SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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


For the quarterly period ended    January 31, 1998
                                 ------------------

Commission file number     0-11254
                          ---------

                                 COPYTELE, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


           Delaware                                             11-2622630
------------------------------                             ------------------
(State or other jurisdiction of                            (I.R.S. employer
 incorporation or organization)                            identification no.)


      900 Walt Whitman Road
      Huntington Station, NY                                     11746
--------------------------------------------------------------------------------
(Address of principal executive offices)                       (Zip Code)


                                 (516) 549-5900
--------------------------------------------------------------------------------
             (Registrant's telephone number, including area code)


         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  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.

Number of shares of common stock, par value, 
$.01 per share, outstanding as of March 10, 1998:             57,861,176 shares 
                                                             ------------------
                                  

<PAGE>





                                TABLE OF CONTENTS
                                -----------------


Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

         Condensed Balance Sheets (Unaudited) as of January  31, 1998 and
         October 31, 1997

         Condensed  Statements  of Operations  (Unaudited)  for the three months
         ended  January 31, 1998 and January 31,  1997,  and for the period from
         November 5, 1982 (Inception) through January 31, 1998

         Condensed Statement of Shareholders'  Equity (Unaudited) for the period
         from November 5, 1982 (Inception) through January 31, 1998

         Condensed  Statements  of Cash Flows  (Unaudited)  for the three months
         ended  January 31, 1998 and January 31,  1997,  and for the period from
         November 5, 1982 (Inception) through January 31, 1998

         Notes to Condensed Financial Statements (Unaudited)

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

Part II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K.

         Signatures.







                                        


                                       2
<PAGE>



                         Part I - FINANCIAL INFORMATION
                         ------------------------------

Item 1. Financial Statements.
       ----------------------  
<TABLE>
<CAPTION>

                                              COPYTELE, INC.
                                              --------------
                                      (Development Stage Enterprise)
                                      ------------------------------
                                   CONDENSED BALANCE SHEETS (UNAUDITED)
                                   ------------------------------------


                                                                                         January 31,           October 31,
                                          ASSETS                                            1998                  1997
                                          ------                                         -----------          ------------
<S>                                                                                  <C>                  <C>    

CURRENT ASSETS:
 Cash (including cash equivalents and interest bearing accounts of
   $10,997,579 and $11,977,526, respectively)                                          $11,186,456             $12,329,171
 Marketable securities, at amortized cost                                                     -                    997,173
 Accrued interest receivable                                                                12,837                  18,429
 Prepaid expenses and other current assets (including amounts due from
   Joint Venture of approximately $4,627,000 and $4,304,000, respectively)               5,509,885               4,853,459
                                                                                      -------------            ------------
                                                                                        16,709,178              18,198,232
 
PROPERTY AND EQUIPMENT (net of accumulated depreciation
   and amortization of $1,133,767 and $1,062,949, respectively)                            926,675                 947,643
INVESTMENT IN JOINT VENTURE (Note 2)                                                       586,587                 723,166
OTHER ASSETS                                                                               105,197                 119,166
DEFERRED TAX BENEFITS (net of valuation allowance of $29,107,000
   and $28,295,000, respectively)                                                             -                      -
                                                                                       -------------          -------------
                                                                                       $18,327,637             $19,988,207
                                                                                      ==============          =============

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

CURRENT LIABILITIES:
 Accounts payable and accrued liabilities                                               $1,305,621              $1,209,065
                                                                                      --------------          --------------

SHAREHOLDERS' EQUITY:
 Preferred stock, par value $100 per share; authorized 500,000 shares;
   no shares outstanding                                                                      -                      -
 Common stock, par value $.01 per share; authorized 240,000,000 shares;
   57,861,176 shares outstanding                                                           578,612                 578,612
 Additional paid-in capital                                                             52,939,185              52,759,485
 Accumulated (deficit) during development stage                                        (36,495,781)            (34,558,955)
                                                                                      --------------         ---------------
                                                                                        17,022,016              18,779,142
                                                                                      --------------         ---------------
                                                                                       $18,327,637             $19,988,207
                                                                                      ==============         ===============


</TABLE>

     The accompanying  notes to condensed  financial  statements are an integral
part of these balance sheets.



