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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K



[x]      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934 For the fiscal year ended October 31, 1996

                                       or

[_]      TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934 (No Fee Required) For the  transition  period from
         ___________ to ___________

                         Commission file number: 0-11254



                                 COPYTELE, INC.
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             (Exact Name of Registrant as Specified in its Charter)

                                    Delaware
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         (State or Other Jurisdiction of Incorporation or Organization)

                                   11-2622630
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                      (I.R.S. Employer Identification No.)

                              900 Walt Whitman Road
                          Huntington Station, NY 11746
                                 (516) 549-5900
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    (Address, Including Zip Code, and Telephone Number, Including Area Code,
                  of Registrant's Principal Executive Offices)

               Securities registered pursuant to Section 12(b) of
                                    the Act:

                                               Name of Each Exchange
         Title of Each Class                    on Which Registered
         -------------------                   ---------------------   
                 NONE                                 NONE


               Securities registered pursuant to Section 12(g) of
                                    the Act:

                          Common Stock, $.01 par value
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                                (Title of Class)

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

Indicate by check mark 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  statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [x].

Aggregate  market value of the voting stock (which  consists solely of shares of
Common Stock) held by  non-affiliates  of the registrant as of January 22, 1997,
computed by reference to the closing sale price of the registrant's Common Stock
on the NASDAQ National Market System on such date ($7.00): $336,882,112.

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes [_] No [_]

On January 22, 1997, the registrant had 57,465,656  shares of Common Stock,  par
value $.01 per share, which is the registrant's only class of common stock.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      NONE
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<PAGE>

                                     PART I

Item 1.   Business

General

CopyTele, Inc. (the "Company" or "CopyTele"),  is a development stage enterprise
whose   principal   activities   include  the  development  of  telephone  based
multi-functional   telecommunications   products   incorporating  the  Company's
ultra-high  resolution flat panel display,  the further expansion of its overall
flat  panel  display  technology,   and  the  operations  of  Shanghai  CopyTele
Electronics  Co.,  Ltd.  ("SCE"),  the  Company's  55% owned  joint  venture  in
Shanghai, China.

SCE  was  formed  to  produce  and  market  multi-functional  telecommunications
products in China,  utilizing  the Company's  flat panel display and  associated
proprietary  hardware and  software  technology  and to supply such  products to
CopyTele for sale outside China. The first telecommunications  product developed
by the Company is MAGICOM(R) 2000, a telephone based  multi-functional  product.
Initial production by SCE of this product commenced in December 1996.

During 1996, the Company increased its efforts to develop ultra-high  resolution
video and color  capability for its overall flat panel display  technology.  See
"Flat  Panel  Display  Technology  - Color  and  Video"  below.  There can be no
assurance, however, that the Company's efforts in this area will be successful.

To date,  the Company has had no  revenues  to support  its  operations  and has
expended  approximately  $20.7  million for research and  development  since its
inception in 1982.  MAGICOM(R)  2000 is only in its initial stages of production
and marketing. The eventual success and profitability of the product will depend
upon many factors, including those normally associated with any new product. See
"MAGICOM(R) 2000 - General" below. Consequently,  there is no assurance that the
Company will generate  significant  revenues in the future, will have sufficient
revenues  to  generate  profits or that other  products  will not be produced by
other companies that will render the products of the Company and of SCE obsolete
or unmarketable.

The Company's Chief Executive Officer, Denis A. Krusos, its President,  Frank J.
DiSanto,  and  other  senior  executives  are  engaged  in  the  management  and
operations  of the Company and SCE,  including  all aspects of the  development,
production  and  marketing  of the  Company's  products  and flat panel  display
technology,  and are important to the future business and financial arrangements
of the Company and SCE.

                                        2


<PAGE>

The Company was incorporated on November 5, 1982, under the laws of the State of
Delaware.  Its principal executive offices are located at 900 Walt Whitman Road,
Huntington Station, New York 11746 and its telephone number is 516-549-5900.

Safe Harbor  Statement  Under the Private  Securities  Litigation  Reform Act of
1995.  Except for the  historical  information  contained  herein,  the  matters
discussed  in this  Annual  Report on Form 10-K are  forward-looking  statements
relating to future events which involve certain risks and uncertainties.

MAGICOM(R) 2000

         General

During 1996, the Company  concentrated  a significant  portion of its efforts on
the  development  of  MAGICOM(R)  2000 for SCE.  The  Company's  strategy was to
incorporate its communications and imaging expertise and its advanced flat panel
display  technology  into a new generation of telephone  based  multi-functional
personal telecommunications  products. This strategy included the development of
the  proprietary  software  and  hardware  which  provides  the many  functional
capabilities of MAGICOM(R) 2000.

MAGICOM(R)  2000  incorporates   CopyTele's  ultra-high  resolution,   patented,
advanced flat panel display, called E-PAPERTM (representing "electronic paper").
The product offers many features, including a dual-line telephone, digital voice
mail system, full duplex speakerphone, fax (full page transmission and paperless
reception), simultaneous voice and electronic handwriting, e-mail communication,
data transmission,  storage and computer interface,  as well as personal copying
capabilities  with  the  use  of  an  optional  Company  printer,  called  MAGIC
PRINTERTM,  and the ability to send to a pager using a touch sensitive  keyboard
screen,  all in a compact  easy-to-use  desktop unit.  MAGICOM(R)  2000 also has
other telecommunications  capabilities,  such as speed dialing,  re-dial, flash,
electronic  directory,  date and time.  It is  capable  of  incorporating,  on a
continuing  basis,  other  functions  that may be  derived  from  the  Company's
proprietary  software   development.   The  Company  is  continuing  to  develop
proprietary  software  to provide  interfacing  with  on-line  services  and the
Internet.  A more complete  list of the main features of MAGICOM(R)  2000 is set
forth on Exhibit 99.1 to this Annual Report on Form 10-K.

CopyTele's  patented flat panel display  technology  incorporated  in MAGICOM(R)
2000 brings an advanced standard of readability to visually displayed electronic
information,  since its display image forms in a manner  closely  resembling the
way a printed  image forms on a page.  Business  documents,  letters,  diagrams,
written messages or notes, magazine articles and other forms of information that
can be received  electronically  can be read with the ease approaching that of a
printed  page.  Users can view in a single image an entire page of  information.
The displayed images can be viewed from any angle under all lighting conditions.
Once an image is  
                                       3

<PAGE>

viewed on the display,  it can be retained  with  minimal  display  power.  This
provides additional  user-friendliness  since no refreshing is necessary to view
an image.  Conventional displays,  such as cathode ray tubes ("CRTs") and liquid
crystal displays ("LCDs"),  require refresh (quick repetition of an image) which
is one reason why people find  reading a printed  page easier and more  natural.
The display,  in combination  with a high quality writing screen and plastic tip
pen,  allows  writing with the ease  approaching  that of writing on paper.  The
display-  writing  screen  combination  can  be  used  to  create  and  transmit
information and edit received documents.  The Company has described these unique
display features as "electronic paper". In addition,  the high resolution of its
display has enabled CopyTele to produce a compact,  lightweight  product capable
of displaying a full page of information, considerably smaller than conventional
lower  resolution  displays would allow. The product size is suitable for office
and home use.

MAGICOM(R)  2000 is only in its initial stages of production and marketing.  The
eventual success and profitability of the product will depend upon many factors,
including those normally associated with any new product.  These factors include
the capability of SCE to produce  sufficient  quantities of MAGICOM(R) 2000, the
ability of the  Company  and SCE to  maintain  an  acceptable  pricing  level to
end-users for the product,  long-term product  performance and the capability of
the Company,  SCE and its  distributors to adequately  service the product,  the
ability of distributors to market their contracted  quantities of the product in
their  respective  territories,  political  and  economic  stability in targeted
marketing territories, and the possible development of competitive products that
could render the product obsolete or unmarketable.

         Joint Venture

SCE was formed on April 10, 1995  pursuant to a Joint  Venture  Agreement  dated
March 28, 1995 ("the Joint  Venture  Agreement")  between  CopyTele and Shanghai
Electronic Components Corp. ("SECC"). With this Joint Venture Agreement, SCE was
formed as a limited liability company in Shanghai, China having a duration of 20
years.  The Company has been advised that SECC is wholly-owned by the government
of China and is the largest electronic components company in China.

The Joint Venture Agreement contemplates an initial investment of $7 million, of
which  half may be  borrowed  from  banks,  with a  registered  capital  of $3.5
million.  The parties have agreed in principle to increase the  investment  to a
maximum of $25 million,  depending  on the nature and extent of SCE's  business.
CopyTele,  which owns a 55% interest in SCE, has contributed $1,225,000 in cash,
and technology  (valued for purposes of the Joint Venture  Agreement at $700,000
and representing  20% of the registered  capital) which has been licensed to SCE
pursuant to a Technology License Agreement,  dated as of March 28, 1995, between
SCE and the Company (the  "Technology  License  Agreement").  In accordance with
Chinese  regulations,   the  maximum  percentage  of  technology  which  can  be
contributed as

                                        4


<PAGE>

registered capital is 20%. SECC and Shanghai  International Trade and Investment
Developing Corp. ("SIT") (which has acquired a 10% economic interest in SCE from
SECC) have  contributed  an aggregate of $1,575,000 in cash to SCE. The Board of
Directors of SCE is comprised of seven  directors.  In accordance with the Joint
Venture Agreement,  CopyTele has appointed four directors, the Vice-Chairman and
the General  Manager,  and SECC and SIT jointly have appointed three  directors,
the  Chairman  and  the  Vice-General  Manager.  The  Company  accounts  for its
investment  in SCE under the equity method of  accounting.  See Notes 2 and 3 to
the Company's Financial Statements.

It is  contemplated  that  additional  financing  for SCE, if required,  will be
obtained from a combination  of third party  borrowings  and equity  investments
contributed  by the Company and the other  parties to SCE in proportion to their
respective  equity  interests  and on terms to be agreed  upon.  The Company may
require  additional  financing  in order to  participate  in SCE  following  its
initial  capital  contributions  and to continue its  research  and  development
activities. There can be no assurance,  however, that adequate financing will be
available to the Company or SCE, or that, if available,  it will be available on
favorable terms and conditions.

CopyTele  has licensed  only the flat panel  application  technology  to SCE for
exclusive  use in China.  SCE does not have the right to  produce  the thin film
coated glass for the Company's  flat panel which is being supplied to SCE by the
Company.  As a  result  of  licensing  the  technology,  CopyTele  will  receive
royalties for the duration of the Technology  License Agreement on all net sales
by SCE, including sales to CopyTele for resale outside of China. Pursuant to the
Joint Venture Agreement,  CopyTele is solely authorized to market and sell SCE's
products  outside of China  while SCE is  responsible  for  marketing  and sales
within China.

On July 10, 1995, an Assignment Agreement was entered into by CopyTele, SECC and
SIT  whereby  SECC  assigned a 10%  economic  interest to SIT in the capital and
profits of SCE from SECC's  original  interest of 45%.  SIT, an  investment  and
trade  development  company,  is a state owned  enterprise  operating  under the
leadership of the Shanghai  Foreign  Economic  Relations and Trade Commission in
Shanghai,  China.  As a result of the  assignment,  SECC's  interest  in SCE was
reduced to 35%. SECC has retained all its duties and obligations under the Joint
Venture Agreement,  but SIT assumed a 10% obligation with respect to the capital
contributions payable by SECC to SCE.

In December 1996,  SCE commenced  initial  production of MAGICOM(R)  2000 in its
12,000 square foot leased facility in Shanghai,  China (the "Leased  Facility").
During 1996,  SCE also completed  construction  of a 30,000 square foot facility
(the  "Owned  Facility")  in  the  Shanghai   Songjiang   Industrial  Zone  (see
"Properties" below), and plans to commence production of MAGICOM(R) 2000 in this
facility and  discontinue  production  in the Leased  Facility  during the first
calendar quarter of 1997. See "Production" below. The capital contributions made
to SCE were  sufficient  to enable  SCE to cover the costs of  building  the new
facility, which
                                        5


<PAGE>

totalled approximately U.S.$1 million in the aggregate. SCE has obtained a third
party loan of U.S.  $220,000 secured by the land-use contract for the purpose of
purchasing  production  materials  and  supplies.  Additional  funding  for  the
purchase of  additional  production  lines,  if  required,  and working  capital
requirements  are  expected  to  be  financed  through  additional  third  party
borrowings.

         Production

SCE utilizes  multi-purpose  production  and assembly line  equipment to produce
MAGICOM(R)  2000.  The production  process  primarily  involves a  multi-station
assembly line for the sequential assembly of various  sub-assemblies,  including
the Company's flat panel display system.  To date,  approximately  forty-five of
SCE's sixty  employees are involved in the assembly and production of MAGICOM(R)
2000. However, the number of employees is subject to change depending upon SCE's
future production  requirements.  MAGICOM(R) 2000's main sub-assemblies  include
printed circuit boards,  which are automatically being populated with electronic
components,  a document scanner,  keypad and function  controls,  the flat panel
assembly and the case. The flat panel assembly includes automatic  insertion and
bonding  of the  128  driver  output  chips  located  on  the  flat  panel,  the
illumination system, and the touch screen. The Company is providing SCE with the
128 output chips,  the flat panel fluid,  and components of the flat panel which
are  being  produced  by  Hoya  Corporation  ("Hoya"),  a  major  Japanese  high
technology  manufacturer of glass products,  under  agreements with the Company.
See "Flat  Panel  Display  Technology  --  General"  below.  The Company is also
receiving  sample   quantities  of  flat  panels  from  Hoya  to  monitor  their
performance.  SCE is  filling  the flat  panels  with the  fluid,  mounting  and
electrically  connecting the 128 output chips to the flat panel, and integrating
the  illumination  system and touch screen to complete the flat panel  assembly.
The  Company  has  provided  testing  systems to SCE to check the  operation  of
MAGICOM(R) 2000 units as they are produced.

Prior to the  commencement of production,  the Company designed and installed in
its  facilities in the United States  production  equipment for the assembly and
testing of its flat panel display system.  This equipment was used to verify and
standardize the production process and to train SCE production  personnel in the
use of the  equipment.  Based on these  results,  similar  equipment  capable of
larger production  quantities was installed in the Leased Facility.  The Company
is  continuing to use its  equipment in the United  States to  sample-test  flat
panels  supplied  by Hoya and for  development  purposes.  The  Company  is also
receiving,  on a sampling basis,  SCE produced  MAGICOM(R) 2000 units to monitor
the quality of the production process.

Initial  production  of  MAGICOM(R)  2000  commenced  in the Leased  Facility in
December 1996.  During 1996, SCE also  completed the  construction  of the Owned
Facility in the Shanghai  Songjiang  Industrial  Zone.  The  Owned  Facility has
warehouse space,  administrative  offices,  and the capability to house multiple
production lines similar to the production line used in the

                                        6

<PAGE>


Leased  Facility.  If  additional  production  lines are  purchased and multiple
shifts per line are utilized, the Company believes that the Owned Facility could
ultimately have the capability of producing up to a maximum of 700,000 units per
year, if necessary depending upon SCE's requirements for finished products.  SCE
believes  it  currently  has  adequate  management,   technical  and  production
personnel to operate the  facility and intends to increase  personnel as needed.
See "Employees and Consultants". SCE currently is in the process of transferring
all of its production  equipment and personnel  from the Leased  Facility to the
Owned Facility, and anticipates commencing production of MAGICOM(R) 2000 in this
facility and  discontinuing  production in the Leased  Facility during the first
calendar  quarter  of 1997.  A  determination  has been made by all  parties  to
terminate  the lease  covering  the Leased  Facility  after the  transfer of all
production  equipment and personnel has been fully  completed.  See "Properties"
below.

