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, 2001
                               ----------------

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
        Melville, NY                                                11747
--------------------------------------------------------------------------------
(Address of principal executive offices)                         (Zip Code)


                                 (631) 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 14, 2001:            63,999,525   shares
                                                             -------------------


<PAGE>






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


Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed  Balance  Sheets as of  January  31,  2001  (Unaudited)  and
         October 31, 2000

         Condensed  Statements of Operations  (Unaudited)  for the three months
         ended  January  31, 2001 and 2000,  and for the period from  inception
         (November 5, 1982) to January 31, 2001

         Condensed Statement of Shareholders' Equity (Unaudited) for the period
         from inception (November 5, 1982) to January 31, 2001

         Condensed  Statements of Cash Flows  (Unaudited)  for the three months
         ended  January  31, 2001 and 2000,  and for the period from  inception
         (November 5, 1982) to January 31, 2001

         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 2.  Changes in Securities and Use of Proceeds

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                                                         2001                 2000
                                  ------                                                      -----------          -----------
<S>                                                                                         <C>                   <C>
CURRENT ASSETS:
  Cash, including cash equivalents and interest bearing accounts of
    $677,925 and $1,119,516, respectively                                                        $703,123           $1,134,045
  Marketable securities, at cost                                                                    -                   96,873
  Accounts receivable, net of allowance for doubtful accounts of  $75,400                         560,933              594,851
  Inventories                                                                                   1,833,950            1,769,285
  Prepaid expenses and other current assets                                                        23,061               60,433
                                                                                                ---------            ---------
                        Total current assets                                                    3,121,067            3,655,487

PROPERTY AND EQUIPMENT, net                                                                       212,293              270,018

OTHER ASSETS                                                                                    2,968,559            2,968,996
                                                                                                ---------            ---------
                                                                                               $6,301,919           $6,894,501
                                                                                               ==========           ==========

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

CURRENT LIABILITIES:
  Accounts payable                                                                             $1,045,298           $1,035,749
  Accrued liabilities                                                                             223,859              301,153
                                                                                                ---------            ---------
                       Total current liabilities                                                1,269,157            1,336,902


SHAREHOLDERS' EQUITY:
  Preferred stock, par value $100 per share; 500,000 shares authorized;
    no shares issued or outstanding                                                                 -                    -
  Common stock, par value $.01 per share; 240,000,000 shares
    authorized; 63,822,155 and 63,084,526 shares issued
    and outstanding, respectively                                                                 638,222              630,845
  Additional paid-in capital                                                                   60,648,774           60,050,852
  Deficit accumulated during the development stage                                            (56,254,234)         (55,124,098)
                                                                                              ------------         ------------
                                                                                                5,032,762            5,557,599
                                                                                              ------------         ------------
                                                                                               $6,301,919           $6,894,501
                                                                                              ============         ============

</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 ended                      Inception
                                                                              January 31,                         (November 5, 1982)
                                                                 --------------------------------------------              to
                                                                         2001                   2000               January 31, 2001
                                                                 ---------------------  ---------------------  ---------------------

<S>                                                             <C>                     <C>                         <C>
SALES                                                                  $178,291               $276,792                 $1,697,166
COST OF SALES                                                            74,250                207,065                    836,992
                                                                 ---------------------  ---------------------  ---------------------
  Gross profit                                                          104,041                 69,727                    860,174

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (including
  research and development expenses of approximately $633,000,
  $641,000 and  $34,839,000, respectively)                            1,242,039              1,422,369                 60,948,602
                                                                 ---------------------  ---------------------  ---------------------

LOSS FROM AND IMPAIRMENT OF
  INVESTMENT IN JOINT VENTURE                                             -                       -                     1,225,000
                                                                 ---------------------  ---------------------  ---------------------

INTEREST INCOME                                                           7,862                 17,988                  5,059,194
                                                                 ---------------------  ---------------------  ---------------------

NET (LOSS)                                                          $(1,130,136)           $(1,334,654)              $(56,254,234)
                                                                 =====================  =====================  =====================

NET (LOSS) PER SHARE OF COMMON STOCK: Basic and Diluted                  $(0.02)                $(0.02)                    $(1.16)
                                                                 =====================  =====================  =====================

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic and Diluted     63,219,271             60,327,102                 48,398,491
                                                                 =====================  =====================  =====================


</TABLE>

The accompanying notes to condensed financial statements are an integral part of
these statements.
                                       4
<PAGE>
<TABLE>
<CAPTION>



                                 COPYTELE, INC.
                                 --------------
                         (Development Stage Enterprise)
                         ------------------------------
                   CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
                   -------------------------------------------
 FOR THE PERIOD FROM INCEPTION (NOVEMBER 5, 1982) THROUGH JANUARY 31, 2001 (UNAUDITED)
 -------------------------------------------------------------------------------------