                                                            3
<PAGE>


<TABLE>
<CAPTION>

                                                           COPYTELE, INC.
                                                           --------------
                                                   (Development Stage Enterprise)
                                                   ------------------------------
                                           CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
                                           ----------------------------------------------

                                                                                                              
                                                                                                                
                                                                                                               For the period from  
                                                                   For the three months                          November 5,1982    
                                                                     ended January 31,                            (inception)
                                                       ----------------------------------------------               through
                                                                1998                      1997                 January 31, 1998
                                                           -----------               -------------             -----------------

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

SALES                                                     $     -                     $      -                    $      -

SELLING, GENERAL AND 
  ADMINISTRATIVE EXPENSES,                                   
  (including research and development  
  expenses of approximately $1,100,000,                            
  $898,000 and $25,485,000,respectively)                      1,958,397                  1,562,504                   40,316,974     
                                                           -------------             --------------             ----------------


LOSS FROM JOINT VENTURE                                         136,579                     69,017                      638,413
                                                           -------------             --------------             ----------------

INTEREST INCOME                                                 158,150                    261,076                    4,459,606
                                                           -------------             --------------             ----------------

NET (LOSS)                                                  ($1,936,826)               ($1,370,445)                ($36,495,781)
                                                           =============             ==============             ================

NET (LOSS) PER SHARE OF COMMON STOCK                             ($0.03)                    ($0.02)                      ($0.79)
                                                           =============             ==============             ================    
                                                         

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
                                                             57,861,176                 57,423,102                   46,097,326
                                                           =============             ==============             ================

</TABLE>

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


<TABLE>
<CAPTION>


                                                            4


<PAGE>



                                                           COPYTELE, INC.
                                                           --------------
                                                   (Development Stage Enterprise)
                                                   ------------------------------
                                            CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
                                            -------------------------------------------
                       FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION) THROUGH JANUARY 31, 1998 (UNAUDITED)
                       -------------------------------------------------------------------------------------


                                                                                                                      Accumulated
                                                                                                                       (Deficit)
                                                                                                  Additional            During
                                                                         Common Stock              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                                                            -                -          (362,030)                 -
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                                                       -                -           298,745                  -
Restatement as of October 31, 1985 for three-for-one 
  stock split                                                    5,714,400          57,144          (57,144)                 -
Common stock issued, at $4 per share, upon exercise     
  of 2,800 warrants in December 1985                                 8,400              84           33,516                  -
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                  -
Restatement as of July 31, 1987 for five-for-four 
  stock split                                                    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 from September 10,1987 
  to December 4, 1990 and to officers on October 29, 1987 
  and February 26, 1989                                            628,040           6,280        6,124,031                  -
Sale of common stock, at market, to senior
  level personnel on February 26, 1989                              29,850             299          499,689                  -
                                                                                                                      
                                                                                                                          Continued

</TABLE>


<TABLE>
<CAPTION>

 

                                                            5
<PAGE>




                                                           COPYTELE, INC.
                                                           --------------
                                                   (Development Stage Enterprise)
                                                   ------------------------------
                                            CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
                                            -------------------------------------------
                       FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION) THROUGH JANUARY 31, 1998 (UNAUDITED)
                       -------------------------------------------------------------------------------------


                                                             Continued
                                                             ---------



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

Sale of common stock, at market, to unrelated party on
  February 26, 1989 amended on March 10, 1989                      35,820              358            599,627              -
Restatement as of January 31, 1991 for
  two-for-one stock split                                      11,502,795          115,028           (115,028)             -
Sale of common stock, at market, to members of officers'
  immediate families from April 26, 1991 to October 27,
  1992                                                            261,453            2,615          2,788,311              -
Common stock issued upon exercise of warrants by
  members of officers' immediate families on various
  dates from September 1993 through March 1996                    579,800            5,798          2,651,462              -
Common stock issued upon exercise of stock options
  from December 16, 1992 to June 12, 1996                       4,535,340           45,353         28,197,223              -
Restatement as of June 17, 1996 for two-for-one 
  stock split                                                  28,382,183          283,822           (283,822)             -
Common stock issued upon exercise of warrants by
  members of officers' immediate families on various
  dates in July and October, 1996, and March 1997                 206,610            2,066          1,062,167              -
Common stock issued upon exercise of stock options
  from July 8, 1996 to October 6, 1997 under stock option
  plans, net of  registration costs                               875,200            8,752          3,042,519              -
Common stock issued upon purchase of equipment                     15,000              150             74,850              -
Stock options granted to consultants                                  -                 -             179,700              -
Accumulated (deficit) during development stage                        -                 -                -            ($36,495,781)
                                                              ------------     -------------    ---------------      --------------
BALANCE, January 31, 1998                                      57,861,176         $578,612        $52,939,185         ($36,495,781)
                                                              ============     =============    ===============      ==============
</TABLE>

     The accompanying  notes to condensed  financial  statements are an integral
part of this statement.






