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 July 31, 1997
                              ------------------------------------------------
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
September 5, 1997:                                            57,810,176  shares
                                                              ------------------





                                       
<PAGE>





                                TABLE OF CONTENTS


Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

         Condensed  Balance  Sheets  (Unaudited)  as of July 31, 1997 and    
         October 31, 1996
      
         Condensed Statements of Operations (Unaudited)for the nine months ended
         July 31, 1997 and July 31, 1996, and for the period from November 5, 
         1982 (Inception) through July 31, 1997

         Condensed Statements of Operations (Unaudited) for the three months 
         ended July 31, 1997 and July 31, 1996

         Condensed  Statement of  Shareholders'  Equity  (Unaudited) for the 
         period from November 5, 1982 (Inception) through July 31, 1997

         Condensed Statements of Cash Flows (Unaudited) for the nine months 
         ended July 31, 1997 and July 31, 1996, and for the period from  
         November 5, 1982 (Inception) through July 31, 1997

         Condensed Statements of Cash Flows (Unaudited) for the three months 
         ended July 31, 1997 and July 31, 1996

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

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)

                                                                 July 31,            October 31,
                                                                   1997                 1996
                                                               -----------          -----------
<S>                                                     <C>                    <C>    
                         
                                     ASSETS

CURRENT ASSETS:
Cash (including cash equivalents and interest 
   bearing accounts of $15,293,882 and $21,921,133,           
   respectively)                                               $ 15,810,924         $ 22,165,892
Accrued interest receivable                                          39,151               49,306
Prepaid expenses and other current assets (including 
   amounts due from Joint Venture of approximately         
   $3,378,000 and $240,000, respectively)                         3,706,384              378,417                                  
                                                                -----------          -----------
                                                                 19,556,459           22,593,615


PROPERTY AND EQUIPMENT ( net of accumulated depreciation
   and amortization of  $1,000,611 and $816,651,                   
   respectively)                                                    906,769              830,606
INVESTMENT IN JOINT VENTURE ( Note 2)                               813,209            1,058,557
OTHER ASSETS                                                        167,274              227,642
DEFERRED TAX BENEFITS ( net of valuation allowance of
   $26,881,000 and $25,308,000, respectively)                          -                    -
                                                                -----------          -----------
                                                               $ 21,443,711         $ 24,710,420
                                                                ===========          ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued liabilities                        $ 1,527,836          $ 1,960,147
                                                                -----------          -----------

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; outstanding  57,800,176 and                 
   57,404,656 shares, respectively                                  578,002              574,047
Additional paid-in capital                                       52,545,221           50,934,606
Accumulated (deficit) during development stage                  (33,207,348)         (28,758,380)
                                                                -----------          -----------
                                                                 19,915,875           22,750,273
                                                                -----------          -----------
                                                               $ 21,443,711         $ 24,710,420
                                                                ===========          ===========
</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 November
                                                 For the nine months                    5,1982                  
                                                   ended July 31,                    (inception)
                                             ---------------------------               through 
                                                  1997           1996                July 31, 1997
                                             ------------    -----------           ----------------
<S>                                          <C>           <C>                      <C>    
SALES                                              $-            $ -                     $-               
                                              -----------   -------------          ----------------

SELLING, GENERAL AND
 ADMINISTRATIVE EXPENSES
 (including research and development
 expenses of approximately $2,835,000,
 $2,450,000 and $23,578,000, respectively)     4,935,838       3,811,250               36,916,047
                                              -----------   -------------          ----------------

LOSS FROM JOINT VENTURE                          245,348          90,549                  411,791
                                              -----------   -------------          ----------------

INTEREST INCOME                                  732,218         455,782                4,120,490
                                              -----------   -------------          ----------------

NET (LOSS)                                   ($4,448,968)    ($3,446,017)            ($33,207,348)
                                              ===========   =============          ================

NET (LOSS) PER SHARE OF
   COMMON STOCK                                   ($0.08)         ($0.06)                  ($0.73)
                                              ===========   =============          ================

WEIGHTED AVERAGE NUMBER OF
   SHARES OUTSTANDING                          57,614,211      54,024,087              45,695,507 
                                              ===========   =============          ================
</TABLE>

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



                                       4
<PAGE>

                                       


                                          

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

                                                       For the three months
                                                          ended July 31,
                                                  ---------------------------
                                                       1997           1996
                                                  ---------------------------

SALES                                                $    -         $    -      
                                                  -------------    -------------

SELLING, GENERAL AND
 ADMINISTRATIVE EXPENSES
 (including research and development
  expenses of approximately
 $814,000 and $989,000, respectively)                 1,598,042      1,636,105
                                                  --------------   -------------

LOSS FROM JOINT VENTURE                                  87,435         62,153
                                                  --------------   -------------