                                                                                                                     Deficit
                                                                                                    Additional     Accumulated
                                                                           Common Stock              Paid-in        During the
                                                                        Shares     Par Value         Capital     Development Stage
                                                                     -------------------------     ------------ -------------------
<S>                                                                   <C>         <C>             <C>             <C>
BALANCE, Inception (November 5, 1982)                                      -         $ -             $  -           $    -

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              -


                                                                                                                           Continued
</TABLE>
                                       5
<PAGE>
<TABLE>
<CAPTION>

                                 COPYTELE, INC.
                                 --------------
                         (Development Stage Enterprise)
                         ------------------------------
                   CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
                   -------------------------------------------
 FOR THE PERIOD FROM INCEPTION (NOVEMBER 5, 1982) THROUGH JANUARY 31, 2001 (UNAUDITED)
 -------------------------------------------------------------------------------------

                                    Continued
                                    ---------


                                                                                                                        Deficit
                                                                                                  Additional          Accumulated
                                                                           Common Stock             Paid-in            During the
                                                                        Shares     Par Value        Capital        Development Stage
                                                                      -----------------------   ---------------   ------------------
<S>                                                                <C>            <C>            <C>                 <C>
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               -
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 purchase of equipment                            15,000         150          74,850               -
Common stock issued upon exercise of stock options
   from July 1996 to October 1999  under stock option plans,
   net of  registration costs                                          1,771,400      17,714       4,414,412               -
Sale of common stock, at market, to a related party
   and other unrelated parties in April and
   September, 1999                                                     1,300,000      13,000       1,461,500               -
Stock options granted to consultants                                       -              -          564,819               -
Common stock issued upon exercise of stock options
   from November 1999 to April 2000 under stock option plans           2,267,400      22,674       3,003,050               -
Sale of common stock, at market, to unrelated parties in
  January and March 2000, net of listing fees                            616,500       6,165         794,420               -
Common stock issued upon exercise of warrants  in May 2000               143,250       1,432         198,604               -

                                                                                                                          Continued
</TABLE>
                                       6
<PAGE>
<TABLE>
<CAPTION>
                                 COPYTELE, INC.
                                 --------------
                         (Development Stage Enterprise)
                         ------------------------------
                   CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
                   -------------------------------------------
 FOR THE PERIOD FROM INCEPTION (NOVEMBER 5, 1982) THROUGH JANUARY 31, 2001 (UNAUDITED)
 -------------------------------------------------------------------------------------

                                    Continued
                                    ---------


                                                                                                                       Deficit
                                                                                                 Additional         Accumulated
                                                                           Common Stock            Paid-in           During the
                                                                        Shares    Par Value        Capital        Development Stage
                                                                       --------------------     --------------   -------------------
<S>                                                               <C>             <C>             <C>                 <C>
Common stock issued upon exercise of stock options
   in January 2001 under stock option plans, net of
   registration costs                                                    734,534       7,346           492,034               -
Issuance of stock to consultants for services rendered                     3,095          31             2,969               -
Deficit accumulated during the development stage                            -             -                -           (56,254,234)
                                                                     -----------   -------------   -----------------  -------------
BALANCE, January  31, 2001                                            63,822,155    $638,222       $60,648,774        $(56,254,234)
                                                                     ============  ==============  ==================  =============


</TABLE>
The accompanying notes to condensed financial statements are an integral part of
these statements.

                                       7
<PAGE>
<TABLE>
<CAPTION>

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


                                                                                                              For the Period from
                                                                         For the three months ended                Inception
                                                                                 January 31,                   (November 5,1982)
                                                                  ------------------------------------------           to
                                                                         2001                   2000            January 31, 2001
                                                                  --------------------   -------------------   ---------------------
<S>                                                                 <C>                    <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Payments to suppliers, employees and consultants                    $(1,244,205)            $(1,161,035)              $(62,775,895)
Cash received from customers                                            212,209                 151,945                  1,060,833
Interest received                                                         7,892                  27,506                  5,056,238
                                                                  --------------------   -------------------   ---------------------
Net cash (used in) operating activities                              (1,024,104)               (981,584)               (56,658,824)
                                                                  --------------------   -------------------   ---------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment                                      (3,071)                 (3,581)                (2,057,230)
Disbursements to acquire certificates of deposit and
  marketable securities                                                   -                         -                  (13,630,910)
Proceeds from maturities of investments                                  96,873                 488,038                 13,630,910
Investment made in Joint Venture                                          -                         -                   (1,225,000)
                                                                  --------------------   -------------------   ---------------------
Net cash provided by (used in) investing activities                      93,802                 484,457                 (3,282,230)
                                                                  --------------------   -------------------   ---------------------

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 costs                                                    499,380                 687,607                 40,786,353
Proceeds from sales of common stock in private
  placements, net of listing fees                                         -                     346,080                  2,275,085
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                               499,380               1,033,687                 60,644,177
                                                                  --------------------   -------------------   ---------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                   (430,922)                536,560                    703,123

