~160		~~469~~39,~~070~~240
Average common shares outstanding		12,~~205~~324,~~807~~894		12,~~101~~185,~~972~~992
Common shares issuable with respect to options issued to employees with a dilutive effect		—-		217,~~900~~100
Total diluted common shares outstanding		12,~~205~~324,~~807~~894		12,~~104~~203,~~872~~092
Diluted earnings per common share		—0.01		~~0.04~~-

Stock options totaling 95,000 ~~and 150,000~~ for the ~~years~~year ended February 2829, ~~2011 and 2010~~2012, ~~respectively,~~ were not included in the net income per common share calculation because the exercise price of these options was greater than the average market price of common stock during the period.

F-19

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – 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.

Simplified Employee Pension Plan – Our SAR/SEP plan has failed to meet certain tests as required by Internal Revenue Service codes regarding contribution limits and employee deferral amounts. We have tested all years of the plan to insure our compliance with Internal Revenue Service regulations. In accordance with the results, we have accrued a contribution to the plan in the amount of $284,955. As of February 29, 2012, we have paid all accrued amounts to the plan through the date of testing. In addition, as a result of contributions paid to the plan subsequent to the testing date, additional interest was accrued to the plan in the amount of $41,952 which was paid May 1, 2012. See Note 1615 - Prior Period Adjustment.

Lease Obligations - We lease our real estate under an operating lease with a related party. The lease effective November 1, 1996 was for a term of five years with three five 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 $97,740 for the years ended February 2829, ~~2011~~2012 and ~~2010~~February 28, 2011, respectively.

Future minimum payments for the current option period:

Fiscal Years Ending February:
2012 through 2016	$	97,740
2013		97,740
2014		97,740
2015		97,740
2016		73,305

Deferred Compensation – On December 29, 1995, we 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. On May 14, 2010, the Board of Directors agreed to surrender the life insurance policy. The remaining balance of $128,000 was paid during the quarter ended November 30, 2010.

On January 1, 1996, we 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. On May 14, 2010, the Board of Directors agreed to pay the balance due during the current year. This balance was paid during the quarter ended November 30, 2010.

F-20

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - Fair Value Measurements:

In September 2006, the FASB issued ASC Topic 820 Fair Value Measurements and Disclosures (formerly Statement of Financial Accounting Standard No. 157 Fair Value Measurements). ASC Topic 820 provides enhanced guidance for using fair value to measure assets and liabilities. Under the standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants in the market in which the reporting entity transacts its business. ASC Topic 820 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, ASC Topic 820 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. The adoption of ASC Topic 820 did not have a material effect on our results of operations, financial position or liquidity.

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

	Carrying
February 29, 2012	Amount		Level 1		Level 2
Assets:
Cash and cash equivalents	$	748,583		748,583		-
Total assets at fair value	$	748,583		748,583		-
February 28, 2011	Amount		Level 1		Level 2
Assets:
Cash and cash equivalents	$	1,881,219		1,881,219		—-
Total assets at fair value	$	1,881,219		1,881,219		—-

February 28, 2010	Amount		Level 1		Level 2
Assets:
Cash and cash equivalents	$	1,908,752		1,908,752		—
Other assets:
Cash value – life insurance		188,641		188,641		—
Total assets at fair value	$	2,097,393		2,097,393		—
Liabilities:
Deferred compensation	$	195,082		—		195,082

In accordance with ASC Topic 820, we measure our cash and cash equivalents at fair value, and they are classified within Level 1 since there is an active, readily tradable market value based on quoted prices. We base our estimates on such prices (Level 1 pricing) as of February 29, 2012 and February 28, 2011, or the measurement date. Active markets are those in which transactions occur in significant frequency and volume to provide pricing information on an on-going basis. Since valuations are based on quoted prices that are readily and regularly available in an active market, the valuation of these items does not entail a significant degree of judgment.

F-21

EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1415 -– ~~Fair~~Prior ~~Value~~Period ~~Measurements (continued)~~Adjustment:

InDuring ~~accordance~~the ~~with~~quarter ~~ASC~~ended ~~Topic~~August ~~820~~31, ~~we measure our cash and cash equivalents and cash value – life insurance at fair value~~2010, ~~and~~we ~~they~~received ~~are~~the ~~classified~~test ~~within~~results ~~Level~~of 1our ~~since~~Simplified ~~there~~Employee isPension anPlan ~~active,~~for ~~readily~~all ~~tradable~~years ~~market~~it ~~value~~was ~~based~~in ~~on quoted prices~~effect. WeThe ~~base~~liability ~~our~~we ~~estimates~~have onincurred ~~such~~to ~~prices~~correct ~~(Level~~the 1plan ~~pricing)~~in asthe amount of ~~February 28~~$263,067 ~~2011~~net ~~and~~of ~~2010,~~income ortaxes ~~the~~was ~~measurement~~recorded ~~date. Active markets are those~~ in ~~which~~our ~~transactions~~year-end ~~occur~~financial instatements ~~significant~~as ~~frequency and volume to provide pricing information on~~ an ~~on-going~~increase ~~basis.~~in ~~Since~~accrued ~~valuations~~expenses ~~are based on quoted prices that are readily~~ and ~~regularly available in an active market, the valuation of these items does not entail~~ a ~~significant~~corresponding ~~degree~~reduction ofto ~~judgment.~~retained ~~The~~earnings ~~fair~~net ~~value~~ of ~~the~~income ~~deferred compensation was determined based on the face value of the debt calculated on a discounted cash flow analysis~~taxes.