MAGICOM(R)  2000 contains  various  electronic  components.  The  commodity-type
components, such as resistors,  capacitors and multi-purpose chips are available
and are being purchased from various vendors world-wide, including SECC. Special
purpose  components,  such as the fax and data chip set,  the 128  output  drive
chips and the flat panel's coated glass plates,  are being purchased from single
vendors which represent the major suppliers of these  components  throughout the
telecommunications,  consumer electronics and other industries. The Company does
not presently anticipate that it will experience any difficulty in obtaining the
required components for MAGICOM(R) 2000.

The Songjiang  Industrial Zone is approximately 20 miles from downtown Shanghai,
30 miles  from a deep  harbor  and 13 miles  from an  international  airport.  A
transportation system of connecting expressways, railroads and waterways provide
efficient  routes to  import  raw  materials  and to export  SCE's  products  to
world-wide markets.

         Marketing

Pursuant to the Joint  Venture  Agreement,  the Company is solely  authorized to
purchase  MAGICOM(R)  2000 from SCE for marketing and sale outside of China.  In
1996, the Company established a Sales and Marketing Office and hired a marketing
team, including  independent sales  representatives,  to implement its marketing
strategy.  To date,  the Company has hired four sales  personnel  in addition to
Frank W. Trischetta, Senior Vice-President Marketing and Sales, and has retained
nine independent representatives in several countries.

The  Company's  marketing  strategy  is  to  penetrate   world-wide  markets  in
progressive  stages,  beginning with those markets which the Company believes to
have lower entry  barriers and to be the least  difficult to supply and service.
The Company  has  initially  focused  its efforts on North  Africa and Egypt and
eventually  plans to progress into other countries of the world,  depending upon
the  growth  of SCE's  production  capabilities  and the  marketing  success  of
MAGICOM(R) 2000.
                                        7


<PAGE>

As a result  of  these  efforts,  the  Company  has  entered  into  distribution
agreements to date with three  distributors to sell and service  MAGICOM(R) 2000
in North  Africa  and Egypt for terms of three  years.  See  "MAGICOM(R)  2000 -
General" above for certain risks  associated with the success and  profitability
of the product. The agreements provide for monthly purchase orders in increasing
quantities  commencing in the first calendar  quarter of 1997, to be accompanied
by irrevocable bank letters of credit,  acceptable to the Company,  furnished by
the  distributors.  The  aggregate  purchase  price  for  the  total  quantities
contracted for sale under the three distribution agreements is approximately $90
million.

In North  Africa,  CopyTele  entered  into an  agreement  with a  consortium  of
companies in Tunisia whose territory includes the countries of Tunisia,  Algeria
and Morocco.  These companies are presently  engaged in sales and service in the
fields of telecommunications, mobile communications, satellite systems, security
and office products.

In Egypt,  CopyTele entered into agreements with two  distributors  that provide
sales and  service to  telecommunications  customers  in the public and  private
sectors. One of the distributors specializes in telecommunications equipment for
banks, hotels, governmental, commercial and industrial customers while the other
specializes in the planning, implementation and maintenance of integrated public
and private telephone systems networks utilizing PBX's, modem telephones, cables
and accessories,  within the governmental and commercial fields.  Jointly,  they
have  been  directly   responsible   for  the  software  and  hardware   design,
installation  and maintenance of over 300,000 local telephone lines in Egypt and
maintain an extensive sales network throughout Egypt which will be available for
distribution of MAGICOM(R) 2000.

The Company's  distributors and independent sales representatives  currently are
in the process of marketing MAGICOM(R) 2000 to telephone  companies,  government
agencies and  industrial,  professional  and service  entities.  In an effort to
support its distributors and independent  representatives  and to facilitate the
opening of new markets, the Company has developed brochures,  videos, exhibition
booths for trade shows, sales handbooks and other sales and marketing tools. The
Company  and   representatives   of  SCE  also  have  participated  in  numerous
international trade shows and press conferences to promote the product.

SCE is solely  responsible  for  marketing  MAGICOM(R)  2000 in  China.  SCE has
featured  MAGICOM(R)  2000 at several  trade  shows in China and has  launched a
marketing  program  pursuant to which SCE has selected  appropriate  local sales
channels   for  the  product  and  has   initiated   relationships   with  local
distributors.  To date, however, no definitive  agreements have been reached for
the distribution of MAGICOM(R) 2000 in China.

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<PAGE>
Flat Panel Display Technology

         General

The  Company  is  continuing  to enhance  the  characteristics  of its  compact,
ultra-high  resolution  charged  particle  flat  panel  display.  The flat panel
possesses a combination  of features  that are not presently  available in other
display screens,  such as ultra-high  resolution,  compatibility  with facsimile
terminals (200 lines per inch in the horizontal and vertical  directions with up
to a full page of  information  with  real-time  display),  a minimal  amount of
inactive space between pixels or picture elements  (allowing the image to appear
smoother),  image retention without  refreshing  (eliminating the need for image
repetition  with  resulting  flicker and operator  fatigue),  approximately  180
degree viewing angle, low power consumption for writing and image retention with
minimal power  consumption.  The Company has developed  flat panels with viewing
areas whose diagonals are 7.8, 7.2 and 5.7 inches, and containing  approximately
1,150,000,  800,000 and 630,000  pixels,  respectively.  The  Company's 7.8 inch
diagonal  flat panel is one of the  principal  features of the  MAGICOM(R)  2000
product.  This flat panel has 1,280 lines by 896 lines with a resolution  of 200
lines per inch in both directions,  and has an image area of approximately 6.4 x
4.5 inches.

The Company is continuing to purchase,  for testing and  demonstration  purposes
and for incorporation into MAGICOM(R) 2000,  production quality flat panels from
Hoya utilizing the Company's design and technology.  The flat panels incorporate
the latest  designs and  improvements  in production  technology by reducing the
number  of steps  necessary  to  construct  the flat  panels,  thereby  allowing
multiple flat panels to be produced from a single primary glass substrate, while
achieving the enhancement of image  brightness and contrast.  Hoya is assembling
the flat  panels.  The  overall  size of the flat panel has been  reduced  while
maintaining the same image area, thereby allowing a larger number of flat panels
to be  produced  from a  single  glass  substrate  and  reducing  the  size  and
potentially  the cost of the  display.  Also,  the Company has  installed in its
facilities  in the United States the  capability  of handling  large scale fluid
production and is supplying the fluid to SCE for insertion into the flat panel.

The Company's flat panel design is utilizing a new chip which has 128 outputs as
compared to the prior chip which had 64 outputs.  The new chip is  approximately
the same size,  has  substantially  higher  speed to  accommodate  faster  panel
operation,  and is capable of using minimal power when viewing an image. The new
chip  is  being  purchased  by the  Company  and is  being  supplied  to SCE for
incorporation into production units.

The flat panel also  utilizes  fluids  which were  developed  by the Company and
which are suitable  for  production  processing.  See "Fluid"  below.  The fluid
contains yellow particles suspended in a dark dye. Thus, the flat panel contains
a yellow background with black writing or vice versa.

Included as an integral  part of the  Company's  flat panel display is a plastic
tip pen and touch writing screen.  Due to the ultra-high  resolution of the flat
panel display,  any language may be clearly  written with the use of the plastic
tip pen. In addition, with the use of the pen on a

                                        9

<PAGE>
keyboard  displayed  on  the  screen  of  the  flat  panel,   various  modes  of
communication  can be initiated,  such as fax,  e-mail and access to information
services.  An integrated front illumination system (see "Illumination" below) is
also  incorporated into the flat panel. This system provides viewing of the flat
panel from  nighttime to sunlight  ambient light  conditions.  By  incorporating
these  capabilities,  the Company's  flat panel  technology  provides  clear and
comfortable  viewing,  from any angle,  of pictures,  text in any language,  and
graphics.

         Color and Video

During  1996,  in light  of the new  digital  video  standards  that  are  being
formulated in the telecommunications industry, the Company increased its efforts
to develop digital video and color capability for its overall flat panel display
technology.  In an effort to achieve  these  goals,  the  Company  expanded  its
technical  staff  with  leading  scientists  in  this  field  and  acquired  new
facilities  and  equipment.  The  Company  believes  that,  if  successful,  the
technology under development,  which involves unique proprietary solid state and
optical  technology,  will be most suitable to obtain  ultra-high  resolution in
color at video speeds,  with minimal  power,  high  contrast and long life.  The
Company anticipates that color  implementation would be achieved without the use
of the  traditional  color filters which are currently used in LCDs. The Company
already has fabricated feasibility models and has demonstrated the capability of
its technology in achieving the required video  response time,  contrast,  color
and resolution.  The Company believes that this technology has the fastest known
response time for any type of display,  including  CRTs and LCDs. The Company is
now in the process of  fabricating  flat panels  incorporating  this  technology
having a resolution of  approximately  240 lines per inch in both the horizontal
and vertical  directions.  The Company  believes that if  ultra-high  resolution
video and color  capability can be fully  developed,  the technology could be of
universal  use  in  such  products  as  computers,   digital  television,  video
conferencing,  multi-media  devices,  personal  telecommunications  and  network
computers (NC), and for accessing on-line information services and the Internet.
The Company has filed for  fundamental  patent  protection for this  technology.
There can be no assurance, however, that the Company's efforts in this area will
be successful.

         Illumination

As part of the  Company's  product  strategy,  an  illumination  system has been
developed and has been included in MAGICOM(R) 2000 to provide  illumination from
nighttime to sunlight.  The front  illumination  system has been integrated with
the flat panel  assembly.  The light is generated  by cold  cathode  fluorescent
lamps.  The design of these lamps was  developed  in  conjunction  with  another
company in accordance with the Company's specifications.  The Company determined
experimentally the dimensions,  slit angle and phosphor color of the fluorescent
lamp.  The  development  also  included  the design of the optical  system,  its
optical quality,  mechanical mounting techniques and the generation of standards
for quality control of the systems, brightness, contrast and uniformity.

                                       10

<PAGE>


The Company is continuing to pursue the  development of new techniques  designed
to further improve light output efficiency. These development activities involve
advanced optics and designs,  such as light shaping diffusers,  edge illuminated
holograms,  pixellated illumination, and optical thin film coatings. This effort
complements the Company's front illumination  system using conventional  optical
light coupling and, if successful,  could lead to lower cost, higher efficiency,
and improved uniformity.

         Fluid

For fluid production  purposes,  an environmentally  controlled chamber has been
installed  at  the  Company's  facilities.  Using  the  chamber,   environmental
parameters  have been set to optimize  desirable  fluid  properties.  Additional
equipment  has been  procured  to allow large  batches of fluid to be  produced.
Equipment  has also been  acquired to  characterize  batches and to assure fluid
consistency.  Results of these tests have led to improved  processing  steps and
increased fluid quality  control.  Production  quantities are now being made and
shipped to SCE for use in the production of MAGICOM(R) 2000.

Fluid  development  work has been expanded through the addition of equipment and
the expansion of the Company's facilities.With this expansion, the processing of
charged  particles in the  suspension  is being further  developed.  A number of
coatings  have been  applied to the  Company's  pigment  particles  to  increase
contrast,  enhance stability and, by changing  particle density,  to broaden the
choice of solvents which may be used for its suspensions.

The Company believes that the display is environmentally  comparable to a liquid
crystal  display and the  Company  presently  is not aware of any  environmental
hazards  associated  with the small  quantity  of fluid  medium  inside the flat
panel.


Second Joint Venture

On April 17, 1996, the Company entered into a letter of intent for the formation
of a second  joint  venture  with  SECC to be  called  Shanghai  CopyTele  No. 2
Electronics Co., Ltd. (the "Second Joint Venture"). Pursuant to the terms of the
letter of  intent,  the main  purpose  of the Second  Joint  Venture  will be to
manufacture and sell electronic  components and parts used in SCE products,  and
products of other  manufacturers.  Initially,  however, the Second Joint Venture
will manufacture and market thick film circuits presently being produced by SECC
at one of its facilities.

The parties are presently discussing possible amendments to the letter of intent
to expand the scope of the  proposed  Second  Joint  Venture,  to  increase  the
initial  capitalization,  and  to  add  additional  parties.  See  "Management's
Discussion and Analysis of Financial Condition and

                                       11

<PAGE>


Results  of  Operations  -  Liquidity"  below for a complete  discussion  of the
proposed capitalization,  unless otherwise amended, of the Second Joint Venture.
The letter of intent,  as amended,  would represent solely the intentions of the
parties and would be subject to the execution of mutually acceptable  agreements
and  the  receipt  of all  necessary  governmental  approvals.  There  can be no
assurance  that the  proposed  Second Joint  Venture will be formed or that,  if
formed, it will be successful.

Competition

The  telecommunications  industry has a substantial  number of competitors which
are significantly larger and possess financial resources  significantly  greater
than those of the Company or SCE. Certain competitive  products contain displays
which primarily include LCDs. These products,  however, have fewer features than
the Company's  product and the displays have  significantly  less resolution and
information  content  capability  than the  Company's  flat panel  display.  The
Company's flat panel is being utilized for the first time in the  marketplace in
MAGICOM(R)   2000.  The  Company  believes  that   telecommunications   products
incorporating  the Company's flat panel could have many commercial  applications
and could  combine  many  characteristics  which the Company  believes  would be
desirable to potential customers.

MAGICOM(R) 2000, the first telecommunications  product developed by the Company,
is a unique product that incorporates the features of many different products on
the market, such as computers,  telephones and fax machines.  The product allows
the user to talk and write on the  machine at the same time as well as  exchange
information,  faxes and messages with other  MAGICOM(R)  2000 units,  terminals,
computers,  fax machines and pagers.  Other products currently  available on the
market do not combine all these features  together with a high  resolution  flat
panel  display.  Distinct  features of the  E-PAPERTM  flat panel screen are its
readability  from any angle up to 180  degrees,  viewability  under any lighting
conditions  and its ability to display full pages of text and images.  It is the
E-PAPERTM  screen,  with its  associated  features,  that the  Company  believes
principally will distinguish MAGICOM(R) 2000 from other comparable products that
may be developed by other manufacturers in the future.

                                       12


<PAGE>

However,  there is no assurance that comparable or superior  products or systems
to MAGICOM(R) 2000 will not be developed  which would render  MAGICOM(R) 2000 or
other products of the Company and SCE difficult to market or otherwise obsolete.

Patents

The Company has received  seventy-nine  (79) patents,  including  those from the
United  States and certain  foreign  patent  offices,  expiring at various dates
between 2005 and 2015. At the present time,  additional patent  applications are
pending with the United States and certain foreign patent offices. The foregoing
patents are related to the design,  structure and methods of construction of the
flat  panel,   methods  of  operating  the  flat  panel,   particle  generation,
applications  using the flat  panel,  and new  applications  for  SCE's  planned
products.  The  Company  has been  advised by its patent  counsel  that in their
opinion  the  subject  matter of the  pending  applications  contain  patentable
material.

The Company has licensed a number of its patents  covering  the flat panel,  but
excluding the flat panel manufacturing  technology, to SCE on an exclusive basis
in China.