                                                            6
<PAGE>



<TABLE>
<CAPTION>

                                                           COPYTELE, INC.
                                                           --------------
                                                   (Development Stage Enterprise)
                                                   ------------------------------
                                           CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                           ----------------------------------------------


                                                                          For the three                        
                                                                          months ended                         For the period from  
                                                                           January 31,                           November 5, 1982
                                                          ----------------------------------------------       (inception) through
                                                                 1998                       1997                 January 31, 1998
                                                          --------------------       -------------------     -----------------------
<S>                                                     <C>                          <C>                     <C>  
CASH FLOWS FROM OPERATING ACTIVITIES:                       
Payments to suppliers, employees and
  consultants                                                 ($2,049,250)               ($2,925,181)             ($43,246,748)
Interest received                                                 190,107                    300,941                 4,446,769      
                                                          --------------------       -------------------     -----------------------
Net cash (used in) operating activities                        (1,859,143)                (2,624,240)              (38,799,979)
                                                          --------------------       -------------------     -----------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and
  equipment                                                      (254,380)                  (225,653)               (2,051,662)
Disbursements to acquire certificates of deposit and
  corporate notes and bonds                                          -                          -                  (13,045,999)
Proceeds from maturities of investments                           970,808                       -                   13,045,999
Investment made in Joint Venture                                     -                          -                   (1,225,000)
                                                          --------------------       -------------------     -----------------------
Net cash (used in) investing activities                           716,428                   (225,653)               (3,276,662)
                                                          --------------------       -------------------     -----------------------

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                                   -                      230,295                35,680,358
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                             -                      230,295                53,263,097
                                                          --------------------       -------------------     -----------------------

NET (DECREASE) INCREASE IN CASH AND 
  CASH EQUIVALENTS                                             (1,142,715)                (2,619,598)               11,186,456

CASH AND CASH EQUIVALENTS AT   
  BEGINNING OF PERIOD                                          12,329,171                 22,165,892                      -
                                                          --------------------       -------------------     -----------------------

CASH AND CASH EQUIVALENTS AT END OF
  PERIOD                                                      $11,186,456                $19,546,294               $11,186,456
                                                          ====================       ===================     =======================
                                                                                                                          
                                                                                                                          Continued

</TABLE>


<TABLE>
<CAPTION>





                                                            7
<PAGE>



                                                           COPYTELE, INC.
                                                           --------------
                                                   (Development Stage Enterprise)
                                                   ------------------------------
                                           CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                           ----------------------------------------------

                                                              Continued
                                                              ---------


                                                                     For the three                        
                                                                      months ended                           For the period from   
                                                                      January 31,                              November 5, 1982 
                                                      ---------------------------------------------          (inception) through
                                                             1998                     1997                     January 31, 1998
                                                      --------------------     --------------------       -------------------------
<S>                                                    <C>                      <C>                       <C>    
RECONCILIATION OF NET (LOSS) TO NET CASH (USED IN)
  OPERATING ACTIVITIES:
Net (loss)                                                 ($1,936,826)             ($1,370,445)                 ($36,495,781)
Stock options granted to consultants                           179,700                     -                          179,700
Loss from Joint Venture                                        136,579                   69,017                       638,413
Depreciation and amortization                                   70,818                   63,304                     1,149,425
Decrease (Increase) in accrued interest
   receivable                                                    5,592                   39,865                       (12,837)
Amortization of discount on marketable
   securities                                                   26,365                     -                              -
(Increase) in prepaid expenses and other
   current assets                                             (656,426)              (1,106,365)                   (5,509,885)
Decrease (Increase) in other assets                             13,969                   55,223                      (105,198)
Increase (Decrease)  in accounts payable and
   accrued liabilities related to operating
   activities                                                  301,086                 (374,839)                    1,356,184
                                                      --------------------     --------------------       -------------------------
Net cash (used in) operating activities                    ($1,859,143)             ($2,624,240)                 ($38,799,979)
                                                      ====================     ====================       =========================