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                      1,134,045               1,587,830                      -
                                                                  --------------------   -------------------   ---------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                             $703,123              $2,124,390                  $ 703,123
                                                                  ====================   ===================   =====================


                                                                                                                           Continued
</TABLE>

                                       8
<PAGE>
<TABLE>
<CAPTION>

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

                                    Continued
                                    ---------



                                                                                                              For the Period from
                                                                      For the three months ended                   Inception
                                                                             January 31,                       (November 5, 1982)
                                                               -----------------------------------------               to
                                                                      2001                  2000                January 31, 2001
                                                               -------------------    ------------------     -----------------------
<S>                                                             <C>                     <C>                  <C>
RECONCILIATION OF NET LOSS TO NET CASH USED IN
  OPERATING ACTIVITIES:
Net loss                                                           $(1,130,136)          $(1,334,654)                 $(56,254,234)
Loss from Joint Venture                                                  -                     -                         1,139,828
Stock option compensation to consultants                               102,919               105,850                       564,819
Stock issued to consultants for services rendered                        3,000                  -                            3,000
Provision for doubtful accounts                                          -                      -                           75,400
Depreciation and amortization                                           60,796                66,267                     1,965,270
Loss from disposition of assets                                           -                      -                          30,050
Impairment of investment in Joint Venture                                 -                      -                          85,172
Impairment of amounts due from Joint  Venture                             -                      -                       1,407,461
Decrease (increase) in accounts receivable                              33,918                   -                        (636,333)
(Increase) decrease in inventory                                       (64,665)              182,118                    (4,833,950)
Decrease (increase) in prepaid expenses and
  other current assets                                                  37,372              (159,563)                     (885,061)
(Increase) in long term amount due from Joint Venture                     -                      -                      (1,407,461)
Decrease (increase) in other assets                                        437                   146                        31,441
(Decrease) increase  in accounts payable and accrued
  liabilities                                                          (67,745)              158,252                     2,055,774
                                                               -------------------    ------------------    ------------------------
Net cash (used) in operating activities                            $(1,024,104)            $(981,584)                 $(56,658,824)
                                                               ===================    ==================    ========================

</TABLE>
The accompanying notes to condensed financial statements are an integral part of
these statements.

                                       9
<PAGE>



                                 COPYTELE, INC.
                                 --------------
                         (Development Stage Enterprise)
                         ------------------------------
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     ---------------------------------------
                          JANUARY 31, 2001 (UNAUDITED)
                          ----------------------------


(1)      Nature and Development of business and other disclosures
         --------------------------------------------------------

Organization and Development Of Business
----------------------------------------

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 multi-functional  encryption  products.  The primary
encryption  product the Company has  produced is the USS-900  (Universal  Secure
System).  The USS-900 is a hardware-based  peripheral  digital encryption system
which  incorporates  a  private  label  digital  cryptographic  chip to  provide
high-grade  information  encryption.  The  Company  has also  developed a laptop
(personal  computer)  security  encryption  product - the ULP-1 (Ultimate Laptop
Privacy),  and a digital version of the USS-900 - the DSS-1000 (Digital Security
System). The Company is also continuing its research and development  activities
for  additional  encryption  products  and flat panel  display  technologies  in
addition to its ultra-high  resolution  charged particle  E-Paper(TM) flat panel
display.

Funding and Management's Plans
------------------------------

Since its inception,  the Company has met its liquidity and capital  expenditure
needs  primarily  through  the  proceeds  from 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 the
exercise  of  stock  options.  The  Company  is  hopeful,  that  with  both  the
development  of its new products and its increased  marketing  efforts,  it will
procure  enough  sales  throughout  fiscal 2001 to emerge  from the  development
stage.  However,  there can be no assurance  that the Company will be able to do
so.

The Company's operations used approximately  $1,024,000 in cash during the first
quarter of fiscal  2001.  As of January  31,  2001,  working  capital  primarily
included  approximately  $703,000  of cash,  $561,000  of  accounts  receivable,
$1,834,000 of inventory  and  approximately  $1,269,000 of accounts  payable and
accrued   liabilities.   The  Company   believes  that  its  existing  cash  and
receivables, along with other potential sources of cash flows will be sufficient
to  enable  it to  continue  in  operation  until at least  the end of the first
quarter of fiscal 2002,  after giving effect to certain  reductions in operating
expenses,  as  necessary.  As of March 14, 2001,  the Company had  approximately
$367,000 in cash,  which reflects,  in part, the proceeds from the collection of
outstanding accounts receivable.

The Company is seeking to improve its liquidity  through  increased sales of its
products.  The Company may also seek to improve its  liquidity  through sales of
its common stock and  additional  exercise of stock options and warrants.  There
can be no assurance that any of these plans will materialize.


                                       10
<PAGE>

The Company has had limited  sales to its dealers,  distributors  and  end-users
since its inception,  and during the first quarter of fiscal 2001 has recognized
revenue  of  approximately  $178,000.  Despite  the  foregoing,  there can be no
assurance  that the Company  will  generate  significant  revenues in the future
(through  sales or  otherwise) to improve its  liquidity,  that the Company will
have sufficient  revenues to generate a profit, that the Company will be able to
expand its current distributor/dealer network, that production capabilities will
be adequate, or that other products will not be produced by other companies that
will render the products of the Company obsolete.