There is no  assurance  that  patents  will be  obtained  for any of the pending
applications.  In  addition,  there is no  assurance  that any  patents  held or
obtained  will protect the Company  against  competitors  either with or without
litigation. The Company is not aware that MAGICOM(R) 2000 is infringing upon the
patents of others. There is no assurance, however, that other products developed
by the Company will not infringe upon the patents of others, or that the Company
and SCE will not have to obtain licenses under the patents of others.

The Company  believes that the foregoing  patents are  significant to the future
operations of the Company.

Research and Development Expenses

Research and development expenses, which have comprised a significant portion of
the Company's selling,  general and administrative expenses since its inception,
were approximately $3,858,000,  $2,353,000,  $2,677,000, and $20,743,000 for the
fiscal years ended October 31, 1996, 1995, 1994 and for the period from November
5, 1982 (inception)  through October 31, 1996,  respectively.  See "Management's
Discussion and Analysis of Financial  Condition and Results of Operations" below
and the Company's Financial Statements.

                                       13

<PAGE>

Employees and Consultants

The Company had  thirty-one  employees and twenty  consultants as of January 22,
1997. Twenty three of these individuals, including the Company's Chairman of the
Board  and its  President,  are  engaged  in  research  and  development.  Their
backgrounds  include  expertise in chemistry,  optics and  electronics.  Fifteen
individuals  are engaged in marketing and the remaining  individuals are engaged
in administrative and financial functions for the Company. None of the Company's
employees are represented by a labor organization or union.

To date, SCE has approximately sixty employees,  of which forty-five are engaged
in production and fifteen are engaged in administrative and other functions.

Item 2.  Properties.

The Company  leases  approximately  10,000 square feet of office and  laboratory
research facilities at 900 Walt Whitman Road,  Huntington Station, New York (its
principal  offices)  from an unrelated  party  pursuant to a lease which expires
November 30, 1998, for a base rent of approximately  $166,000 per annum, as well
as escalation clauses for increases in certain operating costs, for a total cost
aggregating  approximately  $173,000  per annum.  The  Company  has the right to
cancel  portions of the lease as of November  30, 1997 and  February  28,  1998,
respectively.  This  lease  does not  contain  provisions  for its  renewal  and
management will continue to evaluate the future  adequacy of this facility.  See
Note 8 to the Company's Financial Statements.

In February 1996,  the Company  entered into a five year lease with an unrelated
party for approximately 2,300 square feet of office space in Valhalla, New York.
The lease, which expires on June 30, 2001 and is non-renewable,  has a base rent
of  $51,175  per  annum in  years  one and two and  $55,775  per  annum  for the
remainder of the lease.  In October 1996, the Company  entered into a lease with
an unrelated party for approximately  2,000 square feet of office and laboratory
space near its  principal  offices.  This lease,  which expires on May 31, 1997,
provides for a base rent of $1,300 per month and contains a provision permitting
the Company to extend the term of the lease for up to an additional  three years
with escalating rents.

SCE's Leased Facility consists of approximately 12,000 square feet of office and
production  space in Shanghai,  China,  pursuant to a lease which expires by its
terms in April 1997. A  determination  has been made by all parties to terminate
this lease on such earlier date as the transfer of all production  equipment and
personnel from this facility to the new facility  described below has been fully
completed.

During 1996,  SCE  completed  construction  of a 30,000  square foot,  one-story
office, warehouse and production facility owned by SCE in the Shanghai Songjiang
Industrial Zone, on land acquired pursuant to a land-use contract, dated October
11, 1995, with the Land  Administration  Bureau of Shanghai County having a term
of 50 years.  SCE has obtained a one-year  loan of  U.S.$220,000  secured by the
land-use contract. See Note 3 to the Company's

                                       14

<PAGE>
Financial Statements. SCE currently is in the process of transferring all of its
production  equipment  and  personnel  from  the  Leased  Facility  to this  new
facility.

Management  believes  that the  facilities  described  above,  which  are  fully
utilized at the  present  time (other  than SCE's  recently  constructed  30,000
square  foot  facility)  are  adequate  for  the  Company's  and  SCE's  current
requirements.  It is  anticipated  that  additional  space  may be needed in the
future depending upon the nature and extent of the Company's activities with SCE
and with the growth of the Company's and SCE's businesses.

Item 3.  Legal Proceedings.

The Company is not a party to any pending legal proceedings.

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

During the fourth  quarter of the Company's  fiscal year ended October 31, 1996,
no matters were submitted by the Company to a vote of its shareholders.

Executive Officers of the Company

The only  executive  officers  of the  Company  are  Denis A.  Krusos,  Frank J.
DiSanto, Frank W. Trischetta and Gerald J. Bentivegna.  The information required
to be furnished  with respect to these  executive  officers is set forth in, and
incorporated  by reference  from, Item 10 Part III of this Annual Report on Form
10-K.
                                       15


<PAGE>

                                     PART II

Item 5.  Market for the Registrant's Common Equity and
                  Related Stockholder Matters.

The common stock of the Company has been traded on the National  Association  of
Securities  Dealers,  Inc. Automated Quotation National Market System ("NASDAQ -
NMS"), the automated quotation system of the National  Association of Securities
Dealers,  Inc. ("NASD") under the symbol "COPY", since October 6, 1983, the date
public trading of the Company's common stock  commenced.  The high and low sales
prices, as reported by NASDAQ, for each quarterly fiscal period adjusted for the
two-for-one stock split declared in May, 1996, during the Company's fiscal years
ended October 31, 1995 and 1996 have been as follows:
<TABLE>
<CAPTION>

        
--------------------------------------------------------------------------------
             Fiscal Period                High                 Low
--------------------------------------------------------------------------------
        <S>                            <C>                 <C>

           1st quarter 1995              $4.44                $2.38
           2nd quarter 1995               4.13                 2.82
           3rd quarter 1995               5.50                 3.19
           4th quarter 1995               5.25                 3.44
--------------------------------------------------------------------------------
           1st quarter 1996               5.56                 4.06
           2nd quarter 1996               6.06                 4.63
           3rd quarter 1996               9.88                 5.25
           4th quarter 1996               7.63                 5.25
--------------------------------------------------------------------------------
</TABLE>

As of January 22, 1997 the approximate  number of record holders of common stock
of the Company was 1,025.

No cash  dividends  have been paid on the common stock of the Company  since its
inception and the Company has no present  intention to pay any cash dividends in
the foreseeable future.

See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital  Resources" for  information  with respect to
certain minimum listing requirements for the NASDAQ - NMS.

                                       16


<PAGE>

Item 6.  Selected Financial Data.

The following data has been derived from the Financial Statements of the Company
and should be read in conjunction with those  statements,  and the notes related
thereto, which are included in this report.
<TABLE>
<CAPTION>
                                 ---------------------------------------------------------------------
                                                                                                             For the period
                                                As of and for the year ended October 31,                  from November 5, 1982
                                                                                                           (inception) through
                                                                                                            October 31, 1996
                                 ---------------------------------------------------------------------
                                      1996         1995          1994           1993          1992
----------------------------------------------------------------------------------------------------------------------------
<S>                          <C>          <C>            <C>           <C>           <C>                     <C>               

Sales                           $ -          $  -           $    -         $    -        $    -                   $    -
----------------------------------------------------------------------------------------------------------------------------
Selling General and
Administrative Expenses, and     6,166,210    3,350,125      3,651,334     2,925,627      1,978,444               32,146,652
Loss from SCE
----------------------------------------------------------------------------------------------------------------------------
Interest Income                    722,800      356,226        223,817       162,778        151,088                3,388,272
----------------------------------------------------------------------------------------------------------------------------
Net (Loss)                     (5,443,410)  (2,993,899)     (3,427,517)   (2,762,849)    (1,827,356)             ($28,758,380)

----------------------------------------------------------------------------------------------------------------------------
Net (Loss) Per Share of
Common Stock (a)                   ($0.10)      ($0.06)         ($0.07)   ($0.06)        ($0.04)                 ($0.64)
----------------------------------------------------------------------------------------------------------------------------
Total Assets                    24,710,420    9,695,398      6,614,332     8,686,241      4,358,874
----------------------------------------------------------------------------------------------------------------------------
Long Term Obligations           $    -        $  -          $    -         $      -      $    -
----------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity            22,750,273    9,436,708      6,415,233     8,244,925      4,083,800
----------------------------------------------------------------------------------------------------------------------------
Cash Dividends Per Share        $    -        $  -          $    -         $    -        $      -                 $    -
of Common Stock
----------------------------------------------------------------------------------------------------------------------------
         --------------------
<FN>

(a)      Adjusted  for  three-for-one  stock  split  declared  in October  1985,
         five-for-four  stock split declared in August 1987,  two-for-one  stock
         split declared in February 1991 and two-for-one stock split declared in
         May 1996.
</FN>
</TABLE>

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

The Company,  which is a  development  stage  enterprise,  was  incorporated  on
November 5, 1982 and has had no revenues  to support  its  operations  since its
inception.  The Company's principal  activities are the development of telephone
based multi-functional  telecommunications  products incorporating the Company's
ultra-high  resolution flat panel display,  the further expansion of its overall
flat panel technology,  and the operations of SCE, the Company's 55% owned joint
venture in China.  The  Company's  interest  in SCE is  accounted  for under the
equity method of accounting. See "Business - New Developments" and Notes 2 and 3
to the Company's Financial  Statements.  During 1996, the Company also increased
its efforts to develop ultra-high resolution video and color capability for its
overall  flat panel  display  technology.  See  "Business  - Flat Panel  Display
Technology - Color and Video" above.  There can be no assurance,  however,  that
the  Company's  efforts  in this  area  will  be  successful.  There  is also no
assurance  that the Company will  generate  significant  revenues in the future,
will

                                       17


<PAGE>

have  sufficient  revenues to generate profit or that other products will not be
produced by other  companies that will render the products of the Company or SCE
obsolete or unmarketable.

In reviewing  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations,  reference is made to the Company's Financial  Statements
and the notes thereto.

Results of Operations

Selling, general and administrative  expenses,  including the loss from SCE, for
the fiscal years ended  October 31, 1996,  1995 and 1994 and for the period from
November  5, 1982  (inception)  through  October  31,  1996  were  approximately
$6,166,000, $3,350,000, $3,651,000 and $32,147,000,  respectively. These amounts
include  research,  development and tooling costs of  approximately  $3,858,000,
$2,353,000,  $2,677,000  and  $20,743,000,   respectively,  as  well  as  normal
operating expenses. Selling, general and administrative expenses,  including the
loss from SCE,  increased  $2,816,000  during  fiscal 1996 as compared to fiscal
1995 resulting primarily from increases in expenditures for engineering supplies
and services  necessitated  by the present  phase of the  Company's  development
program and related  activities.  Professional  fees increased during the fiscal
1996 period,  especially patent  application  preparation and filing fees. Other
increases in professional fees, including  accounting and shareholder  services,
were  offset by a decline in other  legal  fees  which were not patent  related.
Initial  marketing costs were incurred during the fiscal 1996 period as a result
of the opening and staffing of a marketing office, retention of public relations
and  advertising  firms  and  the  production  of  advertising  and  promotional
materials.  Other expense  categories  also increased in fiscal 1996,  including
compensation  and related costs,  rent and travel  expenditures,  as a result of
adding  personnel in marketing and  engineering,  the rental of additional space
and  facilities,  and travel  associated with marketing and supporting the joint
venture  in  China.  The  Company's  portion  of SCE's  loss in  fiscal  1996 of
approximately  $149,000 as compared to the loss in fiscal 1995 of  approximately
$18,000 was as a result of SCE expensing start up costs prior to production.

Selling,  general  and  administrative  expenses,  including  the loss from SCE,
decreased  $301,000 during fiscal 1995 as compared to fiscal 1994 as a result of
the requirements of the Company's  development  program and related  activities.
Engineering  supplies  purchases and patent  application  preparation and filing
fees  decreased  substantially  during  fiscal  1995,  while  professional  fees
(excluding patent related fees) and business trip expenses increased. Consulting
and  outside  engineering  services  expenses  increased  during  fiscal 1995 as
compared to fiscal 1994 as a result of costs  incurred  in  connection  with the
development of products for SCE.

                                       18


<PAGE>

Since November 1985, the Company's  Chairman of the Board and its President have
waived salary and related pension  benefits for an undetermined  period of time.
Four other  individuals,  including  a former  officer  and three  senior  level
personnel,  waived salary and related pension benefits from January 1987 through
December 1990.  Commencing in January 1991, these four  individuals  waived such
rights for an  undetermined  period of time and they did not  receive  salary or
related pension benefits  through  December 1992. The Company's  Chairman of the
Board,  its  President and the three senior level  personnel  continued to waive
such rights commencing in January 1993 for an undetermined period of time. Since
February 1993, one additional employee is also currently waiving such salary and
benefit rights for an undetermined period of time. See "Executive  Compensation"
and Note 11 to the Company's Financial Statements for a more complete discussion
regarding salary and related pension benefit waivers.

The increase in interest income during fiscal 1996 as compared to 1995 primarily
resulted from a significant  increase in average funds  available for investment
offset slightly by a decrease in interest rates. The increase in interest income
during  fiscal 1995 as compared to fiscal 1994  primarily  resulted from a small
increase in average funds available for investment,  and an increase in interest
rates.  Funds available for investment  during 1996, 1995 and 1994, on a monthly
weighted  average  basis,  were   approximately   $16,011,000,   $7,175,000  and
$7,050,000, respectively. The investment instruments selected by the Company are
principally money market accounts and commercial paper.

During October 1995, the Financial  Accounting  Standards Board issued Statement
of Financial  Accounting  Standard ("SFAS") No. 123,  Accounting for Stock Based
Compensation.  This  statement  establishes  financial  accounting and reporting
standards for stock-based  employee  compensation plans. SFAS No. 123 encourages
entities to adopt a fair value based method of accounting for stock compensation
plans.  However,  SFAS No. 123 also  permits  the Company to continue to measure
compensation  costs under  preexisting  accounting  pronouncements.  If the fair
market value based method of  accounting  is not adopted,  SFAS No. 123 requires
pro forma  disclosures of net income and earnings per share. This statement will
be  adopted  by the  Company  during  fiscal  1997.  The  Company  is  currently
evaluating  the  implications  of SFAS No.  123 and,  as a  result,  has not yet
determined  how it would be applied in its financial  statements.  See Note 2 to
the Company's Financial  Statements.  The Company has adopted all other recently
issued accounting standards which have an impact on its financial statement.

See "Business" and Note 1 to the Company's Financial  Statements for discussions
regarding   uncertainties  that  may  significantly  affect  results  of  future
operations.
                                       19


<PAGE>

Liquidity and Capital Resources

Since its inception,  the Company has met its liquidity and capital  expenditure
needs  primarily  from the  proceeds  of the  sales of its  common  stock in its
initial public offering, in private placements, upon exercise of warrants issued
in connection with the private  placements and public offering and upon exercise
of stock  options  pursuant to the Company's  Stock Option Plan,  adopted by the
Board of  Directors on April 1, 1987 (the "1987  Plan") and the  CopyTele,  Inc.
1993 Stock Option Plan,  adopted by the Board of Directors on April 28, 1993 and
amended on May 3, 1995 and May 10, 1996 (the "1993 Plan").