</TABLE>

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






                                                            8
<PAGE>



                                 COPYTELE, INC.
                                 --------------

                         (Development Stage Enterprise)
                         ------------------------------

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     ---------------------------------------

                          JANUARY 31, 1998 (UNAUDITED)
                          ----------------------------


(1)  Summary  of  significant   accounting   policies  and  other   disclosures:
     ---------------------------------------------------------------------------

CopyTele, Inc. (the "Company"), which was incorporated on November 5, 1982, is a
development stage enterprise whose principal activities include the development,
production    and    marketing   of   a   telephone    based    multi-functional
telecommunications  product, called MAGICOM(R) 2000, incorporating the Company's
ultra-high  resolution   E-Paper(TM)  flat  panel  display  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
Developing  Corp.  ("SIT").  The Company  also is  continuing  its  research and
development  activities  for  ultra-high  resolution  video and color flat panel
displays.  SECC  has  agreed  to  assign  its 35%  interest  in SCE to  Shanghai
Instrumentation  and Electronics  Holding Group Company  ("SIEC") and SIT. After
the assignments, SIEC will own 30%, SIT will own 15% and the Company's ownership
will remain at 55% of SCE. The  assignment  has been  approved by the Company as
well as the board of directors of SCE;  however,  final approval is pending with
the Chinese government.
 
Reference is made to the October 31, 1997 audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1997, for more extensive  disclosures  than contained in these
condensed financial statements.

The Company is producing its telephone based multi-functional telecommunications
product, called MAGICOM(R) 2000, incorporating the Company's flat panel display,
called E-Paper(TM),  and associated proprietary hardware and software technology
and  marketing  the  product   through  its  United  States  and   international
distributor/dealer network The Company has also developed, in conjunction with a
Japanese company, a small portable printer called Magic Printer.  The printer is
being  produced  for the  Company  by the  Japanese  company  and is also  being
marketed through the Company's  marketing  network,  including in China, for use
with MAGICOM(R) 2000 or in conjunction with personal or laptop computers.
 
The success and  profitability  of the Company's  products will depend upon many
factors, including those normally associated with any new product. These factors
include the  capability  of SCE and the Japanese  company to produce  sufficient
quantities of MAGICOM(R)  2000 and Magic Printer,  respectively;  the ability of
the Company and SCE to maintain an acceptable pricing level to end-users for the
products;  long-term product performance and the capability of the Company,  SCE
and its  distributors  to  adequately  service  the  products;  the  ability  of
distributors  to market  their  contracted  quantities  of the products in their
respective  territories;  political and economic stability in targeted marketing
territories;  and the possible  development of  competitive  products that could
render the Company's product obsolete or unmarketable.

The information  contained  herein for the three month periods ended January 31,
1998 and 1997 and for the  period  from  November  5, 1982  (inception)  through
January  31,  1998  is  unaudited,  but  in the  opinion  of  the  Company,  all
adjustments   (consisting  only  of  normal  recurring  adjustments   considered
necessary for a fair presentation of the results of operations for such periods)
have been  included.  The  results of  operations  for  interim  periods may not
necessarily reflect the annual operations of the Company.

In March 1997,  the FASB issued  Statement  of  Financial  Accounting  Standards
("SFAS") No. 128, "Earnings Per Share". This statement establishes standards for
computing and presenting earnings per share ("EPS"),  replacing the presentation
of currently required primary EPS with a presentation of Basic EPS. For entities
with complex capital structures, the statement requires the dual presentation of
both Basic EPS and Diluted EPS on the face of the statement of operations. Under
this new  standard,  Basic EPS is  computed  based on  weighted  average  shares
outstanding and excludes any potential dilution;  Diluted EPS reflects potential
dilution from the exercise or conversion of securities  into common stock and is
similar to the currently  required  fully diluted EPS. SFAS 128 is effective for
financial  statements  issued  for  periods  ending  after  December  15,  1997,
including  interim  periods.  The net loss per share  reported by the Company is
only  Basic EPS as the  impact of any  common  stock  equivalents  would have an
anti-dulitive  effect due to the net loss incurred in the period.  The impact of
the  adoption of this  statement  was not  material to  previously  reported EPS
amounts.