The Chairman of the Board and Chief  Executive  Officer,  the President,  and an
outside  Director  have  made a  representation  that it is their  intention  to
provide  short  term  loans  to the  Company  of up to  $450,000,  $450,000  and
$200,000,  respectively,  if  the  Company  requires  additional  cash  for  its
operations  during the period  ending  January  31,  2002.  The loans would bear
interest at 9% per annum, would be secured by the Company's accounts  receivable
and  inventory  and would mature on January 31,  2002.  These  amounts  would be
reduced on a pro-rata  basis by any other debt or equity  financing  obtained by
the Company and by the proceeds received from certain sales. The  representation
of each  individual  is  conditioned  upon his not becoming  incapacitated  in a
manner that prevents him from performing his present responsibilities.

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 Nasdaq
National Market listing,  and a minimum bid price of at least $1.00 per share in
order to maintain its Nasdaq listing.  The Company anticipates that it will seek
additional sources of funding,  when necessary,  to satisfy such requirements or
for other  purposes.  There can be 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 certain  senior level
personnel, will continue.

Realizability of Assets
-----------------------

Management has recorded the Company's  inventory at its current best estimate of
net realizable value, which is based upon the historic and future selling prices
of the Company's  products.  To date, sales of the Company's  products have been
limited.  Accordingly,  there can be no  assurance  that the Company will not be
required to reduce the selling price of its inventory below its current carrying
value.

Furthermore,  management believes its other assets, which consist principally of
commercial   barter  credits,   will  be  realized  through  future  usage,  and
accordingly are properly valued as of January 31, 2001 (Note 2).

Product Development
-------------------

The success and  profitability  of the Company's  products will depend upon many
factors,  many of which are  beyond  its  control.  These  factors  include  the
capability  of the  Company to market its  products,  the  Company's  continuing
ability  to  purchase  the  encryption  chip for use in the  USS-900  and  other
encryption  products,  long-term  product  performance and the capability of the
Company's dealers and distributors to adequately service the Company's products,
the  ability of the  Company to  maintain  an  acceptable  pricing  level to its
customers  for its  products,  the ability of  suppliers  to meet the  Company's
requirements and schedule, the Company's ability to successfully


                                       11
<PAGE>

develop  its  new  products  under   development,   rapidly  changing   consumer
preference,  and the possible  development  of  competitive  products that could
render the Company's products obsolete or unmarketable.

Basis of Presentation
---------------------

The  condensed  financial  statements  have been  prepared  in  accordance  with
generally  accepted  accounting  principles  for  interim  financial  reporting.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
The  information  contained  herein is for the three month periods ended January
31,  2001 and 2000,  and for the period  from  inception  (November  5, 1982) to
January 31, 2001.  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
herein.

The results of operations for interim  periods may not  necessarily  reflect the
annual  operations  of the Company.  Reference is made to the audited  financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K for the fiscal year ended October 31, 2000, for more extensive  disclosures
than contained in these condensed financial statements.

Revenue Recognition
-------------------

The  Company  recognizes  revenue  upon  shipment  and  passage  of title of its
products to its customers. The Company has not had any sales returns to date.

Use of Estimates
----------------

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

(2) Barter Transaction
    ------------------

In August  2000,  the Company  entered  into a  nonmonetary  barter  transaction
whereby  $3,000,000 of certain inventory was sold in exchange for an equal value
of commercial  trade credits.  In accordance  with Accounting  Principles  Board
("APB")  No.  29,   "Accounting  for  Nonmonetary   Transactions,"  the  Company
recognized no gain or loss on the transaction as it is management's opinion that
this  exchange  was  effected  at  fair  market  value.   These  trade  credits,
($2,954,000  as of January 31, 2001),  which are recorded as other assets on the
accompanying balance sheet, may be redeemed to reduce the cost of advertising as
well as other products and services.

In accordance with Statement of Financial  Accounting Standards ("SFAS") No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," the Company  continually  evaluates the carrying amount of this
asset  for  any  potential  impairment.  Based  on this  evaluation,  management
believes that there is no impairment as of January 31, 2001.


                                       12
<PAGE>

(3) Shareholders' Equity
    --------------------

Stock inventive plans
---------------------

The Company has three stock  inventive  plans:  the 1987 Stock  Option Plan (the
"1987 Plan"),  the CopyTele,  Inc. 1993 Stock Option Plan (the "1993 Plan"), and
the CopyTele, Inc. 2000 Share Incentive Plan (the "2000 Share Plan"), which were
adopted by the Board of Directors on April 1, 1987,  April 28, 1993,  and May 8,
2000, respectively.

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 APB No. 25. 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 have been made at the fair  market  value of the
Company's stock on the date of grant.