INTEREST INCOME                                         217,934        218,866
                                                  --------------   -------------

NET (LOSS)                                          ($1,467,543)   ($1,479,392)
                                                  ==============   =============

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

WEIGHTED AVERAGE NUMBER OF
   SHARES OUTSTANDING                                57,768,861     56,289,270
                                                  ==============   =============

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


                                       5
<PAGE>

                                       


<TABLE>
<CAPTION>
 

                                                       COPYTELE, INC.
                                                  (Development Stage Enterprise)
                                          CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY 
                           FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION) THROUGH JULY 31, 1997 (UNAUDITED)

                                                                                                              Accumulated
                                                                                           Additional       (Deficit) 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>
                                                                               

                                       6
<PAGE>

                                       


<TABLE>
<CAPTION>


                                                          COPYTELE, INC.
                                                  (Development Stage Enterprise)
                                           CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
                           FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION) THROUGH JULY 31, 1997 (UNAUDITED)

                                                              Continued
                                                              ---------

                                                                                                               Accumulated   
                                                                                             Additional     (Deficit) 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 July 18,
  1997 under stock option plans, net of
  registration costs                                                 814,200      8,142      2,828,255               -
Common stock issued upon purchase of equipment                        15,000        150         74,850               -
Accumulated (deficit) during development
  stage                                                                 -           -             -           ($33,207,348)
                                                                 ------------  ---------   -------------    ---------------
BALANCE, July 31, 1997                                            57,800,176   $578,002    $52,545,221        ($33,207,348)
                                                                 ============  =========   =============    ===============

</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
                                                       For the nine                   from November
                                                       months ended                      5, 1982
                                                         July 31,                      (inception) 
                                                -------------------------                through
                                                   1997           1996                 July 31, 1997
                                                ----------     ----------           -------------------
<S>                                      <C>              <C>                       <C> 

CASH FLOWS FROM OPERATING ACTIVITIES:
Payments to suppliers, employees and
  consultants                                 ($8,210,504)    ($3,493,258)              ($38,318,237)
Interest received                                 742,373         455,445                  4,081,340
                                              ------------    ------------              --------------
Net cash (used in) operating activities        (7,468,131)     (3,037,813)               (34,236,897)
                                              ------------    ------------              --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and
  equipment                                      (426,407)       (181,286)                (1,775,402)
Disbursements to acquire certificates of 
  deposit and corporate notes and bonds              -              -                    (12,075,191)
Proceeds from maturities of investments              -              -                     12,075,191
Investment made in Joint Venture                     -           (857,500)                (1,225,000)
                                              ------------    ------------              --------------
Net cash (used in) investing activities          (426,407)     (1,038,786)                (3,000,402)
                                              ------------    ------------              --------------

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   1,539,570      16,656,899                 35,465,484
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       1,539,570      16,656,899                 53,048,223
                                              ------------    ------------              --------------

NET (DECREASE) INCREASE IN CASH AND
  CASH EQUIVALENTS                             (6,354,968)     12,580,300                 15,810,924

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                          22,165,892       8,864,293                      -
                                              ------------    ------------              --------------

CASH AND CASH EQUIVALENTS AT END OF 
  PERIOD                                      $15,810,924     $21,444,593                $15,810,924
                                              ============    ============              ==============

                                                                                            Continued
</TABLE>


                                       8
<PAGE>

                                       


<TABLE>
<CAPTION>

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

                                 Continued
                                 ---------
                                                                                      For the period 
                                                        For the nine                   from November
                                                        months ended                     5, 1982 
                                                          July 31,                     (inception) 
                                                -------------------------                through
                                                   1997           1996                 July 31, 1997
                                                ------------  -----------             -----------------
<S>                                         <C>            <C>                      <C>    

RECONCILIATION OF NET (LOSS) TO NET
  CASH (USED IN) OPERATING ACTIVITIES:
Net (loss)                                    ($4,448,968)    ($3,446,017)               ($33,207,348)
Loss from Joint Venture                           245,348          90,549                     411,791
Depreciation and amortization                     183,960          83,460                   1,005,252
Decrease (Increase) in accrued interest
  receivable                                       10,155            (337)                    (39,151)
(Increase) in prepaid expenses and other
  current assets                               (3,327,967)        (11,133)                 (3,706,384)
Decrease (Increase) in other assets                60,369         (16,947)                   (167,274)
(Decrease) Increase in accounts payable and
  accrued liabilities related to operating
  activities                                     (191,028)        262,612                   1,466,217
                                              --------------   ------------              --------------
Net cash (used in) operating activities       ($7,468,131)    ($3,037,813)               ($34,236,897)
                                              ==============   ============              ==============
</TABLE>


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


                                       9
<PAGE>

                                       