The  amounts  due  from  the  Joint  Venture  of  approximately  $4,627,000  and
$4,304,000,   respectively,   on  the  accompanying   Condensed  Balance  Sheets
represents  parts  inventory,  such  as  the  flat  panel  assembly  components,
purchased  by the  Company  on behalf of SCE  which  are  incorporated  into the
MAGICOM(R) 2000 product.
           
                                       9
<PAGE>


(2)  Investment in Joint Venture:
     ----------------------------

The Company has  contributed to SCE $1,225,000 in cash, and technology  that has
been valued for purposes of the Joint Venture at $700,000.  SCE does not reflect
the $700,000 in  technology  as an asset or equity  investment  in the condensed
financial  statements  presented  below. The other parties have contributed cash
aggregating  $1,575,000.  The Company has reflected its  investment in SCE under
the equity method of accounting and will  recognize  losses in SCE to the extent
of its cash investment.

Condensed financial information for SCE at January 31, 1998 and October 31, 1997
and for the three months ended January 31, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>
   

                           Condensed Balance Sheets                          January 31,              October 31, 
                           -------------------------                             1998                    1997
                                   (Unaudited)                            -----------------       -------------------    
     <S>                                                                 <C>                   <C>    

        Cash                                                                  $   44,718             $  135,890
        Inventories                                                            4,715,542              4,830,461
        Other current assets                                                      62,929                 31,988
        Land occupancy rights, net of amortization; fixed assets,
          net of depreciation and other non-current assets                     2,165,525              2,197,169
                                                                          -----------------       -------------------
                 Total Assets                                                 $6,988,714             $7,195,508
                                                                          =================       ===================

        Short term loans                                                      $  499,964             $  500,012
        Accounts payable and accrued liabilities                                 222,440                504,269
        Due to CopyTele, Inc.                                                  4,627,061              4,303,652
        Capital                                                                1,639,249              1,887,575
                                                                          =================       ===================
                 Total Liabilities and Capital                                $6,988,714             $7,195,508
                                                                          =================       ===================


                                                                                    For the three months ended
                                                                          -------------------------------------------
                       Condensed Statements of Operations                    January 31,              January 31, 
                       ----------------------------------                       1998                     1997
                                   (Unaudited)                            -----------------       -------------------
                                                                         

        Net Sales                                                              $   -                   $   -
        Operating (Loss)                                                       (243,266)               (129,653)
        Other Income (Expense)                                                   (5,060)                  4,167
                                                                          =================       ===================
                 Net (Loss)                                                   ($248,326)              ($125,486)
                                                                          =================       ===================

</TABLE>

The short term loans from a Chinese bank bear  interest at a floating rate which
is currently approximately 7.4% per annum adjustable quarterly. These loans were
extended in December  1997 and will mature May 1998 through  August 1998.  These
loans are secured by a land-use contract and equipment owned by SCE.

Included in accounts  payable  and accrued  liabilities  at January 31, 1998 and
October 31, 1997,  are  approximately  $103,000 and $372,000,  respectively,  of
advances paid by the Company towards the purchase of products from SCE.

The cumulative net (loss)  incurred by SCE since its inception on April 10, 1995
is ($1,160,751).





                                       10
<PAGE>


(3)  Stock option plans:
     -------------------

The Company has two stock option plans,  the 1987 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
(the "1993 Plan").

SFAS No. 123,  "Accounting for Stock Based Compensation",  encourages,  but does
not require  companies to record  compensation  cost for stock-  based  employee
compensation  plans at fair value. The Company has chosen to continue to account
for  stock-based   employee   compensation  using  the  intrinsic  value  method
prescribed in Accounting  Principles  Board Opinion ("APB") No. 25,  "Accounting
for Stock Issued to Employees",  and related interpretations.  Compensation cost
for stock options is measured as the excess,  if any, of the quoted market price
of the Company's stock at the date of grant over the amount an employee must pay
to acquire the stock.  In  accordance  with APB Opinion No. 25, no  compensation
cost has been recognized by the Company,  as all option grants to employees have
been made at the fair market value of the Company's stock on the date of grant.