During the fiscal year ended  October 31, 1996,  the Company  received  proceeds
aggregating  approximately  $17,667,500 from the exercise of options to purchase
5,110,100  shares of its  common  stock  pursuant  to the 1987 Plan and the 1993
Plan. In addition,  during fiscal 1996 the Company received proceeds aggregating
approximately  $1,089,500  from the  exercise  of  warrants  by  members  of the
immediate  families of its  Chairman of the Board and its  President to purchase
384,350 shares of common stock. From the period November 1, 1996 through January
22, 1997 the Company received proceeds aggregating  approximately  $204,500 from
the exercise of stock options for 61,000  shares of the Company's  common stock.
See "Certain  Relationships  and Related  Transactions"  below and the Company's
Financial  Statements for a more complete  discussion  regarding sales of common
stock.

SCE contemplates an initial investment of $7,000,000,  of which half is expected
to be borrowed from banks, and a capital  investment of $3,500,000.  The Company
has  contributed  $1,225,000 in cash, and technology  valued for the purposes of
SCE at $700,000,  and SECC and SIT have  contributed  $1,575,000 in cash to SCE.
See Notes 1, 2 and 3 to the  Company's  Financial  Statements.  SCE may  require
capitalization of up to $25 million, depending upon the nature and extent of its
business activities.

As stipulated in a letter of intent signed with SECC, unless otherwise  amended,
the Second  Joint  Venture is  expected  to have an  initial  capitalization  of
approximately  $2,000,000,  of which half would consist of bank borrowings.  The
Company would invest cash of  approximately  $550,000 and SECC would  contribute
cash, equipment and technology collectively valued at $450,000. The Second Joint
Venture may require an ultimate capitalization of up to $10 million depending on
the  nature  and  extent of its  business  activities,  which if  necessary,  is
expected to be financed  through a  combination  of bank  borrowings  and equity
investments  contributed by the parties in proportion to their equity  interests
and on terms to be agreed upon.

The Company believes that without taking into consideration  revenues from sales
of MAGICOM(R)  2000 it will have  sufficient  funds through the first quarter of
fiscal 2000
                                       20


<PAGE>

to maintain its present level of development efforts and to make its anticipated
capital contribution of $550,000 to the Second Joint Venture.

The Company's estimated funding capacity indicated above assumes, although there
is no assurance,  that the waiver of salary and pension benefits by the Chairman
of the Board,  the  President  and senior level  personnel  will  continue.  The
Company anticipates that it may require additional funds in order to participate
in SCE or the Second Joint Venture  following its initial capital  contributions
and to continue its research and development activities.

The NASD  requires  that the  Company  maintain a minimum of  $4,000,000  of net
tangible  assets to maintain its NASDAQ - NMS listing.  The Company  anticipates
that it will seek additional  sources of funding,  when  necessary,  in order to
satisfy the NASD requirements.

The Company currently has no plans with respect to additional  financing.  There
can be no assurance that adequate funds will be available to the Company, SCE or
the Second Joint  Venture,  including any future capital  contribution,  if any,
beyond  its  initial  capital   contributions  of  $1,225,000  to  SCE  and  the
anticipated  capital  contribution of $550,000 to the Second Joint Venture,  and
its NASD funding  requirements,  or that, if available,  the Company, SCE or the
Second Joint  Venture  will be able to obtain such funds on favorable  terms and
conditions.

See "Business" and Note 1 to the Company's Financial  Statements for discussions
regarding  uncertainties  that may  significantly  affect  future  liquidity and
capital resources.


Item 8. Financial Statements and Supplementary Data.

See accompanying "Index to Financial Statements".

Item 9.  Disagreements on Accounting and Financial Disclosure.

Not applicable.

                                       21


<PAGE>


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

The following  table sets forth certain  information  with respect to all of the
directors and executive officers of the Company:
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------
                                                                                     Director and/or
                            Position with the Company and Principal                  Executive Officer
             Name                  Occupation                                   Age  Since
--------------------------------------------------------------------------------------------------------
<S>                      <C>                                                  <C>      <C>    

Denis A. Krusos             Director, Chairman of the Board and                  69      1982
                            Chief Executive Officer
-------------------------------------------------------------------------------------------------------
Frank J. DiSanto            Director and President                               72      1982
-------------------------------------------------------------------------------------------------------
Gerald J. Bentivegna        Director, Vice President - Finance and               47      1994
                            Chief Financial Officer
-------------------------------------------------------------------------------------------------------
John E. Gillies             Director                                             70      1992
-------------------------------------------------------------------------------------------------------
John R. Shonnard            Director                                             81      1988
-------------------------------------------------------------------------------------------------------
Frank W. Trischetta         Senior Vice President - Marketing and                56      1996
                            Sales
-------------------------------------------------------------------------------------------------------
</TABLE>


Mr.  Krusos  has been a  Director,  Chairman  of the Board  and Chief  Executive
Officer of the Company since  November  1982.  He holds an M.S.E.E.  degree from
Newark College of Engineering, a B.E.E. degree from City College of New York and
a Juris Doctor from St. John's University and is a member of the New York bar.

Mr.  DiSanto has been a Director  and  President of the Company  since  November
1982.  He holds a B.E.E.  degree from  Polytechnic  Institute of Brooklyn and an
M.E.E. degree from New York University.

Mr. Bentivegna has been Vice President - Finance and Chief Financial Officer
since September 1994 and was elected a Director in July 1995. Prior to joining 
the Company, Mr. Bentivegna was employed at Marino Industries Corp. for 
approximately 10 years, where he served as Controller, Treasurer and Chief 
Financial Officer.  He holds an M.B.A. degree from Long Island University and
a B.B.A. from Dowling College.

Mr. Gillies has been a Director of the Company since January 1992.  He has been
an attorney for over forty years and formerly served as a Village Justice and 
as a Village Attorney of the Incorporated Village of Farmingdale.  He is also 
Honorary President of

                                       22


<PAGE>

St. Mary's Children and Family Services,  a not-for-profit child care agency for
which he has served in various capacities for over twenty years.

Mr.  Shonnard has been a Director of the Company since January 1988. He had been
a research  consultant  to the Company from August 1983 until his  retirement in
May  1988.  Mr.   Shonnard  was  engaged  in  development   engineering  in  the
communications  field for over fifty years and has held numerous  patents in the
communications field.

Mr.  Trischetta  has been  Senior Vice  President  -  Marketing  and Sales since
February  1996.  Prior to joining the Company,  Mr.  Trischetta  was employed by
Panasonic  Corporation  for  approximately  15 years  where he served as General
Manager Marketing and Sales for Panasonic Office Automation  Products.  Prior to
that,  Mr.  Trischetta  was employed by 3-M Company for  approximately  17 years
where he advanced to a senior sales and marketing executive position. He holds a
B.B.A. from the University of Miami.

Item 11.  Executive Compensation.

Messrs.  Denis A. Krusos,  Chairman of the Board,  Chief  Executive  Officer and
Director, Frank J. DiSanto, President and Director, Frank W. Trischetta,  Senior
Vice President - Marketing and Sales, and Gerald J. Bentivegna, Vice President -
Finance, Chief Financial Officer and Director, are the executive officers of the
Company.  While  there are no formal  agreements,  Denis A.  Krusos and Frank J.
DiSanto waived any and all rights to receive salary and related pension benefits
for an undetermined period of time commencing November 1, 1985. As a result, Mr.
Krusos  received no salary or bonus during the last three fiscal  years.  Except
for Mr.  Trischetta,  no other executive  officer  received a salary or bonus in
excess of $100,000  during the fiscal year ended October 31, 1996. The following
is  compensation  information  regarding Mr. Krusos and Mr.  Trischetta  for the
fiscal years ended October 31, 1996, 1995 and 1994:

                                       23


<PAGE>
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------

                                                SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------------------------------------

                                                                            Long-Term                       Annual
                                                  Fiscal               Compensation Awards               Compensation
                  Name and                         Year
             Principal Position                   Ended
                                                                      Securities Underlying
                                                                           Options (#)
---------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                          <C>                             <C>     

Denis A. Krusos,                                 10/31/96                    575,000                           -
Chairman of the Board,                           10/31/95                    900,000                           -
Chief Executive Officer and                      10/31/94                    200,000                           -
Director
---------------------------------------------------------------------------------------------------------------------------
Frank W. Trischetta                              10/31/96                    155,000                       $117,600
Senior Vice President -
Marketing and Sales
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following is information  regarding  stock options granted to Mr. Krusos and
Mr.  Trischetta  pursuant to the 1993 Plan during the fiscal year ended  October
31, 1996:
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                 OPTION GRANTS IN LAST FISCAL YEAR
------------------------------------------------------------------------------------------------------------------------------------
                                       Individual Grants                                           Potential Realizable Value at
                                                                                                   Assumed Annual Rates of Stock
                                                                                                Price Appreciation for Option Term
------------------------------------------------------------------------------------------------------------------------------------
                        Number of         Percent of
                       Securities        Total Options
                       Underlying         Granted to          Exercise
                     Options Granted     Employees in           Price           Expiration
       Name              (#) (1)          Fiscal Year          ($/Sh)              Date              5% ($)            10% ($)
------------------------------------------------------------------------------------------------------------------------------------

<S>                    <C>                 <C>            <C>                  <C>                <C>              <C>

Denis A. Krusos          18,890              .41%            $5.2938(2)           3/20/01           $ 16,026          $ 46,410
------------------------------------------------------------------------------------------------------------------------------------
                         181,110             3.96%           $4.8125(3)           3/20/06           $548,139         $1,389,093
                   -----------------------------------------------------------------------------------------------------------------
                         200,000             4.37%           $4.8125(3)           4/21/06           $605,311         $1,533,977
                   -----------------------------------------------------------------------------------------------------------------
                         175,000             3.82%           $6.3750(3)           9/18/06           $701,611         $1,778,019
------------------------------------------------------------------------------------------------------------------------------------
Frank W.                 20,778              .45%            $4.8125 (2)          3/20/06           $ 62,886          $ 159,365
Trischetta
------------------------------------------------------------------------------------------------------------------------------------
                         29,222              .64%            $4.8125 (3)          3/20/06           $ 88.442          $ 224,129
                   -----------------------------------------------------------------------------------------------------------------
                         70,000              1.53%           $4.8125 (3)          4/21/06           $211,859          $ 536,892
                   -----------------------------------------------------------------------------------------------------------------
                         35,000              .76%            $6.3750 (3)          9/18/06           $140,322          $ 355,604
                   -----------------------------------------------------------------------------------------------------------------


                                       24

<PAGE>

<FN>
-----------------
(1)  The  options  are  exercisable  in  whole  or in part  commencing  one year
     following the date of grant unless otherwise  accelerated.  The options are
     not issued in tandem with stock  appreciation or similar rights and are not
     transferable  other than by will or the laws of descent  and  distribution.
     The options  terminate upon  termination of employment,  except that in the
     case of death,  disability  or  termination  for reasons  other than cause,
     options may be  exercised  for certain  periods of time  thereafter  as set
     forth in the 1993 Plan.

(2)  The  exercise  price of these  options was equal to 110% of the fair market
     value of the  underlying  common stock on the date of grant for Mr.  Krusos
     and 100% of the fair market  value of the  underlying  common  stock on the
     date of grant for Mr.  Trischetta  (fair market value being  defined in the
     1993  Plan as the  last  sales  price  of the  Company's  common  stock  on
     NASDAQ-NMS  on the date of grant).  These options were granted as incentive
     stock  options  within the meaning of Section 422 of the  Internal  Revenue
     Code of 1986, as amended.

(3)  The exercise  price of these  options was equal to the fair market value of
     the  underlying  common  stock  on the date of  grant.  These  options  are
     nonqualified options.

</FN>
</TABLE>

The following is information regarding stock option exercises during fiscal 1996
by Mr. Krusos and Mr.  Trischetta  and the values of their options as of October
31, 1996:
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
                                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
                                                FY-END OPTION/VALUES
=====================================================================================================================
                                                         Number of Securities         Value of Unexercised In-the-
                                                    Underlying Unexercised Options    Money Options at Fiscal Year
                                                        at Fiscal Year End (#)                 End ($) (2)
                 Shares Acquired   Value Realized
      Name       on Exercise (#)      ($) (1)
                                                   ------------------------------------------------------------------
                                                      Exercisable    Unexercisable    Exercisable     Unexercisable
=====================================================================================================================
<S>              <C>              <C>               <C>              <C>            <C>              <C>

Denis A. Krusos     1,099,820        $3,191,225        1,597,180        175,000        $1,472,300       $136,719
---------------------------------------------------------------------------------------------------------------------
Frank W.             142,000          $290,750          208,000         155,000         $783,875        $308,594
Trischetta
---------------------------------------------------------------------------------------------------------------------
<FN>
(1)      Such value was  determined by applying the net  difference  between the
         selling  price of the stock sold on day of  exercise  and the  exercise
         price for the options to the number of options exercised.  The exercise
         price of these  options  was  equal  to the  fair  market  value of the
         underlying common stock as defined in the applicable plan.


                                      25


<PAGE>
(2)      Such value was  determined by applying the net  difference  between the
         last sales price of the Company's  common stock on October 31, 1996 and
         the  exercise  price  for the  options  to the  number  of  unexercised
         in-the-money  options held.  The exercise price of these options was at
         least equal to the fair market value of the underlying  common stock as
         defined in the 1993 Plan.
</FN>
</TABLE>

There is no present  arrangement for the  compensation of directors for services
in that  capacity.  Upon the  approval of the  amendment of the 1993 Plan by the
Company's  shareholders on July 24, 1996, each  nonemployee  director elected at
the 1996 Annual Meeting of Shareholders  received  nonqualified stock options to
purchase  40,000  shares of common  stock and such  nonemployee  directors  will
receive  nonqualified  stock  options to purchase  40,000 shares of common stock
each subsequent year that such director is elected to the Board of Directors. In
addition, any future nonemployee director elected to the Board of Directors will
receive  nonqualified  stock  options to purchase  20,000 shares of common stock
upon his initial  election to the Board of Directors and 40,000 each  subsequent
year that such director is elected to the Board of Directors.

Item 12.  Security Ownership of Certain Beneficial Owners
              and Management.

The following table sets forth certain information with respect to the Company's
common stock beneficially owned as of January 22, 1997 by (a) each person who is
known by the management of the Company to be the  beneficial  owner of more than
5% of the Company's common stock, (b) each director or executive  officer of the
Company and (c) all directors and executive officers as a group:

                                       26


<PAGE>
<TABLE>
<CAPTION>


----------------------------------------------------------------------------------------
                                                       Amount and Nature of
                                                            Beneficial
             Name and Address of Beneficial Owner         Ownership(1)(2)    Percent of
                                                                               Class
========================================================================================
<S>                                                        <C>             <C>         
Denis A. Krusos                                               6,434,440       10.86%
900 Walt Whitman Road
Huntington Station, NY  11746
------------------------------------------------------------------------------------
Frank J. DiSanto                                              6,227,960       10.53%
900 Walt Whitman Road
Huntington Station, NY  11746
------------------------------------------------------------------------------------
Gerald J. Bentivegna                                            111,000         .19%
900 Walt Whitman Road
Huntington Station, NY  11746
------------------------------------------------------------------------------------
John E. Gillies                                                  81,000         .14%
320 Conklin Street
Farmingdale, NY  11735
------------------------------------------------------------------------------------
John R. Shonnard                                             247,200(3)         .43%
12521 Rios Road
San Diego, CA  92128
------------------------------------------------------------------------------------
Frank W. Trischetta                                             258,000         .45%
900 Walt Whitman Road
Huntington Station, NY  11746
------------------------------------------------------------------------------------
All Directors and Executive Officers as a Group           13,359,600(3)       21.73%
(6 persons)
------------------------------------------------------------------------------------

--------------------
<FN>

(1)  A  beneficial  owner of a security  includes  any person  who  directly  or
     indirectly has or shares voting power and/or  investment power with respect
     to such  security  or has the  right to obtain  such  voting  power  and/or
     investment power within sixty (60) days.  Except as otherwise  noted,  each
     designated  beneficial  owner in this  report  has sole  voting  power  and
     investment  power with respect to the shares of the Company's  common stock
     beneficially owned by such person.