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

                                                           For the three
                                                            months ended
                                                              July 31,
                                                     -------------------------
                                                       1997          1996
                                                    ------------    ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Payments to suppliers, employees and
  consultants                                       ($2,931,241)  ($1,513,631)
Interest received                                       187,566       191,816
                                                    -------------  -----------
Net cash (used in) operating activities              (2,743,675)   (1,321,815)
                                                    -------------  -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and
  equipment                                             (62,217)      (28,901)
Investment made in joint venture subsidiary                 -        (367,500)
                                                    -------------  -----------
Net cash (used in) investing activities                 (62,217)     (396,401)
                                                    -------------  -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and
  warrants, net of registration disbursements           141,126     9,254,228
                                                    -------------  -----------
Net cash provided by financing activities               141,126     9,254,228
                                                    -------------  -----------

NET (DECREASE) INCREASE IN CASH AND
  CASH EQUIVALENTS                                   (2,664,766)    7,536,012

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                                18,475,690    13,908,581
                                                    -------------  -----------

CASH AND CASH EQUIVALENTS AT END OF
  PERIOD                                             $15,810,924  $21,444,593
                                                    =============  ===========


RECONCILIATION OF NET (LOSS) TO NET
  CASH (USED IN) OPERATING ACTIVITIES:
Net (loss)                                           ($1,467,543) ($1,479,392)
Loss from Joint Venture                                   87,435       62,153
Depreciation and amortization                             60,631       37,089
(Increase) in accrued interest receivable                (30,368)     (27,050)
(Increase) in prepaid expenses and other
  current assets                                      (1,563,431)     (13,404)
(Increase) in other assets                               (17,317)     (53,326)
Increase in accounts payable and accrued
  accrued liabilities related to operating activities    186,918      152,115
                                                       ----------  ----------
Net cash (used in) operating activities              ($2,743,675) ($1,321,815)
                                                       ==========  ==========

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


                                       10
<PAGE>

                                       



                                 
                                 COPYTELE, INC.

                         (Development Stage Enterprise)

                        NOTES TO CONDENSED FINANCIAL STATEMENTS

                               July 31, 1997 (UNAUDITED)


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

     CopyTele,  Inc. (the  "Company"),  is a development  stage enterprise whose
     principal   activities   include  the   development   of  telephone   based
     multi-functional  telecommunications  products  incorporating the Company's
     ultra-high  resolution  flat panel  display,  the further  expansion of its
     overall  flat panel  display  technology,  and the  operations  of Shanghai
     CopyTele  Electronics  Co.,  Ltd.  ("SCE"),  its 55% owned joint venture in
     China, for the production of its telecommunication  products. The remaining
     45%  of  SCE  is  owned  by  two  Chinese  companies,  Shanghai  Electronic
     Components Corp.  ("SECC") which owns 35% and Shanghai  International Trade
     and Investment  Developing Corp.  ("SIT") which owns 10%. Reference is made
     to Note 2, and "Management's Discussion and Analysis of Financial Condition
     and  Results of  Operations"  for further  discussion  involving  SCE.  The
     Company and SECC have  entered  into a letter of intent  with  respect to a
     second joint venture which would manufacture and sell electronic components
     and parts used in SCE's  products  and in products  of other  manufacturers
     (the "Second Joint Venture").  

     The Company has produced a multi-functional  telephone-based product called
     MAGICOM(R)  2000 that can send and receive  handwritten  communications  as
     well  as  simultaneous  voice  and  electronic  handwriting  over a  single
     telephone line. This personal  communications product offers many features,
     including  digital  voice,  fax with full page  transmission  and paperless
     reception,   full  duplex   speakerphone,   e-mail   communications,   data
     transmission,  storage and computer interface,  as well as personal copying
     capabilities  with the use of an optional  Company  printer,  called  Magic
     Printer,  and the ability to send  alphanumeric  messages to pagers using a
     touch sensitive keyboard screen. MAGICOM(R) 2000 incorporates the Company's
     patented  high   resolution   flat  panel  display,   called   E-PAPER(TM),
     representing "electronic paper".

     Reference is made to the October 31, 1996 audited financial  statements and
     notes thereto  included in the Company's Annual Report on Form 10-K for the
     fiscal year ended October 31, 1996,  for more  extensive  disclosures  than
     contained in these condensed financial statements.

     Since  MAGICOM(R) 2000 is the Company's first product and is in its initial
     sales stage, sales and related gross profit are being deferred at this time
     as permitted under generally accepted  accounting  principles.  Income from
     sales,  which was limited by product  enhancements  introduced  late in the
     quarter,  is not  material  to  these  financial  statements.  