Had compensation  cost for these plans been determined  consistent with SFAS No.
123, the Company's  net loss and net loss per share would have  increased to the
following pro forma amounts:

<TABLE>
<CAPTION>
  
                                                  For the Three Months                   For the Three Months
                                                  Ended January 31, 1998                 Ended January 31, 1997
                                             --------------------------------       -------------------------------
       <S>                                           <C>                                     <C>    

          Net Loss:       As Reported                   ($1,936,826)                           ($1,370,445)

                          Pro Forma                     ($3,193,297)                           ($4,352,009)

          Net Loss
          Per Share:      As Reported                        ($0.03)                                ($0.02)

                          Pro Forma                          ($0.06)                                ($0.08)

</TABLE>

Options  granted  to  non-employee  consultants  are  accounted  for  using  the
fair-value method required by SFAS No. 123. Compensation expense for consultants
recognized  in the  three  months  ended  January  31,  1998  was  approximately
$180,000, and is included in general and administrative expenses for the period.
No such costs were incurred in the three month period ended January 31, 1997.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option  pricing  model  with  the  following   weighted  average
assumptions  used for grants for the three  months  ended  January  31, 1998 and
1997,  respectively:  risk  free  interest  rates of 5.50% and  6.24%;  expected
dividend yields of 0%; expected lives of 2.86 and 1.62 years; and expected stock
price  volatility  of 68% and 73%.  The  weighted  average fair value of options
granted  under SFAS No. 123 for the three months ended January 31, 1998 and 1997
are $1.62 and $2.27, respectively.





                                       11
<PAGE>


During the period from  November 1, 1997 to January 31, 1998 there were no stock
options exercised, granted or canceled under the 1987 Plan. At January 31, 1998,
686,160  shares were under  option,  all of which are  exercisable.  The current
weighted average exercise price per share is $4.93.

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. Upon the approval of the 1993 Plan
by the Company's  shareholders  in July 1993, the 1987 Plan was terminated  with
respect to the grant of future options.

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 to 20 million,  as
adjusted  for the  two-for-one  stock split  declared  in May 1996.  Information
regarding  the 1993 Plan from  October 31, 1997 to January 31, 1998 is presented
in the table and narrative below:


<TABLE>
<CAPTION>

                                                                                              Current Weighted
                                                                                              Average Exercise
                                                                           Shares             Price Per Share
                                                                       -------------        -------------------
          <S>                                                         <C>                      <C>    

              Shares Under Option at October 31, 1997                    11,540,360               $5.19
                Granted                                                   1,360,000               $3.38
                Canceled                                                   (120,000)              $4.68
                                                                       --------------
              Shares Under Option at January 31, 1998                    12,780,360               $5.01
                                                                       ==============
              Options Exercisable at January 31, 1998                    10,930,360               $5.20
                                                                       ==============

</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.  At January  31,  1998,  2,150,000
options were available for future grants under the 1993 Plan.

(4)  Warrants to purchase common stock:
     ----------------------------------

Warrants  previously  issued by the  Company  were  primarily  to members of the
immediate families of its Chairman of the Board and its President in conjunction
with the sale of its Common Stock.  The exercise price of each warrant was equal
to at least the fair market value of the underlying  common stock on the date of
issuance  of  such  warrant.   At  October  31,  1997,  after   adjustments  for
anti-dilution  provisions  and all  applicable  stock splits,  there were 96,000
shares covered by warrants with a weighted  average  exercise price of $5.07 per
share.  During the period  from  November  1, 1997 to January  31,  1998,  these
warrants expired, therefore at January 31, 1998, there were no shares covered by
warrants.



                                       12
<PAGE>




         Item 2.  Management's Discussion and Analysis of Financial
                  -------------------------------------------------
                      Condition and Results of Operations.
                      ------------------------------------

The Company is a development  stage enterprise that was incorporated on November
5, 1982.  The Company is  producing  its  products and selling them to end-users
through its distributor/dealer network. Although limited sales to end-users have
been made to date by the  distributors  and  dealers,  the Company has  deferred
revenue recognition on these sales to distributors and dealers pending sustained
acceptance  of its products by the  end-users.  Prior to these limited sales the
Company  had no  revenues  from  sales  to  support  its  operations  since  its
inception.   The  Company's   principal   activities  include  the  development,
production    and    marketing   of   a   telephone    based    multi-functional
telecommunications  product, called MAGICOM(R) 2000, incorporating the Company's
ultra-high  resolution   E-Paper(TM)  Flat  Panel  Display  technology  and  the
operations  of SCE, the  Company's  55% owned joint  venture in Shanghai,  China
which is accounted  for under the equity  method of  accounting.  The Company is
also marketing a small  portable  printer called Magic Printer and is continuing
its research and  development  activities  for ultra-high  resolution  video and
color  flat  panel  displays.  There  can be no  assurance,  however,  that  the
Company's efforts in these areas will be successful.  There is also no assurance
that the Company will  generate  significant  revenues in the future,  will 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.