NOTE 1516 – ~~Environmental Matters~~Dividends:

~~Our~~On ~~past~~April ~~and~~14, ~~present daily operations include activities~~2011, ~~which~~our ~~are~~Board ~~subject~~of toDirectors ~~extensive~~declared a ~~federal,~~cash ~~and~~dividend ~~state~~of ~~environmental and safety regulations~~$0.12 ~~Compliance~~per ~~with~~share ~~these~~on ~~regulations~~all ~~has~~common ~~not~~shares ~~had,~~outstanding. ~~nor~~The ~~do we expect such compliance to have~~dividend, any material effect upon expected capital expenditures, net income, financial condition, or competitive position. We have engaged a licensed site remediation professional and special environmental counsel in ~~order to facilitate~~ the ~~environmental~~amount ~~approvals which will be necessary in conjunction with any potential sale or similar transaction~~ of ~~our company. Remediation costs for the years ended February 28, 2011 and 2010 were~~ $651,~~928 and $17~~471,~~440,~~963 ~~respectively.~~was ~~Future~~paid ~~remediation~~on ~~costs~~May ~~estimated for the year ended February 29~~12, ~~2012~~2011 ~~approximate $69,000. We believe that our current practices and procedures comply with applicable regulations. Our policy is~~ to ~~accrue~~shareholders ~~environmental and related costs~~ of arecord ~~non-capital~~at ~~nature when it is both probable that a liability has been incurred and that~~ the ~~amount~~close ~~can~~of bebusiness ~~reasonably~~on ~~estimated.~~April No28, ~~such amounts have been accrued in these statements~~2011.

NOTE 1617 –- ~~Prior~~Subsequent ~~Period Adjustment~~Event:

~~During~~Merger ~~the~~Agreement ~~quarter~~- ~~ended~~On ~~August~~March 3114, ~~2010~~2012, we ~~received~~entered ~~the~~into ~~test~~an ~~results~~Agreement and Plan of ~~our~~Merger ~~Simplified~~(the ~~Employee~~“Merger ~~Pension~~Agreement”) ~~Plan~~with ~~for~~Polymathes ~~all~~Holdings ~~years~~I itLLC, ~~was~~a inNew ~~effect.~~Jersey ~~The~~limited liability wecompany ~~have~~(the ~~incurred~~“Parent”), and Polymathes Acquisition I Inc., a New Jersey corporation and wholly owned subsidiary of the Parent (the “Purchaser”). Pursuant to ~~correct~~the Merger Agreement, and upon the ~~plan~~terms inand subject to the ~~amount~~conditions thereof, Parent has agreed to cause the Purchaser to commence a tender offer (the “Offer”) to purchase all of ~~$263~~the outstanding shares of common stock,~~067~~ isno ~~presented~~par invalue per share, of the ~~financial~~Company ~~statements~~(the as“Shares”), anat ~~increase~~a inprice ~~accrued~~of ~~expenses~~$0.22 ~~and~~per aShare ~~corresponding~~(the ~~reduction~~“Offer Price”), paid to ~~retained~~the ~~earnings~~seller ~~net~~in ofcash, ~~income~~without interest thereon and subject to applicable withholding taxes.

~~NOTE~~The 17Merger –Agreement ~~Subsequent~~provides ~~Event~~that the Offer will commence as promptly as practicable (and in any event within 45 days) after the date of the Merger Agreement, and will remain open for at least 20 business days (including the day on which the Offer is commenced). Pursuant to the Merger Agreement, after the consummation of the Offer, and subject to certain conditions set forth in the Merger Agreement, the Parent shall cause the Purchaser to be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and as a wholly owned subsidiary of Parent. Upon completion of the Merger, each Share that is not tendered and accepted pursuant to the Offer (excluding those Shares that are owned by the Company as treasury stock, any Shares owned by the Parent or Purchaser and Shares held by any shareholders who perfect their statutory dissenters rights under New Jersey law) will be canceled and converted into the right to receive the Offer Price in cash (without interest and subject to applicable withholding taxes). If the Purchaser holds 90% or more of the outstanding Shares immediately prior to the Merger, it may effect the Merger as a short-form merger pursuant to the New Jersey Business Corporation Act. Otherwise, the Company may hold a special shareholders’ meeting to obtain shareholder approval of the Merger.

On April 14, 2011, our Board of Directors declared a cash dividend of $0.12 per share on all common shares outstanding payable on May 12, 2011 to shareholders of record at the close of business on April 28, 2011.F-22

22EPOLIN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 - Subsequent Event (continued):

F-23

Filing Compare · EPOLIN INC /NJ/