(2)  Includes 1,772,180 shares, 1,682,180 shares, 110,000 shares, 80,000 shares,
     117,600  shares,  258,000 shares and 4,019,960  shares as to which Denis A.
     Krusos, Frank J. DiSanto,  Gerald J. Bentivegna,  John E. Gillies,  John R.
     Shonnard, Frank W. Trischetta

                                      27

<PAGE>
         and all directors and executive officers as a group, respectively, have
         the right to acquire  within 60 days upon  exercise of options  granted
         pursuant to the 1987 Plan and/or the 1993 Plan.

(3)      Includes 129,600 shares of the Company's common stock, all of which are
         held in a  revocable  trust by the Wells Fargo Bank  (successor  of the
         First Interstate  Bank), as trustee of such trust. Mr. Shonnard and his
         wife, Janet L. Shonnard, are the beneficiaries of such trust and, under
         certain  circumstances,  may exercise  the voting power and  investment
         power of the trust jointly.
</FN>
</TABLE>

Item 13.  Certain Relationships and Related Transactions.

In fiscal 1996, Peri D. Krusos,  Denis Z. Krusos and Daniel A. DiSanto exercised
warrants  to  purchase  185,710,  185,710  and  12,930  shares of common  stock,
respectively,  at the weighted  average exercise price of $2.83 per share of the
Company's common stock. Each exercise price represented the fair market value of
such stock on the date of issuance of these warrants,  subsequently adjusted for
the  two-for-one  stock splits  declared by the Company in February 1991 and May
1996 and the anti-dilution  provisions of the warrants. The warrants were issued
in fiscal 1990 in  conjunction  with sales of common stock by the Company to the
foregoing  individuals.  Peri D. Krusos and Denis Z. Krusos are the daughter and
son, respectively,  of Denis A. Krusos and Daniel A. DiSanto is the son of Frank
J. DiSanto.

As of January  22,  1997,  after  adjustments  for the  two-for-one  stock split
declared in May 1996, Peri D. Krusos, Denis Z. Krusos and Daniel A. DiSanto each
held  warrants  to purchase  105,940  shares of common  stock,  all of which are
exercisable.
                                       28


<PAGE>

                                     PART IV

Item 14.          Exhibits, Financial Statement Schedules, and
                  Reports on Form 8-K.

(a)(1)(2)         Financial Statement Schedules

                  See accompanying "Index to Financial Statements".

  (a)(3)          Executive Compensation Plans and Arrangements

                  Stock  Option  Plan  (1987)  (filed  as  Exhibit  10.18 to the
                  Company's Quarterly Report on Form 10-Q for the fiscal quarter
                  ended April 30, 1987).

                  Amendment to Stock Option Plan (1987)  (filed as Exhibit 10.69
                  to the  Company's  Annual  Report on Form 10-K for the  fiscal
                  year ended October 31, 1990).

                  CopyTele, Inc. 1993 Stock Option Plan (filed as Annex A to the
                  Company's Proxy Statement dated June 10, 1993).

                  Amendment to CopyTele,  Inc.  1993 Stock Option Plan (filed as
                  Exhibit  4(d) to the  Company's  Form S-8 dated  September  6,
                  1995).

                  Amendment to CopyTele,  Inc.  1993 Stock Option Plan (filed as
                  Exhibit 10.32 to the Company's  Quarterly  Report on Form 10-Q
                  for the fiscal year ended April 30, 1996.

      (b)         Reports on Form 8-K

                  No current report on Form 8-K was filed for the Company during
                  the fourth quarter of its fiscal year ended October 31, 1996.

      (c)         Exhibits

                  (a)      3.1     Certificate of Incorporation, as amended.

                  (b)      3.2     By-laws, as amended and restated.

                  (c)      10.1    Stock Option Plan, adopted on April 1, 1987
                                   and approved by shareholders on May 27, 1987.


                                       29


<PAGE>

  (d)      10.2    Amendment to Stock Option Plan, adopted on March 12,
                   1990 and approved by shareholders on May 24, 1990.

  (e)      10.3    Stock Purchase Warrant, dated September 16, 1991,
                   between the Registrant and Denis Z. Krusos.

  (e)      10.4    Stock Purchase Warrant, dated September 16, 1991,
                   between the Registrant and Daniel A. DiSanto.

  (e)      10.5    Stock Purchase Warrant, dated September 16, 1991,
                   between the Registrant and Peri D. Krusos.

  (e)      10.6    Stock Purchase Warrant, dated December 16, 1991,
                   between the Registrant and Denis Z. Krusos.

  (e)      10.7    Stock Purchase Warrant, dated December 16, 1991,
                   between the Registrant and Daniel A. DiSanto.

  (e)      10.8    Stock Purchase Warrant, dated December 16, 1991,
                   between the Registrant and Peri D. Krusos.

  (f)      10.9    Stock Purchase Warrant, dated March 12, 1992, between
                   the Registrant and Denis Z. Krusos.

  (f)      10.10   Stock Purchase Warrant, dated March 12, 1992, between
                   the Registrant and Daniel A. DiSanto.

  (f)      10.11   Stock Purchase Warrant, dated March 12, 1992, between
                   the Registrant and Peri D. Krusos.

  (a)      10.12   Stock Purchase Warrant, dated July 24, 1992, between the
                   Registrant and Denis Z. Krusos.

  (a)      10.13   Stock Purchase Warrant, dated July 24, 1992, between the
                   Registrant and Daniel A. DiSanto.

  (a)      10.14   Stock Purchase Warrant, dated July 24, 1992, between the
                   Registrant and Peri D. Krusos.

  (g)      10.15   Stock Purchase Warrant, dated October 27, 1992, between
                   the Registrant and Denis Z. Krusos.




                                          30

<PAGE>

  (g)      10.16      Stock Purchase Warrant, dated October 27, 1992, between
                      the Registrant and Daniel A. DiSanto.

  (g)      10.17      Stock Purchase Warrant, dated October 27, 1992, between
                      the Registrant and Peri D. Krusos.

  (h)      10.18      CopyTele, Inc. 1993 Stock Option Plan, adopted on April
                      28, 1993 and approved by shareholders on July 14, 1993.

  (i)      10.19      Joint Venture Contract, dated as of March 28, 1995, by
                      and between Shanghai Electronic Components Corp. and
                      CopyTele, Inc.

  (i)      10.20      Technology License Agreement, dated as of March 28,
                      1995, by and between Shanghai CopyTele Electronics
                      Co., Ltd. and CopyTele, Inc.

  (j)      10.21      Amendment No. 1 to the CopyTele, Inc. 1993 Stock
                      Option Plan, adopted on May 3, 1995 and approved by
                      shareholders on July 19, 1995.

  (k)      10.22      Assignment Agreement, dated as of July 10, 1995, by and
                      among Shanghai Electronic Components Corp., Shanghai
                      International Trade and Investment Developing Corp. and
                      CopyTele, Inc.

  (l)      10.23      Amendment No. 2 to the CopyTele, Inc. 1993 Stock
                      Option Plan, adopted on May 10, 1996 and approved by
                      shareholders on July 24, 1996.

           23.1       Consent of Arthur Andersen LLP.

           27         Financial Data Schedule.

           99.1       Description of Main Features of Magicom(R)2000.



   (a)      Incorporated by reference to Form 10-Q for the fiscal quarter ended
            July 31, 1992.

                                       31



<PAGE>



   (b)      Incorporated by reference to Post-Effective Amendment No. 1 to Form
            S-8 (Registration No. 33-49402) dated December 8, 1993.

   (c)      Incorporated by reference to Form 10-Q for the fiscal quarter ended
            April 30, 1987.

   (d)      Incorporated by reference to Form 10-K for the fiscal year ended
            October 31, 1990.

   (e)      Incorporated by reference to Form 10-K for the fiscal year ended
            October 31, 1991.

   (f)      Incorporated by reference to Form 10-Q for the fiscal quarter ended
            April 30, 1992.

   (g)      Incorporated by reference to Form 10-K for the fiscal year ended
            October 31, 1992.

   (h)      Incorporated by reference to Proxy Statement dated June 10, 1993.

   (i)      Incorporated by reference to Form 8-K dated March 28, 1995.

   (j)      Incorporated by reference to Form S-8 (Registration No. 33-62381) 
            dated September 6, 1995.

   (k)      Incorporated by reference to Form 10-K for the fiscal year ended
            October 31, 1995.

   (l)      Incorporated by reference to Form 10-Q for the fiscal quarter ended
            April 30, 1996.




                                       32
<PAGE>



                                   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.

                                       COPYTELE, INC.

                                       By: /s/ Denis A. Krusos
                                          ----------------------
                                       Denis A. Krusos
                                       Chairman of the Board and
January 29, 1997                       Chief Executive Officer

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 date indicated.


                                       By:/s/ Denis A. Krusos
                                       ----------------------
                                       Denis A. Krusos
                                       Chairman of the Board,
                                       Chief Executive Officer
                                       and Director (Principal Executive
January 29, 1997                       Officer)

                                       By:/s/ Frank J. DiSanto
                                       -----------------------
                                       Frank J. DiSanto
January 29, 1997                       President and Director

                                       By:/s/ Gerald J. Bentivegna
                                       ---------------------------
                                       Gerald J. Bentivegna
                                       Vice President - Finance,
                                       Chief Financial Officer and
                                       Director (Principal Financial
January 29, 1997                       and Accounting Officer)

                                       By:/s/ John R. Shonnard
                                       -----------------------
                                       John R. Shonnard
January 29, 1997                       Director

                                       By:/s/ John E. Gillies
                                       ----------------------
                                       John E. Gillies
January 29, 1997                       Director



                                       33

<PAGE>
                                 COPYTELE, INC.

                         (Development Stage Enterprise)

                          INDEX TO FINANCIAL STATEMENTS


                                OCTOBER 31, 1996


<TABLE>
<CAPTION>

                                                                                                                 Page

<S>                                                                                                          <C>
Report of Independent Public Accountants                                                                          F-1

Balance Sheets as of October 31, 1996 and 1995                                                                    F-2

Statements of Operations for the three years ended October 31, 1996 and for the period
   from November 5, 1982 (inception) through October 31, 1996                                                     F-3

Statements of Shareholders' Equity for the period from November 5, 1982 (inception)
   through October 31, 1983 and for the thirteen years ended October 31, 1996                                  F-4 - F-7

Statements of Cash Flows for the three years ended October 31, 1996 and for the
   period from November 5, 1982 (inception) through October 31, 1996                                              F-8

Notes to Financial Statements                                                                                 F-9 - F-16



</TABLE>

Information required by schedules called for under Regulation S-X is either not
applicable or is included in the financial statements or notes thereto.



<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------




To CopyTele, Inc.:


           We have audited the accompanying balance sheets of CopyTele, Inc. (a
Delaware corporation in the development stage -- Note 1) as of October 31, 1996
and 1995, and the related statements of operations and cash flows for each of
the three years in the period ended October 31, 1996 and for the period from
November 5, 1982 (inception) to October 31, 1996 and the statements of
shareholders' equity for the period from November 5, 1982 (inception) through
October 31, 1983 and for each of the thirteen years in the period ended October
31, 1996. 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 generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. 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. We believe that our audits provide a reasonable basis for our
opinion.

           In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of CopyTele, Inc. as of
October 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended October 31, 1996 and for the
period from November 5, 1982 (inception) to October 31, 1996, and the changes in
its shareholders' equity for the period from November 5, 1982 (inception)
through October 31, 1983 and for each of the thirteen years in the period ended
October 31, 1996 in conformity with generally accepted accounting principles.





                                                             ARTHUR ANDERSEN LLP



New York, New York
January 22, 1997



<PAGE>

<TABLE>
<CAPTION>

                                 COPYTELE, INC.

                         (Development Stage Enterprise)

                                 BALANCE SHEETS


                                                                                              October 31,       October 31,
                                                                                                 1996              1995
                                                                                                 ----              ----
<S>                                                                                       <C>              <C>
                                                             ASSETS
                                                             ------
CURRENT ASSETS:
  Cash (including cash equivalents and interest bearing accounts of
    $21,921,133 and $8,786,210, respectively)                                                 $22,165,892      $ 8,864,293
  Accrued interest receivable                                                                      49,306           36,206
  Prepaid expenses and other current assets (including amounts due from    
    Joint Venture of approximately $240,000 at October 31, 1996)                                  378,417           52,451
                                                                                              -----------      -----------
                                                                                               22,593,615        8,952,950
PROPERTY AND EQUIPMENT (net of accumulated depreciation
 and amortization of $816,651 and $690,420, respectively)                                         830,606          235,201

INVESTMENT IN JOINT VENTURE (Notes 1, 2 and 3)                                                  1,058,557          349,687

OTHER ASSETS                                                                                      227,642          157,560

DEFERRED TAX BENEFITS (net of valuation allowance of $25,308,000
  and $15,983,000, respectively)                                                                     -                -
                                                                                              -----------      -----------
                                                                                              $24,710,420      $ 9,695,398
                                                                                              ===========      ===========

                                              LIABILITIES AND SHAREHOLDERS' EQUITY
                                              ------------------------------------

CURRENT LIABILITIES:
  Accounts payable and accrued liabilities                                                    $ 1,960,147      $   258,690
                                                                                              -----------      -----------

COMMITMENTS AND CONTINGENCIES (Note 8)

SHAREHOLDERS' EQUITY (Note 5):
  Preferred stock, par value $100 per share; authorized 500,000 shares;
    no shares outstanding                                                                            -                -
  Common stock, par value $.01 per share; authorized 120,000,000 shares;
    outstanding 57,404,656 and 25,955,103 shares, respectively                                    574,047          259,551
  Additional paid-in capital                                                                   50,934,606       32,492,127
  Accumulated (deficit) during development stage                                              (28,758,380)     (23,314,970)
                                                                                              -----------      -----------
                                                                                               22,750,273        9,436,708
                                                                                              -----------      -----------
                                                                                              $24,710,420      $ 9,695,398
                                                                                              ===========      ===========


</TABLE>

      The accompanying notes are an integral part of these balance sheets.

                                      F-2
<PAGE>


<TABLE>
<CAPTION>

                                 COPYTELE, INC.


                         (Development Stage Enterprise)

                            STATEMENTS OF OPERATIONS


                                                                                                               For the Period From
                                                               For the Years Ended October 31,                  November 5, 1982
                                                   -------------------------------------------------------     (inception) through
                                                          1996              1995             1994               October 31, 1996
                                                         ------            ------           ------             -----------------
<S>                                               <C>             <C>              <C>                     <C>              
SALES                                             $           -   $           -    $             -         $               -
                                                     -------------   -------------     --------------          ----------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
  (including research and development 
  expenses of approximately
  $3,858,000, $2,353,000, $2,677,000
  and $20,743,000, respectively)                         6,017,580       3,332,312          3,651,334                31,980,209
                                                     -------------   -------------     --------------          ----------------

LOSS FROM JOINT VENTURE (Notes 1, 2 and 3)                 148,630          17,813               -                      166,443
                                                     -------------   -------------     --------------           ---------------

INTEREST INCOME                                            722,800         356,226            223,817                 3,388,272
                                                     -------------   -------------     --------------           ---------------

NET (LOSS)                                             ($5,443,410)    ($2,993,899)       ($3,427,517)             ($28,758,380)
                                                     =============   =============     ==============           ===============

NET (LOSS) PER SHARE OF COMMON STOCK                     ($.10)           ($.06)             ($.07)                    ($.64)
                                                          ====             ====               ====                      ====

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING           54,771,891      50,514,568         49,377,392                45,058,256
                                                        ==========      ==========         ==========                ==========

</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                                 COPYTELE, INC.