The Company  announced  in  December  of 1997 that it is engaged in  preliminary
discussions with SIEC. The present intentions of the companies as set forth in a
non-binding  letter of intent is to mutually  cooperate to develop,  produce and
market high technology  products,  under mutually  acceptable  terms,  using the
Company's overall flat panel and associated technology.  The parties also intend
to cooperate to mutually  market certain of SIEC's  products,  to be enhanced by
the  Company's  technology,  outside  of  China.  In  order  to  share  in their
respective  efforts,  the  companies  are  attempting to devise and agree upon a
means to share an interest in each other's company. It is presently contemplated
that the Company  would issue common stock in an amount  representing  less than
20% of its  currently  outstanding  shares in exchange for an interest in SIEC's
holdings.  The  companies  are in  discussions  concerning  the  details of this
possible arrangement,  although it is expected to take a number of months before
the  parties  could  enter  into a final,  binding  agreement.  There  can be no
assurance  that  the  parties  will be able to  arrive  at  mutually  acceptable
agreements or obtain the requisite governmental  approvals.  Among the issues to
be finalized are those concerning the valuation of CopyTele's  shares, the form,
structure  and  valuation  of the  interest  in SIEC's  holdings  that  would be
exchanged for CopyTele's  shares,  the nature and structure of the venture,  the
specific  products  to be  developed  for  sale  and the  likely  timetable  for
implementing the venture.  As previously  disclosed,  the Company entered into a
letter of intent in 1996 for the  formation of a second joint venture with SECC.
In light of the Company's current  discussions with SIEC,  however,  the Company
has determined that it is unlikely that it will pursue this second joint venture
if a definitive agreement is ultimately reached with SIEC.

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

Safe Harbor Statement Under the Private Securities Litigation Reform Act 
of 1995
-------

Certain   statements  in  this   Quarterly   Report  on  Form  10-Q   constitute
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown  risks,  uncertainties  and other  factors  which  may cause the  actual
results,  performance or achievements of the Company to be materially  different
from any future  results,  performance or  achievements  expressed or implied by
such  forward-looking   statements.  See  Note  1  to  the  condensed  financial
statements  in  this  Form  10-Q  and  "Business"  and  Note 1 to the  Company's
Financial  Statements  contained in the Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1997 for discussions  regarding  uncertainties
that may  significantly  affect the results of operations,  future liquidity and
capital resources.


                                   13

<PAGE>

Results of Operations
---------------------

Selling,  general and  administrative  expenses including the loss from SCE, for
the three month  periods ended January 31, 1998 and 1997 and for the period from
November  5, 1982  (inception)  through  January  31,  1998  were  approximately
$2,095,000,  $1,632,000,  and $40,955,000,  respectively.  These amounts include
research,  development and tooling costs of approximately $1,100,000,  $898,000,
and $25,485,000 respectively, as well as normal operating expenses.

Selling,  general  and  administrative  expenses  including  the loss  from SCE,
increased  approximately $463,000 during the three months ended January 31, 1998
as compared to the same period in 1997  resulting  primarily  from  increases in
expenses for salaries,  losses from joint venture  operations,  costs associated
with stock based  compensation to consultants,  professional  fees,  engineering
costs, and to a lesser extent, communication costs and rents. Salaries increased
in the 1998  period  over the 1997  period  as a result  of the  Company  hiring
additional marketing and engineering  personnel.  The Company's portion of SCE's
loss  increased  over the prior year from  $69,000 in fiscal  1997  compared  to
$137,000 in fiscal 1998 as a result of manufacturing costs being absorbed over a
limited  quantity of product  produced and initial  marketing  costs.  Marketing
related  costs,  including  travel,  decreased  in  the  current  period  as the
Company's  higher  start up costs  were  absorbed  in the prior  year's  period.
Telecommunication  costs and rents  increased to a lesser  extent over the prior
year's  period  as  compared  to  other  cost  increases.  Engineering  supplies
increased  primarily as a result of the implementation of engineering changes to
MAGICOM(R)  2000.  Included in the increase  was the cost to eliminate  obsolete
components  which was offset  somewhat by reduced  purchases  of panels and chip
drivers used for testing and evaluation purposes, and the purchase of MAGICOM(R)
2000 units from SCE for similar  purposes.  A decrease in workers'  compensation
costs was offset by an increase in pension and other group  insurance  cost as a
result of the  addition of new  personnel.  Professional  fees  increased in the
aggregate during the 1998 fiscal year as a result of higher legal and accounting
expense associated with the Joint Venture and the Company's  potential agreement
with SIEC,  but were offset by a decrease in patent  related  costs.  A non-cash
expense of  approximately  $180,000  was  charged to  earnings  for stock  based
compensation to consultants with an offset to Paid-In Capital.