     The  Company,  which  controls  four of the seven  votes of SCE's  board of
     directors,  has reflected its  investment in SCE under the equity method of
     accounting  in  the  accompanying  condensed  financial  statements.  Under
     certain  circumstances,  decisions involving SCE require either a unanimous
     or two-thirds vote of SCE's board of directors.

     The information contained herein for the nine and three month periods ended
     July 31, 1997 and 1996 and for the period from November 5, 1982 (inception)
     through July 31, 1997 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.


                                       11
<PAGE>

     The Company  invests  principally  in short-term  highly  liquid  financial
     instruments  with  maturities  of less than three  months,  which have been
     classified  as  cash  equivalents  in the  accompanying  condensed  balance
     sheets. The cost of these investments approximates market value.

     The Company has adopted all recently issued accounting standards which have
     a material impact on its condensed  financial  statements.  The Company has
     implemented  Statement of Financial  Accounting Standards ("SFAS") No. 123,
     "Accounting for Stock Based Compensation" as disclosed in Note 3.

     The  amounts due from the Joint  Venture of  approximately  $3,378,000  and
     $240,000,  respectively,  on  the  accompanying  Condensed  Balance  Sheets
     represent  certain  parts,  such as the  flat  panel  assembly  components,
     purchased by the Company on behalf of SCE which are  incorporated  into the
     MAGICOM(R) 2000 product.

 (2) Investment in SCE:
     ------------------

     The Company has  contributed  $1,225,000 in cash, and technology  which has
     been  valued for  purposes  of SCE 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  (see Note 1) and will  recognize
     losses on SCE to the extent of its cash investment.

     Condensed  Balance Sheets for SCE at July 31, 1997 and October 31, 1996 and
     Condensed  Statements of  Operations  for the nine month periods ended July
     31, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>

                            Condensed Balance Sheets
                            ------------------------
                                   (Unaudited)

                                                   July 31,      October 31,
                                                    1997             1996
                                                -------------    -------------
<S>                                           <C>              <C>    
       
        Cash and other current assets            $   106,312       $  993,049
        Inventories                                4,027,463             -
        Fixed assets and land occupancy
        rights, net, and other                     
        non-current assets                         2,229,973        1,792,538
                                                -------------    -------------
             Total Assets                         $6,363,748       $2,785,587
                                                =============    =============

        Short-term loans                         $   500,235       $     -
        Accounts payable and accrued               
        liabilities                                3,812,224          288,210
        Capital                                    2,051,289        2,497,377
                                                -------------    -------------
             Total Liabilities and Capital       $ 6,363,748       $2,785,587
                                                =============    =============
</TABLE>
<TABLE>
<CAPTION>


                       Condensed Statements of Operations
                       ----------------------------------
                                   (Unaudited)
                                                 
                                                   For the nine months ended
                                                ------------------------------
                                               July 31, 1997      July 31,1996
                                               --------------    --------------               
<S>                                          <C>             <C>   
                                            
       Net sales                                $     -          $     -
       Operating (loss)                           (440,470)        (179,016)
       Other income/(expense)                       (5,618)          14,381
                                                =============    =============
       Net (loss)                              ($  446,088)     ($  164,635)
                                                =============    =============
</TABLE>


     Amounts  due  the  Company  of   approximately   $3,378,000  and  $240,000,
     respectively,  are included in accounts payable and accrued  liabilities on
     the Condensed  Balance  Sheets.  Since  MAGICOM(R) 2000 is also SCE's first
     product and also in its initial sales stage, sales and related gross profit
     are being  deferred  at this time as  permitted  under  generally  accepted
     accounting principles.

                                       12
<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").

     Statement of Financial  Accounting  Standards ("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
     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.  Accordingly,  under APB  Opinion  No.  25, no
     compensation cost has been recognized by the Company.

     Had compensation cost for these plans been determined  consistent with SFAS
     Statement 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 nine Months     For the nine Months
                                     Ended July 31, 1997     Ended July 31, 1996
                                     -------------------     -------------------
<S>                                   <C>                      <C>    

       Net Loss:    As Reported            ($ 4,448,968)            ($3,446,017)

                    Pro Forma              ($12,802,621)            ($8,186,556)
       Net Loss
       Per Share:   As Reported                  ($0.08)                 ($0.06)

                    Pro Forma                    ($0.22)                 ($0.15)

</TABLE>

     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 nine  months  ended July 31,  1997 and
     1996,  respectively:  risk free interest rates of 5.60% and 5.99%; expected
     dividend  yields  of 0% and 0%;  expected  lives of 2.56  and 2 years;  and
     expected stock price  volatility of 69% and 70%. The weighted  average fair
     value of options  granted under SFAS  Statement No. 123 for the nine months
     ended July 31, 1997 and 1996 are $2.28 and $1.66, respectively.