                         (Development Stage Enterprise)

                       STATEMENTS OF SHAREHOLDERS' EQUITY

                FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION)

                          THROUGH OCTOBER 31, 1983 AND

                  FOR THE THIRTEEN YEARS ENDED OCTOBER 31, 1996

                                                                                                                      Accumulated
                                                                                                                       (Deficit)
                                                                               Common Stock            Additional       During
                                                                     --------------------------------    Paid-in      Development
                                                                          Shares         Par Value       Capital         Stage
                                                                          ------         ---------       -------         -----

<S>                                                                  <C>            <C>             <C>            <C>            
BALANCE, November 5, 1982 (inception)                                         -     $        -      $          -   $          -
  Sale of common stock, at par, to incorporators on November 8,
    1982                                                                 1,470,000         14,700              -              -
  Sale of common stock, at $.10 per share, primarily to officers
   and employees, from November 9, 1982 to November 30, 1982               390,000          3,900            35,100           -
  Sale of common stock, at $2 per share, in private offering
    from January 24, 1983 to March 28, 1983                                250,000          2,500           497,500           -
  Sale of common stock, at $10 per share, in public offering
    on October 6, 1983, net of underwriting discounts of $1
    per share                                                              690,000          6,900         6,203,100           -
  Sale of 60,000 warrants to representative of underwriters,
    at $.001 each, in conjunction with public offering                        -              -                   60           -
  Costs incurred in conjunction with private and public offerings             -              -             (350,376)          -
  Net (loss) for the period                                                   -              -                 -          (976,919)
                                                                     -------------    -----------    --------------  -------------
BALANCE, October 31, 1983                                                2,800,000         28,000         6,385,384       (976,919)
  Additional costs incurred in conjunction with public offering               -              -              (11,654)          -
  Net (loss) for the period                                                   -              -                 -        (1,542,384)
                                                                     -------------    -----------    --------------  -------------
BALANCE, October 31, 1984                                                2,800,000         28,000         6,373,730     (2,519,303)
  Common stock issued, at $12 per share, upon exercise of
    57,200 warrants from February 5, 1985 to October 16, 1985,
    net of registration costs                                               57,200            572           630,845           -
  Proceeds from sales of common stock by individuals from
    January 29, 1985 to October 4, 1985 under agreements
    with the Company, net of costs incurred by the Company                    -              -              362,365           -
  Three-for-one stock split (A)                                          5,714,400         57,144           (57,144)          -
  Net (loss) for the period                                                   -              -                 -        (1,745,389)
                                                                     -------------    -----------     -------------  -------------
BALANCE, October 31, 1985                                                8,571,600         85,716         7,309,796     (4,264,692)
  Common stock issued, at $4 per share, upon exercise of 2,800
    warrants in December 1985                                                8,400             84            33,516           -
  Additional costs incurred by the Company in conjunction with
    sales of common stock by individuals from January 29, 1985
    to October 4, 1985 under agreements with the Company                      -              -              (62,146)          -
  Net (loss) for the period                                                   -              -                 -        (1,806,696)
                                                                     -------------    -----------    --------------  -------------
BALANCE, October 31, 1986                                                8,580,000         85,800         7,281,166     (6,071,388)



                                                                       Continued

                                      F-4
<PAGE>

<CAPTION>

                                 COPYTELE, INC.

                         (Development Stage Enterprise)

                       STATEMENTS OF SHAREHOLDERS' EQUITY

                FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION)

                          THROUGH OCTOBER 31, 1983 AND

                  FOR THE THIRTEEN YEARS ENDED OCTOBER 31, 1996

                                  Continued                                                                           Accumulated
                                                                                                                       (Deficit)
                                                                               Common Stock            Additional       During
                                                                     --------------------------------    Paid-in      Development
                                                                          Shares         Par Value       Capital         Stage
                                                                          ------         ---------       -------         -----
<S>                                                                  <C>            <C>             <C>            <C>
  Sale of common stock, at market, to officers on January 9, 1987
    and April 22, 1987 and to members of their immediate families
    on July 28, 1987                                                        67,350            674           861,726           -
  Additional costs incurred by the Company in conjunction with
    sales of common stock by individuals from January 29, 1985
    to October 4, 1985 under agreements with the Company                      -              -               (1,474)          -
  Five-for-four stock split (A)                                          2,161,735         21,617           (21,617)          -
  Fractional share payments in conjunction with five-for-four
    stock split                                                               -              -               (1,345)          -
  Sale of common stock, at market, to members of officers'
    immediate families on September 10, 1987 and to officers on
    October 29, 1987                                                        64,740            647           309,601           -
  Net (loss) for the period                                                   -              -                 -        (1,401,736)
                                                                    --------------    -----------     -------------  -------------
BALANCE, October 31, 1987                                               10,873,825        108,738         8,428,057     (7,473,124)
  Sale of common stock, at market, to members of officers'
    immediate families from November 24, 1987 to June 29, 1988
    and additional contributions by officers in January 1988 
    and March 1988 related to adjustments to sales price of common
    stock on October 29, 1987                                              260,210          2,602         2,250,594           -
  Net (loss) for the period                                                   -              -                 -        (1,317,305)
                                                                    --------------     ----------     -------------  -------------
BALANCE, October 31, 1988                                               11,134,035        111,340        10,678,651     (8,790,429)
  Sale of common stock, at market, to an officer on February 26,
    1989 and to members of officers' immediate families from 
    February 26, 1989 (amended on March 10, 1989) to September
    27, 1989                                                               142,725          1,427         2,093,851           -
  Sale of common stock, at market, to senior level personnel
    on February 26, 1989                                                    29,850            299           499,689           -
  Sale of common stock, at market, to unrelated party on
    February 26, 1989 amended on March 10, 1989                             35,820            358           599,627           -
  Net (loss) for the period                                                   -              -                 -        (1,101,515)
                                                                    --------------     ----------     -------------  -------------
BALANCE, October 31, 1989                                               11,342,430        113,424        13,871,818     (9,891,944)
  Sale of common stock, at market, to members of officers'
    immediate families from November 14, 1989 to October 15,
    1990                                                                   117,825          1,179         1,140,725           -
  Net (loss) for the period                                                   -              -                 -        (1,111,413)
                                                                     -------------     ----------     ------------- --------------
BALANCE, October 31, 1990                                               11,460,255        114,603        15,012,543    (11,003,357)


                                                                       Continued
                                      F-5

<PAGE>

<CAPTION>

                                 COPYTELE, INC.

                         (Development Stage Enterprise)

                       STATEMENTS OF SHAREHOLDERS' EQUITY

                FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION)

                          THROUGH OCTOBER 31, 1983 AND

                  FOR THE THIRTEEN YEARS ENDED OCTOBER 31, 1996

                                 Continued                                                                            Accumulated
                                                                                                                       (Deficit)
                                                                               Common Stock            Additional       During
                                                                     --------------------------------    Paid-in      Development
                                                                          Shares         Par Value       Capital         Stage
                                                                          ------         ---------       -------         -----
<S>                                                                  <C>            <C>             <C>            <C>
  Sale of common stock, at market, to members of officers'
    immediate families on December 4, 1990                                  42,540            425           329,260           -
  Two-for-one stock split (A)                                           11,502,795        115,028          (115,028)          -
  Sale of common stock, at market, to members of officers'
    immediate families from April 26, 1991 to September 16, 1991           102,543          1,025         1,033,981           -
  Net (loss) for the period                                                   -              -                 -        (1,299,992)
                                                                    --------------     ----------    -----------------------------
BALANCE, October 31, 1991                                               23,108,133        231,081        16,260,756    (12,303,349)
  Sale of common stock, at market, to members of officers'
    immediate families from December 16, 1991 to October
    27, 1992                                                               158,910          1,589         1,754,330           -
  Costs incurred in conjunction with registration of stock
    option plan                                                               -              -              (33,251)          -
  Net (loss) for the period                                                   -              -                 -        (1,827,356)
                                                                    --------------    -----------    -------------- --------------
BALANCE, October 31, 1992                                               23,267,043        232,670        17,981,835    (14,130,705)
  Common stock issued upon exercise of stock options from
    December 16, 1992 to October 22, 1993 under stock option
    plan                                                                 1,032,940         10,330         5,914,480           -
  Common stock issued upon exercise of warrants by members
    of officers' immediate families in September 1993                      239,000          2,390           996,774           -
  Net (loss) for the period                                                   -              -                 -        (2,762,849)
                                                                    --------------    -----------   -------------------------------
BALANCE, October 31, 1993                                               24,538,983        245,390        24,893,089    (16,893,554)
  Cost incurred in connection with registration of stock
    option plan                                                               -              -              (50,324)          -
  Common stock issued upon exercise of stock options from
    December 22, 1993 to June 14, 1994 under stock option plan             233,200          2,332         1,273,411           -
  Common stock issued upon exercise of warrants by members
    of officers' immediate families in July 1994                            65,220            652           371,754           -
  Net (loss) for the period                                                   -              -                 -        (3,427,517)
                                                                    --------------    -----------   -------------------------------
BALANCE, October 31, 1994                                               24,837,403        248,374        26,487,930    (20,321,071)



                                                                       Continued

                                      F-6
<PAGE>
<CAPTION>


                                 COPYTELE, INC.

                         (Development Stage Enterprise)

                       STATEMENTS OF SHAREHOLDERS' EQUITY

                FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION)

                          THROUGH OCTOBER 31, 1983 AND

                  FOR THE THIRTEEN YEARS ENDED OCTOBER 31, 1996

                                    Continued
                                                                                                                      Accumulated
                                                                                                                       (Deficit)
                                                                               Common Stock            Additional       During
                                                                     --------------------------------    Paid-in      Development
                                                                          Shares         Par Value       Capital         Stage
                                                                          ------         ---------       -------         -----
<S>                                                                <C>                 <C>          <C>               <C>
  Cost incurred in connection with registration of stock
    option plan                                                               -              -              (29,759)          -
  Common stock issued upon exercise of stock options from
    February 17, 1995 to October 30, 1995 under stock option plans         980,400          9,804         5,278,824           -
  Common stock issued upon exercise of warrants by members
    of officers' immediate families in February, July and
    September 1995                                                         137,300          1,373           755,132           -
  Net (loss) for the period                                                   -              -                 -        (2,993,899)
                                                                    --------------    -----------   ---------------   ------------
BALANCE, October 31, 1995                                               25,955,103        259,551        32,492,127    (23,314,970)

  Common stock issued upon exercise of stock options from
    November 2, 1995 to June 12, 1996 under stock option plans           2,288,800         22,888        15,843,842           -
  Common stock issued upon exercise of warrants by members
    of officers' immediate families in January and March, 1996             138,280          1,383           527,802           -
  Two-for-one stock split (A)                                           28,382,183        283,822          (283,822)          -
  Common stock issued upon exercise of stock option from
    July 8, 1996 to October 30, 1996 under stock option plans              532,500          5,325         1,795,395           -
  Common stock issued upon exercise of warrants by members
    of officers' immediate families in July and October, 1996              107,790          1,078           559,262           -
  Net (loss) for the period                                                   -              -                 -        (5,443,410)
                                                                    --------------    -----------    --------------   ------------
BALANCE, October 31, 1996                                               57,404,656       $574,047       $50,934,606   $(28,758,380)
                                                                    ==============    ===========    ==============   ============


<FN>
(A) Reflects cumulative effect on all share data prior to splits described in
Note 5.
</FN>
</TABLE>
        The accompanying notes are an integral part of these statements.


                                      F-7
<PAGE>


<TABLE>
<CAPTION>

                                 COPYTELE, INC.

                         (Development Stage Enterprise)
                            STATEMENTS OF CASH FLOWS

                                                                                                               For the Period from
                                                                      For the Years Ended October 31,           November 5, 1982
                                                           -------------------------------------------------  (inception) through
                                                                     1996           1995          1994         October 31, 1996
                                                                  --------         ------        ------       -----------------

<S>                                                         <C>                <C>            <C>                <C>  
CASH FLOWS FROM OPERATING ACTIVITIES:
  Payments to suppliers, employees and consultants            ($  4,888,841)     ($3,274,894)   ($3,837,859)       ($30,107,733)
  Interest received                                                 709,700          337,061        219,727           3,338,967
  Interest paid                                                        -                 -             -                   -
                                                            ---------------    -------------  -------------      --------------
         Net cash (used in) operating activities                 (4,179,141)      (2,937,833)    (3,618,132)        (26,768,766)
                                                            ---------------    ------------- --------------      --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Payments for purchases of property and equipment                 (418,733)         (90,549)       (51,902)         (1,348,995)
  Disbursements to acquire certificates of deposit and
    corporate notes and bonds                                          -                -              -            (12,075,191)
  Proceeds from maturities of investments                              -                -              -             12,075,191
  Investment made in Joint Venture                                 (857,500)        (367,500)          -             (1,225,000)
                                                            ---------------   -------------- --------------     ---------------
         Net cash (used in) investing activities                 (1,276,233)        (458,049)       (51,902)         (2,573,995)
                                                            ---------------   -------------- --------------     ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from sales of common stock and warrants, net
    of underwriting discounts of $690,000 related to initial
    public offering in October 1983                                    -                -              -             17,647,369
  Proceeds from exercise of stock options and warrants,
    net of registration disbursements                            18,756,975        6,015,374      1,597,825          33,925,914
  Proceeds from sales of common stock by individuals under
    agreements with the Company, net of disbursements made
    by the Company                                                     -                -              -                298,745
  Disbursements made in conjunction with sales of stock                -                -              -               (362,030)
  Fractional share payments in conjunction with stock split            -                -              -                 (1,345)
                                                            ---------------   -------------- --------------     ---------------
         Net cash provided by financing activities               18,756,975        6,015,374      1,597,825          51,508,653
                                                            ---------------   -------------- --------------     ---------------
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                    13,301,599        2,619,492     (2,072,209)         22,165,892

CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIOD                                                       8,864,293        6,244,801      8,317,010                -
                                                            ---------------   -------------- --------------     ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                      $22,165,892       $8,864,293     $6,244,801         $22,165,892
                                                            ===============   ============== ==============     ===============
RECONCILIATION OF NET (LOSS) TO NET CASH
  (USED IN) OPERATING ACTIVITIES:
    Net (loss)                                                ($  5,443,410)     ($2,993,899)   ($3,427,517)       ($28,758,380)
    Loss from Joint Venture                                         148,630           17,813           -                166,443
    Depreciation                                                    126,231           62,518         56,002             821,292
    (Increase) in accrued interest receivable                       (13,100)         (19,165)        (4,091)            (49,306)
    (Increase) decrease in prepaid expenses and other
      current assets                                               (325,966)          (6,457)         1,950            (378,417)
    (Increase) in other assets                                      (70,082)         (58,842)        (1,951)           (227,642)
    Increase (decrease) in accounts payable and
       accrued liabilities related to operating activities        1,398,554           60,199       (242,525)          1,657,244
                                                           ----------------   -------------- --------------     ---------------
         Net cash (used in) operating activities              ($  4,179,143)     ($2,937,833)   ($3,618,132)       ($26,768,766)
                                                           ================   ============== ==============     ===============

</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-8

<PAGE>

                                 COPYTELE, INC.
                         (Development Stage Enterprise)
                          NOTES TO FINANCIAL STATEMENTS
                                OCTOBER 31, 1996


(1) Nature of business and funding:
    -----------------------------------

         CopyTele, Inc. (the "Company"), which was incorporated on November 5,
           1982, is a development stage enterprise, whose principal activities
           include the development of telephone based multi-functional
           telecommunications products, incorporating the Company's ultra-high
           resolution flat panel display, the further expansion of its overall
           flat panel technology and the operations of Shanghai CopyTele
           Electronics Co., Ltd. (the "Joint Venture " or "SCE"), the Company's
           55% owned joint venture in Shanghai, China, with Shanghai Electronic
           Components Corp. ("SECC") and Shanghai International Trade and
           Investment Developing Corp. ("SIT").