While there are no formal  agreements,  the Company's  Chairman of the Board and
its  President  have  waived  salary  and  related   pension   benefits  for  an
undetermined  period of time commencing  November 1985. Four other  individuals,
including  an officer and three  senior level  personnel,  then  employed at the
Company,  waived salary and related  pension  benefits 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
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.

The  decrease  in interest  income of  approximately  $103,000  during the three
months  ended  January 31, 1998 as compared to the same period in 1997  resulted
primarily  from a decrease in average  funds  available  for  investment.  Funds
available for investment during the fiscal 1998 and 1997 three month comparison,
on  a  monthly  weighted  average  basis,  were  approximately  $11,377,000  and
$20,204,000,  respectively.  The investment  instruments selected by the Company
are principally money market accounts and commercial paper.


                                   14

<PAGE>

Liquidity and Capital Resources
-------------------------------

Since its inception,  the Company has met its liquidity and capital  expenditure
needs  primarily  from the  proceeds of 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, upon the exercise of
stock options  pursuant to the 1987 Plan and the 1993 Plan and recently from the
sale of its products.

Working  capital  decreased  by  approximately   $1,586,000  from  approximately
$16,990,000 at October 31, 1997 to approximately $15,404,000 at January 31, 1998
as a result of the loss incurred for the period and the purchase of property and
equipment.

SCE required an initial  aggregate  capital  investment of  $3,500,000  from the
parties  to the joint  venture.  The Joint  Venture  Agreement  contemplates  an
additional  $3,500,000  investment  which may be  borrowed  from  banks of which
approximately  $700,000 has been borrowed to date.  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 and 2
to the Company's  condensed  financial  statements.) SCE may require  additional
capitalization  of up to a total of $25 million,  depending  upon the nature and
extent of its  business  activities.  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  or  SCE,  including  any  future  capital
contribution,  if any,  beyond the Company's  initial capital  contributions  of
$1,225,000 to SCE, or that,  if  available,  the Company and SCE will be able to
obtain such funds on favorable terms and conditions.

The Company believes that without taking into  consideration  potential revenues
from  sales of  MAGICOM(R)  2000 it will have  sufficient  funds  into the first
quarter of fiscal 2000 to maintain  its present  level of  development  efforts.
This includes,  among other things,  the collection of the amounts due from SCE,
but  excludes  cash  expenditures  that  may  be  required  with  the  potential
transaction  with SIEC. The amounts due from SCE are primarily  costs related to
the  purchase  of  components  for SCE's use in  MAGICOM(R)  2000  units.  It is
expected that SCE will pay the Company during the current year through the sales
of units and financing from banks,  although the amounts due may increase before
repayment begins.

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 following its initial capital  contributions and to continue its research
and development activities.


      

                                   15

<PAGE>

   
Item 6.            Exhibits and Reports on Form 8-K.
                   ---------------------------------

                  (a)     Exhibits
                          --------

                          27 - Financial Data Schedule

                  (b)     Reports on Form 8-K.
                          --------------------

                          No  reports  on Form 8-K were  filed for the  Company
                          during the quarter ended January 31, 1998.




                                       16
<PAGE>






                                   SIGNATURES
                                   ----------

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

                                        CopyTele, Inc.



                                        DENIS A. KRUSOS
                                        ---------------
                                        Denis A. Krusos
                                        Chairman of the Board,
                                        Chief Executive Officer
                                        and Director (Principal Executive
March 17, 1998                          Officer)

                                        FRANK J. DISANTO
                                        ----------------
                                        Frank J. DiSanto
March 17, 1998                          President and Director

                                        GERALD J. BENTIVEGNA
                                        --------------------
                                        Gerald J. Bentivegna
                                        Vice President - Finance,
                                        Chief Financial Officer and
                                        Director (Principal Financial
March 17, 1998                          and Accounting Officer)



                                       17