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 month  periods  ended January 31, 2001 and 2000 and the
period from  inception  (November  5, 1982) to January  31,  2001 was  $102,919,
$105,850 and $564,819, respectively, which was measured at the vesting date upon
the Company's  determination of performance commitment achievement in accordance
with Emerging  Issues Task Force No. 96-18  "Accounting  for Equity  Instruments
That Are Issued to Other Than  Employees for Acquiring,  or in Conjunction  with
Selling,   Goods  or  Services,"  and  is  included  in  selling,   general  and
administrative expenses for the periods.

As of January  31,  2001,  stock  options to  purchase  14,389,326  shares  were
outstanding  of  which  stock  options  to  purchase   14,061,326   shares  were
exercisable.  During the period from  February 1, 2001  through  March 14, 2001,
options to purchase  50,000  shares and stock awards for the issuance of 177,370
shares were granted under the 2000 Share Plan.

Warrants
--------

As of January 31, 2001,  1,773,250  warrants to purchase  shares of common stock
were outstanding and exercisable.

(4) Net(Loss)Per Share of Common Stock
    ----------------------------------

The Company complies with the provisions of SFAS No. 128,  "Earnings Per Share".
In accordance  with SFAS 128, basic net (loss) per common share ("Basic EPS") is
computed by dividing net (loss) by the weighted  average number of common shares
outstanding.  Diluted net (loss) per common share ("Diluted EPS") is computed by
dividing net (loss) by the weighted average number of common shares and dilutive
common share equivalents and convertible  securities then outstanding.  SFAS No.
128 requires the  presentation  of both Basic EPS and Diluted EPS on the face of
the statements of operations.  Diluted EPS for all periods presented is the same
as Basic EPS, as the  inclusion of the impact of common stock  equivalents  then
outstanding would be anti-dilutive.


                                       13
<PAGE>

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


Forward-Looking Statements
--------------------------

Information  included  in  this  Quarterly  Report  on  Form  10-Q  may  contain
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation Reform Act of 1995. These  forward-looking  statements are subject to
risks and uncertainties and other factors, some of which are beyond our control,
that could cause  actual  results to differ  materially  from those  forecast or
anticipated in the forward-looking  statements.  These risks,  uncertainties and
factors  include,  but are not limited to,  those  factors set forth in "General
Risks and  Uncertainties"  below and Note 1 in  "Notes  to  Condensed  Financial
Statements".


General
-------

We have been a  development-stage  enterprise since our inception on November 5,
1982. Our principal activities include the development, production and marketing
of  multi-functional,  hardware-based,  peripheral digital  encryption  devices.
These  encryption   devices  provide   high-grade   security  for  domestic  and
international users over virtually every communications media.

Our line of encryption products presently includes the USS-900, the DSS-1000 and
the ULP-1, which are available with either the high-grade strength of the Harris
Corporation  ("Harris")  digital  cryptographic chip - the Citadel (TM) CCX - or
the Triple DES algorithm to provide high-grade  encryption.  Harris is supplying
the chip at a  negotiated  price under a  three-year  agreement  entered into in
1999. Triple DES is an algorithm available in the public domain,  which has been
incorporated  into our  software.  Triple  DES is used by many  U.S.  government
agencies.

We are  continuing  our  research  and  development  activities  for  additional
encryption  products and flat-panel  displays,  including our E-Paper ultra-high
resolution  display and our thin film color and video field emission  ultra-high
resolution  display.  In  addition,   we  have  redirected  our  development  of
solid-state optical technology to the development of an ultra-high speed optical
modulator for use in encryption  technology and to process optical  information.
We  cannot  assure  you,  however,  that  our  efforts  in these  areas  will be
successful.

We are currently using several U.S.- based electronic production  contractors to
produce  the  components  for  our  encryption  devices.  We sell  our  products
primarily through a distributor/dealer network and also to end-users.

In reviewing  Management's  Discussion  and Analysis of Financial  Condition and
Results of  Operations,  please refer to our Financial  Statements and the notes
thereto.


                                       14
<PAGE>

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

Three months ended January 31, 2001 compared with three months ended January 31,
--------------------------------------------------------------------------------
2000
----

Sales -
-------

Sales decreased by approximately  $99,000, or 36%, to approximately  $178,000 in
the three months ended January 31, 2001 as compared with approximately  $277,000
in the comparable prior-year period. Sales of the USS-900 increased in the first
quarter of fiscal 2001 to  approximately  $153,000,  or 86% of total  sales,  as
compared with approximately $44,000 in the prior-year period.

We are hopeful, although there is no assurance, that with an increased marketing
effort for our existing products and our new products under development, we will
procure  sufficient  sales  during  fiscal 2001 to emerge  from the  development
stage.

Gross Profit-
-------------

Gross  profit   increased  in  the  three  months  ended  January  31,  2001  to
approximately   $104,000,   or  58%  as  a  percentage  of  sales,  compared  to
approximately  $70,000  or 25%  as a  percentage  of  sales  in  the  comparable
prior-year period. The increase in gross profit is primarily due to the increase
in USS-900 sales.