         Since its inception, the Company has had no revenues to support its
           operations. There is no assurance that the Company will generate
           significant revenues in the future, will have sufficient
           revenues to generate a profit or that other products will
           not be produced by other companies that will render the products of
           the Company and of the Joint Venture obsolete. The Chairman of the
           Board, the President and other senior executives are engaged in the
           management and operations of the Company and the Joint Venture,
           including all aspects of the development, production and marketing of
           the Company's products and flat panel technology, and are important
           to the future business and financial arrangements of the Company and
           the Joint Venture.

         The Company has received seventy-nine patents from the United States
           Patent and Trademark Office and certain foreign patent offices,
           expiring at various dates between 2005 and 2015, related to the
           design, structure and methods of construction of the flat panel,
           methods of operating the flat panel, particle generation,
           applications using the flat panel and new applications for SCE's
           planned products. At the present time, additional patent applications
           are pending with the United States and certain foreign patent
           offices. There is no assurance that patents will be obtained for any
           of the pending applications. In addition, there is no assurance that
           any patents held or obtained will protect the Company against
           competitors either with or without litigation. The Company is not
           aware that MAGICOM(R) 2000 is infringing upon the patents of others.
           There is also no assurance that, if the Company or the Joint Venture
           successfully develops other products, such products will not infringe
           upon the patents of others, or that the Company and the Joint Venture
           will not have to obtain licenses under patents of others. The Company
           believes that the aforementioned patents are significant to the
           future operations of the Company.

         During 1995, the Company signed a joint venture contract (the "Joint
           Venture Contract") with SECC to form a joint venture in Shanghai,
           China with a 20 year duration. With this agreement, the Joint
           Venture, was formed with the Company owning a 55% share in capital,
           profits and losses. The remaining 45% is owned by two Chinese
           companies, SECC which owns 35% of the Joint Venture and SIT which
           owns 10% as a result of an Assignment Agreement entered into by the
           Company, SECC and SIT. Reference is made to Note 3 for a further
           discussion regarding the Joint Venture. Pursuant to a Technology
           License Agreement entered into on the same date as the Joint Venture
           Contract, the Company has licensed its flat panel application
           technology to the Joint Venture for exclusive use in China. The
           Company is solely authorized to market Joint Venture products outside
           of China. The parties to the Joint Venture have agreed in 
           principle to increase the investment to a maximum of $25 million,
           depending upon the nature and extent of business activities.
           It is contemplated that this capitalization, if necessary, will be
           financed through a combination of borrowings and equity investments
           contributed by the Company, SECC and SIT in proportion to their
           respective equity interests and on terms to be agreed upon. The
           Company may require additional financing in order to participate in
           the Joint Venture following its initial capital contributions. No
           assurance can be given that the Company will be able to raise its
           share of future capitalization, if necessary, or that adequate
           financing will be available at terms and conditions favorable to
           the Company.

                                      F-9
<PAGE>


         The Company has produced a telephone based multi-functional
           telecommunications product, incorporating the Company's flat panel
           and associated propriety hardware and software technology, called
           MAGICOM(R)2000. The product can enable users to have a personal
           information center in a single unit which integrates voice
           communication, digital messaging, fax (transmission and paperless
           reception), copier, electronic handwriting, touch sensitive screen,
           data storage and transmission, and computer interfacing. The
           success and profitability of the product will depend upon many
           factors, including those normally associated with any new product.
           These factors include the capability of SCE to produce sufficient
           quantities of MAGICOM(R)2000, the ability of the Company and SCE to
           maintain an acceptable pricing level to end-users for the product,
           long-term product performance and the capability of the Company, SCE
           and its distributors to adequately service the product, the ability
           of distributors to market their contracted quantities of the product
           in their respective territories, political and economic stability in
           targeted marketing territories, and the possible development of
           competitive products that could render the product obsolete or
           unmarketable.

         The Company believes that without taking into consideration revenues
           from sales of MAGICOM(R) 2000 it will have sufficient funds through
           the first quarter of fiscal 2000 to maintain its present level of
           development efforts and to make its anticipated capital contribution
           of $550,000 to the Second Joint Venture (See Note 3). The National
           Association of Securities Dealers, Inc. requires that the Company
           maintain a minimum of $4,000,000 of net tangible assets to maintain
           its National Association of Securities Dealers, Inc. Automated
           Quotation National Market System listing. The Company anticipates
           that it will seek additional sources of funding, when necessary, to
           satisfy such requirements or for other purposes. There is no
           assurance that such funding, if required, will be obtained. The
           Company's estimated funding capacity indicated above assumes,
           although there is no assurance, that the waiver of salary and pension
           benefits by the Chairman of the Board, the President and senior level
           personnel will continue. See Note 11 for a more complete discussion
           regarding such waivers.

(2) Summary of significant accounting policies:
    -------------------------------------------

         Cash equivalents-
         -----------------

           The Company classifies highly liquid investments with remaining
              maturities of three months or less at their date of purchase by
              the Company as cash equivalents. These cash equivalents are
              recorded at cost, which approximates fair market value at October
              31, 1996 and 1995, respectively.

         Property and equipment-
         -----------------------

           Property and equipment, consisting primarily of engineering
              equipment, is stated at cost. Depreciation is calculated on a
              straight-line basis primarily over five years.

         Investment in Joint Venture-
         ----------------------------

           The Company controls four of seven votes of the Joint Venture's board
              of directors. However, major issues involving the Joint Venture
              require either a unanimous or two-thirds vote of the Joint
              Venture's board of directors. Since the Company has significant
              influence over the Joint Venture's operations but does not have
              control, the Company has reflected its investment in the Joint
              Venture under the equity method of accounting.

         Research, development and tooling costs-
         ----------------------------------------

           Research, development and tooling costs incurred by the Company are
              included in selling, general and administrative expenses in the 
              year incurred.

         Income taxes-
         -------------

           The Company recognizes deferred tax liabilities and assets for the
              estimated future tax effects of events that have been recognized
              in the Company's financial statements or tax returns. Under this
              method, deferred tax liabilities and assets are determined based
              on the difference between the financial statement and tax bases of
              assets and liabilities using enacted tax rates in effect in the
              years in which the differences are expected to reverse.

                                      F-10
<PAGE>


         Net (loss) per share of common stock-
         -------------------------------------

           Net(loss) per share of common stock has been computed based on the
              weighted average number of shares outstanding during the periods.
              Such amounts and shares have been restated for stock splits
              declared since inception, as more fully described in Note 5.
              Average common equivalent shares outstanding have not been
              included, as the computation would not be dilutive.

         Recently issued accounting standards-
         -------------------------------------

           During October 1995, the Financial Accounting Standards Board issued
              Statement of Financial Accounting Standard ("SFAS") No. 123,
              Accounting for Stock Based Compensation. This statement
              establishes financial accounting and reporting standards for
              stock-based employee compensation plans. SFAS No. 123 encourages
              entities to adopt a fair value based method of accounting for
              stock compensation plans. However, SFAS No. 123 also permits the
              Company to continue to measure compensation costs under
              preexisting accounting pronouncements. If the fair value based
              method of accounting is not adopted, SFAS No. 123 requires pro
              forma disclosures of net income and earnings per share in the
              notes to financial statements. The Company has not yet determined
              how this pronouncement will be implemented and, accordingly, has
              not determined what impact this pronouncement will have on the
              Company's financial statements. This statement will be adopted by
              the Company in the first quarter of fiscal 1997.

           The Company has adopted all recently issued accounting standards
              which are applicable, none of which were material to the financial
              position or results of operations of the Company's financial
              statements.

         Use of estimates-
         -----------------

           The preparation of financial statements in conformity with generally
              accepted accounting principles requires management to make
              estimates and assumptions that affect the amounts reported in the
              financial statements and related notes to financial statements.
              Actual results could differ from those estimates.

         Reclassifications-
         ------------------

           Certain prior year amounts have been reclassified to conform with the
             current year presentation.

(3) Investment in Joint Ventures:
    -----------------------------

         The Company has contributed $1,225,000 in cash, and technology which
            has been valued for purposes of the Joint Venture at $700,000. The
            Joint Venture does not reflect the $700,000 in technology as an
            asset or equity investment in the condensed financial statements
            presented below. SECC and SIT have contributed cash aggregating
            $1,575,000. The Company has reflected its investment in the Joint
            Venture under the equity method of accounting (See Note 2) and will
            recognize losses on the Joint Venture to the extent of its cash
            investment.

         Condensed financial information for Shanghai CopyTele Electronics Co.,
            Ltd. at October 31, 1996 and 1995 and for the year ended October 31,
            1996 and for the period from May 18, 1995 (inception) through
            October 31, 1995, is as follows:
<TABLE>
<CAPTION>

                                Condensed Balance Sheets                               1996                  1995
                                ------------------------                               ----                  ----

<S>                                                                                <C>                     <C>        
          Cash                                                                     $   726,640             $   722,170
          Other Current Assets                                                         266,409                       -
          Land-Use Rights, net                                                         308,516                 309,507
          Fixed Assets, net                                                            145,643                   8,257
          Construction in Progress                                                     878,533                   8,178
          Restricted Cash                                                              275,245                       -
          Deposits                                                                     184,601                       -
                                                                                    ----------              ----------
                   Total Assets                                                     $2,785,587              $1,048,112
                                                                                    ==========              ==========

          Accrued Expenses                                                          $  288,210              $  240,499
          Capital                                                                    2,497,377                 807,613
                                                                                    ----------              ----------
                   Total Liabilities and Capital                                    $2,785,587              $1,048,112
                                                                                    ==========              ==========

                           Condensed Statements of Operations
          Net Sales                                                                 $        -              $        -
          Operating (Loss)                                                            (289,447)                (35,234)
          Interest Income                                                               19,211                   2,847
                                                                                    ----------              ----------
                   Net (Loss)                                                       $ (270,236)             $  (32,387)
                                                                                    ==========              ==========

</TABLE>
                                      F-11
<PAGE>

         The restricted cash is securing letters of credit to purchase
           equipment.

         Subsequent to year end, the Joint Venture obtained a $220,000 loan 
           which bears interest at a rate of 7.3% per annum and matures in 
           December 1997.  This loan is secured by the land-use rights.

         Second Joint Venture-
         ---------------------

           On April 17, 1996, the Company entered into a letter of intent for
              the formation of a second joint venture with SECC to be called
              Shanghai CopyTele No. 2 Electronics Co., Ltd. (the "Second Joint
              Venture"). Pursuant to the terms of the letter of intent, the main
              purpose of the Second Joint Venture will be to manufacture and
              sell electronic components and parts used in SCE products, and
              products of other manufacturers. Initially, however, the Second
              Joint Venture will manufacture and market thick film circuits
              presently being produced by SECC at one of its facilities.

           As stipulated in the letter of intent signed with SECC, unless
              otherwise amended, the Second Joint Venture is expected to have an
              initial capitalization of approximately $2,000,000, of which half
              would consist of bank borrowings. The Company would invest cash of
              approximately $550,000 and SECC would contribute cash, equipment
              and technology collectively valued at $450,000. The Second Joint
              Venture may require an ultimate capitalization of up to $10
              million depending on the nature and extent of its business
              activities, which if necessary, is expected to be financed through
              a combination of bank borrowings and equity investments
              contributed by the parties in proportion to their equity interests
              and on terms to be agreed upon. 


(4) Issuance of warrants:
    ---------------------

         In conjunction with the sale of its common stock to members of the
           immediate families of its Chairman of the Board and its President,
           the Company issued warrants to these individuals. In addition, the
           Company also issued warrants to an unrelated party (which expired in
           May 1994) who purchased shares of the Company's common stock and to
           its former Vice President - Finance. Information regarding these
           warrants for the three years ended October 31, 1996, after
           adjustments for anti-dilutive provisions and applicable stock splits,
           is as follows:
<TABLE>
<CAPTION>

                                                                                                    Current Weighted
                                                                                                    Average Exercise
                                                                                     Shares          Price per Share
                                                                                     ------          ---------------

<S>                                                                                 <C>                 <C>    
           Shares covered by warrants at October 31, 1993                           1,982,946           $  3.64
           Warrants exercised                                                        (130,440)          $  2.86
           Warrants expired                                                          (513,840)          $  3.95
                                                                                 ------------
           Shares covered by warrants at October 31, 1994                           1,338,666           $  3.58
           Warrants exercised                                                        (274,600)          $  2.76
           Warrants expired                                                          (211,400)          $  2.91
                                                                                 ------------
           Shares covered by warrants at October 31, 1995                             852,666           $  3.90
           Warrants exercised                                                        (384,350)          $  2.83
           Warrants expired                                                           (53,200)          $  1.88
                                                                                 ------------
           Shares covered by warrants at October 31, 1996                             415,116           $  5.11
                                                                                 ============             =====

</TABLE>
                                      F-12
<PAGE>


         The exercise price of all of the aforementioned warrants represented
           the fair market value of the underlying common stock on the day
           preceding issuance of such warrants. These warrants are exercisable
           for five years commencing ninety days from the date of issuance. As
           of October 31, 1996, all of the warrants to purchase shares of common
           stock issued and outstanding were exercisable.

(5) Stock splits:
    -------------

         On October 4, 1985, the Company declared a three-for-one stock split,
           effected in the form of a 200% stock dividend, payable on November 8,
           1985 to shareholders of record as of October 15, 1985. On August 13,
           1987, the Company declared a five-for-four stock split, effected in
           the form of a 25% stock dividend, payable on September 15, 1987 to
           shareholders of record as of August 31, 1987. On February 12, 1991,
           the Company declared a two-for-one stock split, effected in the form
           of a 100% stock dividend, payable on March 18, 1991 to shareholders
           of record as of February 25, 1991. On May 24, 1996 the Company
           declared a two-for-one stock split, effected in the form of a 100%
           stock dividend, payable on June 17, 1996 to shareholders of record as
           of June 4, 1996. The weighted average number of shares outstanding
           and net loss per share amounts in the accompanying financial
           statements have been restated to reflect the stock splits.

(6) Preferred stock:
    ----------------

         On May 29, 1986, the Company's shareholders authorized 500,000 shares
           of preferred stock with a par value of $100 per share. The shares of
           preferred stock may be issued in series at the direction of the Board
           of Directors, and the relative rights, preferences and limitations of
           such shares will all be determined by the Board. The Board of
           Directors currently has no definitive plan or agreements for issuance
           of any of the preferred stock.