     Information regarding the 1987 Plan from October 31, 1996 to July 31, 1997,
     after  adjustments  for all  applicable  stock splits,  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,      
       1996                                    754,360           $4.75

       Exercised                               (68,200)          $2.93

                                             -------------
       Shares under option at July 31, 1997    686,160           $4.93
                                             =============

       Exercisable at July 31, 1997            686,160           $4.93
                                             =============

</TABLE>


                                       13
<PAGE>

     The exercise  price with respect to each option granted under the 1987 Plan
     from its  inception  was  equal to at least  the fair  market  value of the
     underlying  common stock of the Company (the "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, 1996 to July 31, 1997
     after  adjustments  for all  applicable  stock splits,  is presented in the
     table and narrative below:


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

       Shares under option at October 31,         
       1996                                       9,174,860       $5.32

       Granted                                    2,905,500       $4.73

       Exercised                                   (213,500)      $3.97

       Canceled                                    (155,500)      $6.34
                                              ----------------

       Shares under option at July 31,      
       1997                                      11,711,360       $5.19
                                              ================

       Exercisable at  July  31, 1997             8,993,360       $5.22
                                              ================



     The exercise  price with respect to each option granted under the 1993 Plan
     from its  inception  was  equal to at least  the fair  market  value of the
     underlying  Common Stock on the date of grant. At July 31, 1997,  3,280,000
     options were available for future grants under the 1993 Plan.

     From  August 1, 1997  through  September  5,  1997,  the  Company  received
     proceeds  aggregating  approximately  $33,125  relating to the  exercise of
     options to  purchase  10,000  shares of Common  Stock  pursuant to the 1993
     Plan.

     As of  September 5, 1997,  8,983,360  of the options to purchase  shares of
     Common Stock granted and outstanding under the 1993 Plan were exercisable.



                                       14
<PAGE>

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

     Information  from  October  31, 1996 to July 31,  1997  regarding  warrants
     previously  issued by the Company,  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,   after  adjustments  for  anti-dilution
     provisions and all applicable stock splits, is as follows:

                                                               Current Weighted
                                                               Average Exercise
                                                    Shares     Price Per Share
                                                    ------     ---------------
  
       Shares covered by warrants at October                            
       31, 1996                                     415,116           $5.11
       Warrants exercised                          ( 98,820)          $5.10    
       Warrants expired                            (169,296)          $5.08
                                                 --------------
       Shares covered by warrants at July 31,                
       1997                                         147,000           $5.10
                                                 ==============


     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.  As of July 31, 1997,  all of the  warrants to purchase  shares of
     Common Stock issued and outstanding were exercisable.

(5)  Subsequent Events:
     ------------------

     On August 27, 1997,  Mr. John E.  Gillies,  a Director of the Company since
     1992, passed away. During his tenure as Director,  Mr. Gillies provided the
     Company  with his  guidance  and  support  in all  material  aspects of the
     Company's  activities.  Mr.  Gillies  also  served on the  Company's  Audit
     Committee where he interfaced with the Company's independent auditors.

     On  September  4, 1997,  the  remaining  Directors  elected  Mr.  George P.
     Larounis to serve as an interim  Director  until the next annual meeting of
     stockholders  when the Board of  Directors  are elected or  reelected.  Mr.
     Larounis has held numerous positions as a senior international executive of
     Bendix International and Allied Signal and is a foreign patent attorney. He
     has  served on the Board of  Directors  of  numerous  affiliates  of Allied
     Signal  in  Europe,  Asia and  Australia.  Prior to  being  elected  to the
     Company's  Board of Directors,  Mr.  Larounis served as a consultant and an
     advisor to the Company.




                                       15
<PAGE>

  
     Item 2.  Management's  Discussion  and Analysis of Financial  Condition and
              Results of Operations.
              ----------------------
              
     The Company,  which is a development stage enterprise,  was incorporated on
     November 5, 1982 and has had no revenues,  other than  initial  sales which
     have been  deferred,  to support its operations  since its  inception.  The
     Company's  principal  activities  are the  development  of telephone  based
     multi-functional  telecommunications  products  incorporating the Company's
     ultra-high  resolution  flat panel  display,  the further  expansion of its
     overall flat panel technology, and the operations of SCE, the Company's 55%
     owned joint venture in China for the  production  of its  telecommunication
     products.  The Company's  interest in SCE is accounted for under the equity
     method  of  accounting  (see  Notes  1 and  2 to  the  Company's  condensed
     financial statements). During the past year, the Company also increased its
     efforts to develop ultra-high resolution video and color capability for the
     further expansion of its overall flat panel display  technology.  There can
     be no assurance,  however,  that the Company's efforts in this area will be
     successful.  There is also no  assurance  that the  Company  will  generate
     significant  revenues  in the  future,  will have  sufficient  revenues  to
     generate  profits  or that other  products  will not be  produced  by other
     companies  that will render the  products of the Company or SCE obsolete or
     unmarketable.