Selling, General and Administrative Expenses-
---------------------------------------------

Selling, general and administrative expenses decreased approximately $180,000 or
13% to approximately $1,242,000 for the three months ended January 31, 2001 from
approximately $1,422,000 for the comparable prior-year period.

The  decrease in  selling,  general and  administrative  expenses  for the three
months  ended  January  31,  2001 as  compared  with the  prior-year  period  is
primarily a result of effective  cost-cutting  measures,  specifically  employee
compensation  and  related  costs   decreasing  by  approximately   $92,000  and
engineering supplies decreasing by approximately $82,000.

Research and Development Expenses-
----------------------------------

Research and development  expenses,  which are included in selling,  general and
administrative  expenses, were approximately $633,000 and $641,000 for the three
month periods ended January 31, 2001 and 2000, respectively.

Interest Income-
----------------

Interest income  decreased by approximately  $10,000 to approximately  $8,000 in
the three months ended January 31, 2001 as compared to approximately  $18,000 in
the comparable period in the prior-year, primarily as a result of a reduction in
average funds available for investment.



                                       15
<PAGE>

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

Since our  inception,  we have met our liquidity and capital  expenditure  needs
primarily  from the proceeds of sales of our common stock in our initial  public
offering, in private placements,  upon exercise of warrants issued in connection
with the  private  placements  and our  initial  public  offering,  and upon the
exercise of stock options pursuant to our 1987, 1993 and 2000 stock option plans
(the "1987 Plan," the "1993 Plan," and the "2000 Share Plan," respectively).

During the three month  period  ended  January 31,  2001,  we received  proceeds
aggregating  approximately  $212,000 in payments from our customers for products
sold.   During  the  quarter  ended  January  31,  2001,  we  received  proceeds
aggregating  approximately  $505,000  from  the  exercise  of stock  options  to
purchase shares of our common stock pursuant to the 2000 Share Plan.

Working  capital   decreased  by  approximately   $467,000  from   approximately
$2,319,000 at October 31, 2000 to approximately  $1,852,000 at January 31, 2001,
as a result of the  decrease in accounts  receivable,  the  increase in accounts
payable and the use of cash and marketable securities to fund operations, offset
by the increase in inventory and the decrease in accrued liabilities.

Our operations used approximately $1,024,000 in cash during the first quarter of
fiscal 2001.  As of January 31, 2001,  working  capital  included  approximately
$703,000 of cash, $561,000 of accounts  receivable,  $1,834,000 of inventory and
approximately  $1,269,000  of accounts  payable and accrued  liabilities.  As of
March 14, 2001, we had approximately  $367,000 in cash, which reflects, in part,
the proceeds from the collection of outstanding accounts receivable.  We believe
that existing cash and receivables,  along with other potential  sources of cash
flows,  will be sufficient to enable us to continue in operation  until at least
the end of the first  quarter of fiscal  2002,  after  giving  effect to certain
reductions in operating expenses, as necessary.  We anticipate that, thereafter,
we will  require  additional  funds to continue our  marketing  and research and
development  activities,  and we will require  outside funding if cash generated
from  operations  is  insufficient  to satisfy our liquidity  requirements.  Our
ability to fund continuing  operations may depend in part upon the  availability
of  financing  from our  Chairman of the Board,  our  President,  and an outside
Director,  as described below. However, our projections of future cash needs and
cash flows may differ from actual results.  If current cash and cash that may be
generated   from   operations   are   insufficient   to  satisfy  our  liquidity
requirements, we will seek to sell debt or equity securities or to obtain a line
of credit.  The sale of additional  equity  securities or convertible debt could
result in additional dilution to our stockholders.  We can give you no assurance
that we will be able to generate adequate funds from operations, that funds will
be available to us from debt or equity financings or that, if available, we will
be able to obtain such funds on  favorable  terms and  conditions.  We currently
have no definitive arrangements with respect to additional financing.

In connection  with our annual audit for the fiscal year ended October 31, 2000,
our Chairman of the Board and Chief  Executive  Officer,  our President,  and an
outside Director have  represented to our independent  auditors that it is their
intention  to provide  short term loans to us of up to  $450,000,  $450,000  and
$200,000,  respectively, if we require additional cash for our operations during
the period  ending  January 31,  2002.  The loans would bear  interest at 9% per
annum, would be secured by accounts receivable and inventory and would mature on
January 31,  2002.  These  amounts  would be reduced on a pro-rata  basis by any
other debt or equity financing  obtained by us and by the proceeds received from
certain sales. The representation of each individual is conditioned


                                       16
<PAGE>

upon  his  not  becoming  incapacitated  in a  manner  that  prevents  him  from
performing his present responsibilities.