(7) Stock option plans:
    -------------------

         In May 1987 the Company's shareholders approved a stock option plan
           (the "1987 Plan") which, after giving consideration to the
           five-for-four and two two-for-one stock splits described in Note 5 as
           well as an amendment approved by shareholders in May 1990 to increase
           the number of shares issuable under the 1987 Plan, provided for the
           purchase of 9,000,000 shares of common stock. The 1987 Plan provided
           for the granting of incentive stock options to key employees and
           nonqualified options to key employees, consultants and directors of
           the Company. The option price was determined by the Board of
           Directors, but with respect to incentive stock options the option
           price could not be less than the fair market value at the date of
           grant. The stock options are exercisable over a period not to exceed
           10 years, also as determined by the Board of Directors. In July 1992,
           the Company registered the shares of common stock covered by the 1987
           Plan. Upon the approval of the CopyTele, Inc. 1993 Stock Option Plan
           (the "1993 Plan") by the Company's shareholders in July 1993, the
           1987 Plan was terminated with respect to the grant of future options.

         Information regarding the 1987 Plan for the three years ended October
           31, 1996  is as follows:

<TABLE>
<CAPTION>

                                                                                                     Range of Option
                                                                                     Shares          Price per Share
                                                                                     ------          ---------------

<S>                                                                            <C>                   <C>
           Shares under option at October 31, 1993                                  3,842,120        $  1.94 - $  6.94
           Exercised                                                                 (466,400)       $  2.47 - $  2.75
                                                                               --------------
           Shares under option at October 31, 1994                                  3,375,720        $  1.94 - $  6.94
           Exercised                                                               (1,262,000)       $  1.94 - $  2.75
           Canceled                                                                  (345,600)       $  2.75 - $  5.63
                                                                               --------------
           Shares under option at October 31, 1995                                  1,768,120        $  2.09 - $  6.94
           Exercised                                                               (1,013,760)       $  2.09 - $  5.63
                                                                               --------------
           Shares under option at October 31, 1996                                    754,360        $  2.47 - $  6.94
                                                                               ==============        =================

</TABLE>
                                      F-13

<PAGE>

         The exercise price with respect to all of the options granted under the
           1987 Plan from its inception was at least equal to the fair market
           value of the underlying common stock on the date of grant. As of
           October 31, 1996, all of the options to purchase shares of common
           stock granted and outstanding under the 1987 Plan were exercisable.
           From November 1, 1996 through January 22, 1997, options to purchase
           15,000 shares of the Company's stock under the 1987 Plan were
           exercised at a price of $2.75 per share.

         On July 14, 1993, the Company's shareholders approved the 1993 Plan
           which had been adopted by the Company's Board of Directors on April
           28, 1993. The 1993 Plan was amended as of May 3, 1995 and May 10,
           1996 to, among other things, increase the number of shares of the
           Company's common stock available for issuance pursuant to grants
           thereunder from 6 million shares to 20 million shares after giving
           consideration to the two-for-one stock split in 1996. The 1993 Plan
           provides for the granting of stock options to purchase shares of
           common stock of the Company or stock appreciation rights up to the
           aggregate of 20 million shares. Incentive options and rights may be
           granted to key employees and nonqualified options and rights may be
           granted to key employees and consultants of the Company. As amended,
           nonqualified options to purchase 40,000 shares of common stock will
           be granted annually to each re-elected nonemployee director of the
           Company and 20,000 shares to each newly elected non employee
           director. The 1993 Plan is administered by the Stock Option
           Committee, which determines the option price, term and provisions of
           each option; however, the purchase price of shares issuable upon the
           exercise of incentive stock options will not be less than the fair
           market value of such shares and incentive stock options will not be
           exercisable for more than 10 years.

         Information regarding the 1993 Plan for the three years ended October
           31, 1996 is as follows:
<TABLE>
<CAPTION>

                                                                                                       Range of Option
                                                                                     Shares            Price per Share
                                                                                     ------            ---------------

<S>                                                                             <C>                   <C>    
           Shares under option at October 31, 1993                                  2,430,000         $  6.88 - $  8.50
           Granted                                                                  2,442,000         $  2.44 - $  6.38
           Canceled                                                                  (410,000)        $  5.75 - $  6.88
                                                                                -------------
           Shares under option at October 31, 1994                                  4,462,000         $  2.44 - $  8.50
           Granted                                                                  5,250,000         $  2.44 - $  4.50
           Exercised                                                                 (698,800)        $  2.44 - $  3.16
           Canceled                                                                  (120,000)        $  2.82 - $  5.75
                                                                                -------------
           Shares under option at October 31, 1995                                  8,893,200         $  2.44 - $  8.50
           Granted                                                                  4,578,000         $  4.75 - $  8.00
           Exercised                                                               (4,096,340)        $  2.44 - $  6.38
           Canceled                                                                  (200,000)        $  4.75 - $  4.81
                                                                                -------------
           Shares under option at October 31, 1996                                  9,174,860         $  2.81 - $  8.50
                                                                                =============         =================
</TABLE>

         The exercise price with respect to all of the options granted under the
           1993 Plan from its inception was at least equal to the fair market
           value of the underlying common stock on the grant date. As of October
           31, 1996, 5,596,860 of the options to purchase shares of common stock
           granted and outstanding under the 1993 Plan are exercisable. At
           October 31, 1996, 6,030,000 options were available for future grants
           under the 1993 Plan.

         From November 1, 1996 through January 22, 1997, options to purchase
           46,000 shares of the Company stock under the 1993 Plan were exercised
           at a price range of $3.31 to $3.63 per share. From November 1, 1996
           through January 22, 1997, the Company granted 1,785,500 options to
           purchase the Company's common stock pursuant to the 1993 Plan.


                                      F-14
<PAGE>

(8) Commitments and contingencies:
    ------------------------------

         Leases-
         -------

           During 1996, the Company leased additional space at its principal
              location for office and laboratory research facilities with its
              landlord, an unrelated party. The current lease is for
              approximately 10,000 square feet and expires on November 30, 1998.
              The lease now contains base rentals of approximately $166,000 per
              annum, as well as escalation clauses for increases in certain
              operating costs, for a total cost aggregating approximately
              $173,000 per annum. The Company has the right to cancel portions
              of the lease as of November 30, 1997 and February 28, 1998,
              respectively. Such cancellation would not result in any material
              liabilities.

           In February 1996, the Company entered into a five year lease with an
              unrelated party for approximately 2,300 square feet of office
              space. The lease expires on June 30, 2001 and is non-renewable. It
              has a base rent of approximately $51,000, per annum, for the first
              two years and approximately $56,000, per annum, thereafter. The
              Company entered into a third lease with another unrelated party in
              October 1996. This lease which expires on May 31, 1997 has a base
              monthly rental of $1,300 and contains a provision to extend the
              term of the lease for up to three years with escalating rents.

           Rent expense for the years ended October 31, 1996, 1995, 1994 and for
              the period from November 5, 1982 (inception) through October 31,
              1996 was approximately $215,000 , $130,000, $120,000 and
              $1,555,000, respectively.

         Key-man life insurance-
         -----------------------

           The Company maintains key-man life insurance, aggregating $1,500,000
              insuring the lives of its Chairman of the Board and its President.
              The Company is the beneficiary under these policies. Annual
              expenses relating to the maintenance of this insurance aggregated
              approximately $30,000.

(9) Employees' pension plan:
    ------------------------

           The Company adopted a noncontributory defined contribution pension
              plan, effective November 1, 1983, covering all of its present
              employees. Contributions, which are made to a trust, are based
              upon specified percentages of compensation, as defined in the
              plan. Pension cost, which approximated $70,000, $50,000 $43,000
              and $443,000 for the years ended October 31, 1996, 1995 and 1994
              and in the period from the inception of the plan through October
              31, 1996, respectively, has been accrued and funded on a current
              basis.

(10) Income taxes:
     -------------

           At October 31, 1996, the Company had tax net operating loss and tax
              credit carryforwards of approximately $54,981,000 and $1,316,000
              respectively, available, within statutory limits (expiring at
              various dates between 1998 and 2011), to offset future regular
              Federal corporate taxable income and taxes payable. The principle
              differences between the net loss for financial statement purposes
              and the tax net operating loss attributable to the year ended
              October 31, 1996, were deductions for tax purposes of option
              holders' income related to stock option exercises aggregating
              approximately $15,569,000. If the tax benefits are ultimately
              realized relating to deductions of option holders' income, those
              benefits will be credited directly to additional paid-in capital.
              Certain changes in stock ownership can result in a limitation on
              the amount of net operating loss and tax credit carryovers that
              can be utilized each year.

           The Company had tax net operating loss and tax credit carryforwards
              of approximately $49,667,000 and $84,000 respectively, at October
              31, 1996, available, within statutory limits, to offset future New
              York State corporate taxable income and taxes payable, if any,
              under certain computations of such taxes. The tax net operating
              loss carryforwards expire at various dates between 1998 and 2011
              and the tax credit carryforwards expire between 1999 and 2006.

           Deferred tax benefits at October 31, 1996 and 1995, which are fully
              offset by valuation allowances, primarily represent the estimated
              future tax effects of Federal and State net operating loss and tax
              credit carryforwards aggregating approximately $25,308,000 and
              $15,983,000, respectively. 

                                      F-15
<PAGE>

           During the period from November 5, 1982 (inception) through October
              31, 1996, the Company incurred no Federal and no material State
              income taxes.

(11) Selling, general and administrative expenses:
     ---------------------------------------------

           While there is no formal agreement, the Company's Chairman of the
              Board and its President have waived any and all rights to receive
              salary and related pension benefits for an undetermined period of
              time commencing November 1985. The aggregate annual expenses for
              these individuals at the time of such waivers was approximately
              $325,000.

           Four other individuals, including an officer and senior level
              personnel, then employed at the Company, waived any and all rights
              to receive salary and related pension benefits for the period from
              January 1987 through December 1990. While there are no formal
              agreements, commencing January 1991, these individuals waived such
              rights for an undetermined period of time and they did not receive
              salary or related pension benefits through December 1992. The
              three senior level personnel continued to waive such rights
              commencing in January 1993 for an undetermined period of time.
              Since February 1993, one additional employee is also currently
              waiving such salary and benefit rights for an undetermined period
              of time. The aggregate annual expense for these five individuals,
              then employed at the Company, at the time of their respective
              initial waivers was approximately $440,000.

           The Company does not contemplate the retroactive reinstatement of any
              of the salary or related pension benefit waivers indicated above.





<PAGE>

                                  EXHIBIT INDEX


         Exhibit
Ref.     Number                     Description

(a)      3.1      Certificate of Incorporation, as amended.

(b)      3.2      By-laws, as amended and restated.

(c)      10.1     Stock Option Plan, adopted on April 1, 1987 and approved by
                  shareholders on May 27, 1987.

(d)      10.2     Amendment  to Stock  Option  Plan,  adopted on March 12, 1990
                  and approved by shareholders on May 24, 1990.

(e)      10.3     Stock Purchase Warrant, dated September 16, 1991, between the
                  Registrant and Denis Z. Krusos.

(e)      10.4     Stock Purchase Warrant, dated September 16, 1991, between the
                  Registrant and Daniel A. DiSanto.

(e)      10.5     Stock Purchase Warrant, dated September 16, 1991, between the
                  Registrant and Peri D. Krusos.

(e)      10.6     Stock Purchase Warrant, dated December 16, 1991, between the
                  Registrant and Denis Z. Krusos.

(e)      10.7     Stock Purchase Warrant, dated December 16, 1991, between the
                  Registrant and Daniel A. DiSanto.

(e)      10.8     Stock Purchase Warrant, dated December 16, 1991, between the
                  Registrant and Peri D. Krusos.

(f)      10.9     Stock Purchase Warrant, dated March 12, 1992, between the 
                  Registrant and Denis Z. Krusos.

(f)      10.10    Stock Purchase Warrant, dated March 12, 1992, between the
                  Registrant and Daniel A. DiSanto.

(f)      10.11    Stock Purchase Warrant, dated March 12, 1992, between the
                  Registrant and Peri D. Krusos.

                                       34


<PAGE>

(a)      10.12     Stock Purchase Warrant, dated July 24, 1992, between the
                   Registrant and Denis Z. Krusos.

(a)      10.13     Stock Purchase Warrant, dated July 24, 1992, between the
                   Registrant and Daniel A. DiSanto.

(a)      10.14     Stock Purchase Warrant, dated July 24, 1992, between the 
                   Registrant and Peri D. Krusos.

(g)      10.15     Stock Purchase Warrant, dated October 27, 1992, between the
                   Registrant and Denis Z. Krusos.

(g)      10.16     Stock Purchase Warrant, dated October 27, 1992, between the
                   Registrant and Daniel A. DiSanto.

(g)      10.17     Stock Purchase Warrant, dated October 27, 1992, between the
                   Registrant and Peri D. Krusos.

(h)      10.18     CopyTele, Inc. 1993 Stock Option Plan, adopted on April 28,
                   1993 and approved by shareholders on July 14, 1993.

(i)      10.19     Joint Venture Contract, dated as of March 28, 1995, by and
                   between Shanghai Electronic Components Corp. and CopyTele,
                   Inc.

(i)      10.20     Technology License Agreement, dated as of March 28, 1995, by 
                   and between Shanghai CopyTele Electronics Co., Ltd. and
                   CopyTele, Inc.

(j)      10.21     Amendment No. 1 to the CopyTele, Inc. 1993 Stock Option Plan,
                   adopted on May 3, 1995 and approved by shareholders on July 
                   19, 1995.

(k)      10.22     Assignment Agreement, dated as of July 10, 1995, by and among
                   Shanghai Electronic Components Corp., Shanghai International 
                   Trade and Investment Developing Corp. and CopyTele, Inc.


(l)      10.23     Amendment No. 2 to the CopyTele, Inc. 1993 Stock Option Plan,
                   adopted on May 10, 1996 and approved by shareholders on
                   July 24, 1996.

         23.1      Consent of Arthur Andersen LLP.

         27        Financial Data Schedule




                             35
<PAGE>


      99.1          Description of Main Features of MAGICOM(R)2000.

---------------     -----------------------------------------------

(a)      Incorporated by reference to Form 10-Q for the fiscal quarter ended
         July 31, 1992.
(b)      Incorporated by reference to Post-Effective Amendment No. 1 to Form S-8
         (Registration No. 33-49402) dated December 8, 1993.
(c)      Incorporated by reference to Form 10-Q for the fiscal quarter ended 
         April 30, 1987.
(d)      Incorporated by reference to Form 10-K for the fiscal year ended 
         October 31, 1990.
(e)      Incorporated by reference to Form 10-K for the fiscal year ended 
         October 31, 1991.
(f)      Incorporated by reference to Form 10-Q for the fiscal quarter ended 
         April 30, 1992.
(g)      Incorporated by reference to Form 10-K for the fiscal year ended 
         October 31, 1992.
(h)      Incorporated by reference to Proxy Statement dated June 10, 1993.
(i)      Incorporated by reference to Form 8-K dated March 28, 1995.
(j)      Incorporated by reference to Form S-8 (Registration No. 33-62381) dated
         September 6, 1995.
(k)      Incorporated by reference to Form 10-K for the fiscal year ended
         October 31, 1995.
(l)      Incorporated by reference to Form 10-Q for the fiscal quarter ended 
         April 30, 1996.

                                       36


38995\0001\2579\RPT1277V.160