     The Company has entered into  marketing  agreements  with  distributors  in
     several countries  throughout the world.  These agreements are for terms of
     three years and provide for the purchase of the distributors'  requirements
     of the Company's  MAGICOM(R) 2000 product in their respective  territories.
     The  agreements   provide  for  periodic   purchase  orders  in  increasing
     quantities,  to be  accompanied  by  irrevocable  bank  letters  of  credit
     furnished by the distributors.  The Company is providing  technical support
     to its  distributors  and has added features and made changes in MAGICOM(R)
     2000 in order to  assist  them in  meeting  their  respective  governmental
     telecommunications  approval  and  customer  requirements.  The Company has
     commenced  fulfilling  initial orders from the  distributors for MAGICOM(R)
     2000  units  incorporating  these  features  and  changes,  which are being
     produced by SCE.

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

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

     Safe Harbor Statement Under the Private Securities Litigation Reform Act of
     1995
     ----
     Except  for  the  historical  information  contained  herein,  the  matters
     discussed  in this  Quarterly  Report  on  Form  10-Q  are  forward-looking
     statements  relating  to future  events  which  involve  certain  risks and
     uncertainties,  including  those  identified  herein  and in the  Company's
     Annual  Report on Form 10-K for the fiscal year ended October 31, 1996 (the
     "1996  10-K").  See  "Business"  and  Note  1 to  the  Company's  Financial
     Statements   contained   in  the  1996  10-K  for   discussions   regarding
     uncertainties  that may  significantly  affect the  results of  operations,
     future liquidity and capital resources.



                                       16
<PAGE>

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

     Since  MAGICOM(R) 2000 is the Company's first product and is in its initial
     sales stage, sales and related gross profit are being deferred at this time
     as permitted under generally accepted  accounting  principles.  Income from
     sales,  which was limited by product  enhancements  introduced  late in the
     quarter, is not material to these financial  statements.  Selling,  general
     and administrative expenses for the nine and three month periods ended July
     31,  1997 and 1996 and for the period  from  November  5, 1982  (inception)
     through   July  31,  1997  were   approximately   $4,936,000,   $3,811,000,
     $1,598,000, $1,636,000 and $36,916,000, respectively. These amounts include
     research,  development  and  tooling  costs  of  approximately  $2,835,000,
     $2,450,000,  $814,000,  $989,000 and $23,578,000  respectively,  as well as
     normal   operating   expenses.   The  increase  in  selling,   general  and
     administrative expenses during the comparative nine month period ended July
     31, 1997, of approximately  $1,125,000 resulted primarily from increases in
     compensation (including related costs), engineering supplies, and marketing
     costs  necessitated  by the  present  phase  of the  Company's  development
     program and related activities.  Compensation expense increased as a result
     of the staffing of a marketing  department  and the addition of  scientific
     personnel  to  increase  the  Company's   efforts  to  develop   ultra-high
     resolution  video and color  capability  for its overall flat panel display
     technology.  Engineering  supplies  increased  primarily  as  a  result  of
     expensing  components  used for  training  purposes at SCE, and the Company
     obtaining  sample  quantities  of  MAGICOM(R)  2000,  produced by SCE,  for
     evaluation to insure product  quality.  Other  operating  costs,  including
     marketing,  travel,  rent and  communication  costs,  also increased in the
     current period.  Marketing costs increased as a result of the production of
     marketing brochures and videos, while travel costs increased as a result of
     travel  associated with selecting  distributors  and attending trade shows.
     Travel  expenses to China also increased due to the Company's need to train
     SCE's technical personnel. The increase in rent was a result of the Company
     increasing the size of its facilities.  Professional  fees decreased in the
     aggregate as a result of significantly lower patent application preparation
     fees  in  the  current  period.  The  decrease  in  selling,   general  and
     administrative  expenses  during the  comparative  three month period ended
     July 31, 1997 of approximately $38,000 resulted primarily from decreases in
     engineering supplies,  payroll taxes associated with stock option exercises
     and travel related costs to a lesser extent.  Other operating costs such as
     compensation and marketing costs increased in the current period.

     The  Company's  portion of SCE's loss  increased  during the nine and three
     month  periods by $155,000  and $25,000,  respectively,  as compared to the
     same  periods  in 1996.  The  increases  in the  losses  were the result of
     progressively higher costs as SCE approached and entered the initial stages
     of production of MAGICOM(R) 2000.