We are seeking to improve our liquidity through increased sales of products.  In
an effort to generate sales,  we have marketed the USS-900  directly to U.S. and
international  office  equipment  distributors and dealers and, during the three
months  ended  January  31,  2001,  we  have   recognized   total   revenues  of
approximately  $178,000.  We have also recently commenced marketing the DSS-1000
and ULP-1. We are hopeful,  although we can give you no assurance,  that we will
generate  significant  revenues in the future  (through  sales or  otherwise) to
improve our liquidity.

The NASD  requires  that we  maintain a minimum of  $4,000,000  of net  tangible
assets to  maintain  our  Nasdaq  National  Market  listing.  If our stock  were
delisted, the delisting could potentially have an adverse effect on the price of
our common stock and could adversely  affect the liquidity of the shares held by
our  stockholders.  Our  net  tangible  assets  as  of  January  31,  2001  were
approximately  $5,033,000. We anticipate that we may require additional funds to
maintain the NASD net tangible assets requirement.  We can give you no assurance
that we will be able to generate  adequate  funds from  operations or that funds
will be available to us from equity  financings.  We also can offer no assurance
that, if available,  we will be able to obtain such funds on favorable terms and
conditions.

The NASD also requires that we maintain a minimum closing bid price of $1.00 for
continued listing. If at any time the bid price for our common stock falls below
$1.00 per share for a period of thirty  consecutive  business days, the NASD has
the right to delist our stock if within ninety days thereafter the bid price for
the stock is not at least  $1.00 per  share  for a  minimum  of ten  consecutive
business days. If our stock were delisted,  the delisting  could have an adverse
affect on the price of our common stock and could adversely affect the liquidity
of the shares  held by our  stockholders.  The  closing bid price for our common
stock on March 14, 2001 was $0.75.

Management  has  recorded  our  inventory  at its current  best  estimate of net
realizable value,  which is based upon the historic and future selling prices of
the USS-900 and  remaining  SCS-700s.  To date,  sales of our products have been
limited. Accordingly,  there can be no assurance that we will not be required to
reduce the selling price of our inventory below its current carrying value.

Furthermore,  management believes its other assets, which consist principally of
commercial   barter  credits,   will  be  realized  through  future  usage,  and
accordingly are properly valued as of January 31, 2001

Our 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.


General Risks and Uncertainties
-------------------------------

     o    We have  experienced  significant  net losses and negative  cash flows
          from operations since our inception and they may continue.

We have had net losses and  negative  cash  flows from  operations  in each year
since  our  inception  and we may  continue  to  incur  substantial  losses  and
experience  substantial  negative cash flows


                                       17
<PAGE>

from  operations.  We have  incurred  substantial  costs and expenses  since our
inception in developing our flat panel display and encryption  technologies  and
in our efforts to produce  commercially  marketable  products  incorporating our
technology.  We have had limited  sales to our dealers,  distributors  and other
customers to support our operations from inception  through January 31, 2001. We
have  incurred  net  losses  aggregating  $56,254,234  during  the same  period.
Research and development  expenses during that period  aggregated  approximately
$34,839,000 and negative cash flows from operations aggregated  $56,658,824.  We
have set forth below our net  losses,  research  and  development  expenses  and
negative  cash flows from  operations  for the three month periods ended January
31, 2001 and 2000:

<TABLE>
<CAPTION>

                                                 Fiscal Years Ended                     Three Months Ended
                                                    October 31,                              January 31,
                                                 ------------------                     -------------------
                                                 2000          1999                     2001            2000
                                                 ----          ----                     ----            ----
       <S>                                     <C>           <C>                    <C>             <C>
      Net Loss                                $4,964,173      $8,465,016              $1,130,136      $1,334,654
      Research and Development                $2,732,000      $3,163,000              $  633,000      $  641,000
      Negative Cash Flows From Operations     $4,840,578      $6,117,096              $1,024,104      $  981,584
</TABLE>

     o    We may need  additional  funding in the near  future  which may not be
          available  on  acceptable  terms  and,  if  available,  may  result in
          dilution to our stockholders.

We anticipate that we will require  additional  funding to continue our research
and  development  activities,  market our  products  and  satisfy  the  National
Association of Securities  Dealers,  Inc. (NASD)  requirement that we maintain a
minimum of $4 million of net  tangible  assets to maintain  our Nasdaq  National
Market  listing,  if cash generated from  operations is  insufficient to satisfy
these requirements.  Based on reductions in operating expenses that we have made
and additional reductions that we may implement,  if necessary,  we believe that
our cash  resources,  including cash received from February 1, 2001 to March 14,
2001, and other  potential  sources of cash flows will be sufficient to continue
in  operation  until at least the end of the first  quarter of fiscal  2002.  We
anticipate that,  thereafter,  we will require  additional funds to continue our
marketing and research and development  activities,  and we will require outside
funding if cash  generated  from  operations  is  insufficient  to  satisfy  our
liquidity requirements.  Our ability to fund continuing operations may depend in
part upon the  availability  of financing  from our  Chairman of the Board,  our
President and an outside Director who represented to our independent auditors in
connection  with our  annual  audit  for  fiscal  year  2000  that it was  their
intention  to provide  financing  aggregating  up to $1.1  million if we require
additional cash for our operations during the period ending January 31, 2002, as
more fully  described under  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources." However,
our  projections  of future  cash needs and cash flows may  differ  from  actual
results.  If current cash and cash that may be  generated  from  operations  are
insufficient to satisfy our liquidity requirements, we will seek to sell debt or
equity  securities or to obtain a line of credit.  The sale of additional equity
securities  or  convertible  debt could  result in  additional  dilution  to our
stockholders.  We can give  you no  assurance  that we will be able to  generate
adequate funds from operations,  that funds will be available to us from debt or
equity financings or that, if available, we will be able to obtain such funds on
favorable terms and conditions.