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

     The increase in interest income of  approximately  $276,000 during the nine
     months ended July 31, 1997 as compared to the same period in 1996 primarily
     resulted from an increase in funds available for investment aided by higher
     interest  rates. In the three month  comparison,  lower funds available for
     investment  were  offset by higher  interest  rates.  Funds  available  for
     investment  during the nine and three month periods ended July 31, 1997 and
     1996, on a monthly weighted average basis, were approximately  $18,600,000,
     $14,638,000,  $16,505,000  and  $21,380,000,  respectively.  The investment
     instruments  selected by the Company are principally  money market accounts
     and commercial paper.



                                       17
<PAGE>

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

     Since  its  inception,  the  Company  has met  its  liquidity  and  capital
     expenditure  needs primarily from the proceeds of the sales of Common Stock
     in its initial public  offering,  in private  placements,  upon exercise of
     warrants  issued in  connection  with the  private  placements  and  public
     offering,  and upon exercise of stock options pursuant to the 1987 Plan and
     the 1993 Plan.

     From  November  1, 1996 to July 31,  1997,  the Company  received  proceeds
     aggregating approximately $1,047,000 relating to the exercise of options to
     purchase  281,700 shares of Common Stock under the 1987 and 1993 Plans.  In
     addition,  proceeds  aggregating  approximately  $504,000  relating  to the
     exercise  of  warrants  to  purchase  98,820  shares of Common  Stock  were
     received in the same period.

     SCE contemplates an initial capitalization of $7,000,000,  of which half is
     expected to be borrowed from banks,  and the balance of $3,500,000 has been
     invested  by the  Company,  SECC  and  SIT.  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 capitalization of up to $25 million,  depending upon the nature and
     extent of its business activities.

     On April 17,  1996,  the  Company  entered  into a letter of intent for the
     formation of a second joint  venture with SECC.  The parties are  presently
     discussing  possible  amendments to the letter of intent.  As stipulated in
     the letter of intent, unless otherwise amended, the Second Joint Venture is
     expected to have an initial capitalization of approximately  $2,000,000, of
     which half would consist of bank borrowings.  The Company would invest cash
     of approximately  $550,000 and SECC would  contribute  cash,  equipment and
     technology  collectively  valued at $450,000.  The Second Joint Venture may
     require an ultimate  capitalization  of up to $10 million  depending on the
     nature  and extent of its  business  activities  which,  if  necessary,  is
     expected to be financed through a combination of bank borrowings and equity
     investments  contributed  by the  parties  in  proportion  to their  equity
     interests and on terms to be agreed upon.

     The Company believes that without taking into  consideration  revenues from
     sales of MAGICOM(R)  2000 it will have  sufficient  funds through the first
     quarter of fiscal 2000 to maintain its present level of development efforts
     and to make its anticipated capital  contribution of $550,000 to the Second
     Joint Venture.

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

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

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


                                       18
<PAGE>

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


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

     At the Company's Annual Meeting of Shareholders held on July 23, 1997, five
     directors were elected, an amendment to the CopyTele,  Inc.  Certificate of
     Incorporation  was  approved  and the  selection  of Arthur  Andersen  LLP,
     independent public  accountants,  to audit the financial  statements of the
     Company  for the fiscal year ending  October  31,  1997 was  ratified.  The
     following  is a  tabulation  of the voting  with  respect to the  foregoing
     matters:


     (a)   Election of Directors -

                  Nominee                     For          Withheld
                  -------                     ---          --------

            Denis A. Krusos               52,136,871        560,907
            Frank J. DiSanto              52,131,301        566,474
            John R. Shonnard              51,948,457        749,318
            John E. Gillies               51,952,487        745,288
            Gerald J. Bentivegna          52,142,921        554,854

     (b)   Approval of Amendment to the CopyTele, Inc. Certificate of 
           Incorporation.

                  For                      Against          Abstain
                  ---                      -------          -------

              50,127,895                   2,410,400        159,480

     (c)   Ratification  of  selection  of Arthur  Andersen  LLP as  Independent
           Auditors for the Fiscal Year Ending October 31, 1997:

                  For                      Against          Abstain
                  ---                      -------          -------

              52,393,164                     200,415        104,196

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

     (a)  Exhibits

          3.1 Certificate of Amendment to the Certificate of 
              Incorporation of CopyTele, Inc.
          
           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
     July 31, 1997.


                                       19
<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
September 12, 1997                              Executive Officer)



                                                FRANK J. DISANTO
                                                ----------------
                                                Frank J. DiSanto
September 12, 1997                              President and Director



                                                GERALD J. BENTIVEGNA
                                                --------------------
                                                Gerald J. Bentivegna
                                                Vice President - Finance and
                                                Chief Financial Officer and
                                                Director (Principal Financial
September 12, 1997                              and Accounting Officer)


                                     



                                       20
<PAGE>
                                       

        


                              EXHIBIT INDEX

EXHIBIT No.                   Description
-----------                   ------------

     3.1                        Certificate of Amendment to the Certificate
                                of Incorporation of CopyTele, Inc.
     