     o    We may not generate  sufficient  revenues to support our operations in
          the future or to generate profits.


                                       18
<PAGE>

We are  principally  engaged in the production  and marketing of  hardware-based
peripheral digital  encryption systems called the USS-900,  the DSS-1000 and the
ULP-1.  Our  encryption  products are only in their initial stages of commercial
production and marketing. Our ability to generate sufficient revenues to support
our  operations  in the future or to generate  profits will depend upon numerous
factors, many of which are beyond our control, including:

          o    our  ability  to  successfully  market  our  line  of  encryption
               products;
          o    our continuing ability to purchase the Citadel(TM) CCX encryption
               chip from Harris Corporation for use in our encryption products;
          o    our  production  capabilities  and  those  of  our  suppliers  as
               required for the production of our encryption products;
          o    long-term  product  performance and the capability of our dealers
               and distributors to adequately service our products;
          o    our ability to maintain an acceptable  pricing level to end-users
               for our products;
          o    the ability of suppliers to meet our requirements and schedule;
          o    our  ability  to  successfully  develop  our new  products  under
               development, particularly our new encryption products;
          o    rapidly changing consumer preferences; and
          o    the  possible  development  of  competitive  products  that could
               render our products obsolete or unmarketable.

     o    We are  dependent  upon a few key  executives  and the  loss of  their
          services could adversely affect us.

Our Chief  Executive  Officer,  Denis A.  Krusos,  and our  President,  Frank J.
DiSanto,  founded  our  company in 1982 and are  engaged in the  management  and
operations of our business, including all aspects of our development, production
and marketing of our products and flat panel display technology.  Messrs. Krusos
and DiSanto,  and other senior executives,  are important to our future business
and  financial  arrangements.  The loss of the  services of any such persons may
have a material adverse effect on our business and prospects.

     o    We may not be able to  compete  successfully  in the very  competitive
          market for our encryption products.

The market for our  encryption  products  worldwide  is highly  competitive  and
subject to rapid technological  changes. Most of our competitors are larger than
us and possess financial,  research, service support,  marketing,  manufacturing
and  other  resources  significantly  greater  than  ours.  We  cannot  give any
assurance  that we will be able to  compete  successfully  in the market for our
encryption products.

     o    If we are unable to maintain our Nasdaq National  Market listing,  the
          market price of our common stock could be adversely affected.

The NASD  requires  that we  maintain a minimum  of $4  million of net  tangible
assets and a closing bid price of at least $1 per share in order to continue our
Nasdaq  National Market  listing.  If our stock were delisted,  it could have an
adverse  affect on the market price of our common stock and

                                       19
<PAGE>

the  liquidity of our shares.  As of January 31, 2001,  our net tangible  assets
were  approximately  $5,033,000.  The closing  bid price of our common  stock on
March 14, 2001 was $0.75.




                            PART II OTHER INFORMATION
                            -------------------------


Item 2.  Changes in Securities and Use of Proceeds
         -----------------------------------------

Recent Sales of Unregistered Securities
---------------------------------------

In January  2001,  the Company  issued  3,095  shares of Common Stock in partial
payment for  services  rendered by a consulting  firm,  which were valued on the
basis of the closing price of the  Company's  common stock on the day before the
date of issuance.  The shares of Common Stock were issuance in reliance upon the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended, relative to sales by an issuer not involving a public offering.



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

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

                  None.

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

                  No  current  report on Form 8-K was  filed  for the  Company
                  during the quarter ended January 31, 2001.



                                       20
<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.



                                             By: DENIS A. KRUSOS
                                                 -------------------------------
                                             Denis A. Krusos
                                             Chairman of the Board,
                                             Chief Executive Officer
                                             and Director (Principal Executive
March 19, 2001                               Officer)

                                             By: FRANK J. DISANTO
                                                 -------------------------------
                                             Frank J. DiSanto
March 19, 2001                               President and Director

                                             By: HENRY P. HERMS
                                                 -------------------------------
                                             Henry P. Herms
                                             Vice President - Finance and
                                             Chief Financial Officer  (Principal
March 19, 2001                               Financial and Accounting Officer)




                                       21