     27             -           Financial Data Schedule



                                       21
<PAGE>
                                       



                        CERTIFICATE OF AMENDMENT

                                 TO THE

                      CERTIFICATE OF INCORPORATION

                                   OF

                             COPYTELE, INC.


         Pursuant to Section 242 of the General Corporation Law
                        of the State of Delaware


     THE UNDERSIGNED, DENIS A. KRUSOS, being the Chairman of the Board and Chief
     Executive Officer of CopyTele,  Inc., a corporation  organized and existing
     under  laws of the  State of  Delaware  (the  "Corporation"),  DOES  HEREBY
     CERTIFY:

     FIRST:  That article  FOURTH of the  Certificate  of  Incorporation  of the
     Corporation is hereby amended to read as follows:

     "FOURTH:  The total  number of shares of stock that the  Corporation  shall
     have authority to issue is two hundred forty million five hundred  thousand
     (240,500,000),  of which two hundred forty million  (240,000,000)  shall be
     Common Stock of the par value of $.01 per share and five  hundred  thousand
     (500,000) shall be Preferred Stock of the par value of $100 per share.  The
     500,000 shares of Preferred Stock may be issued from time to time in one or
     more  series,  each of such  series to have  such  voting  powers,  full or
     limited,  or no  voting  powers,  designations,  preferences  and  relative
     participating,  optional or other  special  rights and  qualifications  and
     limitations or  restrictions as are stated and expressed in the resolutions
     providing for the issue of such series adopted by the Board of Directors as
     hereinafter provided. Authority is hereby expressly granted to the Board of
     Directors to establish and designate one or more series of Preferred  Stock
     and to fix the relative rights, preferences and limitations of each series,
     including without limitation:

        1.    The number of shares to constitute such series and the
              distinctive designations thereof;

        2.    The  dividend  rate to which  such  shares  shall  be  entitled  
              and the restrictions,   limitations   and  conditions  upon  the  
              payment  of  such dividends,  whether  dividends shall be 
              cumulative, the date or dates from which dividends (if cumulative)
              shall accumulate and the dates on which dividends (if declared) 
              shall be payable;
        
        3.    Whether or not the shares of such series  shall be  redeemable
              and, if so, the terms,  limitations and restrictions with respect 
              to such  redemption, including without limitation the manner of
              selecting shares for redemption if less than all shares are to be
              redeemed,  and  the  amount,  if any, in addition to any accrued
              dividends thereon, which the holders of shares of such series 
              shallbe entitled to receive upon the redemption thereof, which 
              amount may vary at different redemption dates and may be different
              with respect to shares redeemed through the operation of any 
              purchase, retirementof sinking fund and with respect to shares 
              otherwise redeemed;
        4.    The amount in addition to any accrued  dividends thereon which
              the  holders of shares of such series shall be entitled to receive
              upon  the  voluntary or involuntary liquidation, dissolution  or
              winding up of the Corporation, which  amount may vary at different
              dates and may  vary depending on whether such liquidation,
              dissolution or winding up is voluntary or involuntary;


                                       

                                       22
<PAGE>

        5.    Whether or not the shares of such series shall be subject to the
              operation of a purchase, retirement or sinking fund and, if so, 
              the terms, limitations and restrictions with respect thereto,  
              including without limitation whether such purchase, retirement or 
              sinking fund shall be cumulative or non-cumulative, the extent to 
              and the manner in which such fund shall be applied to the 
              purchase, retirement or redemption of the shares of such series 
              for  retirement or to other corporate purposes and the terms and  
              provisions relative to theoperation thereof;

        6.    Whether or not the shares of such series shall have conversion 
              privileges and, if so, prices or rates of conversion and the
              method, if any, of adjusting the same;

        7.    The voting powers, if any, of such series; and

        8.    Any other relative rights, preferences and limitations
              thereof as shall not be inconsistent with this Article."

     SECOND:  That this  amendment to the  Certificate of  Incorporation  of the
     Corporation  has  been  duly  adopted  by the  Board  of  Directors  of the
     Corporation and by the affirmative vote of the holders of a majority of the
     outstanding  shares of the  Corporation's  common stock, par value $.01 per
     share,  in  accordance  with the  provisions  of Section 242 of the General
     Corporation Law of the State of Delaware.


     IN  WITNESS  WHEREOF,  Denis A.  Krusos,  Chairman  of the  Board and Chief
     Executive Officer of the Corporation, has duly executed this Certificate of
     Amendment this 23rd day of July,  1997 and affirms,  under the penalties of
     perjury, that the statements herein are true and correct.


                               /s/ Denis A. Krusos
                               -------------------
                               Denis A. Krusos
                               Chairman of the Board and
                               Chief Executive Officer



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