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, 1999

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 10, 1999:        60,057,376   shares

<PAGE>


                             TABLE OF CONTENTS


Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed Balance Sheets as of July 31, 1999 (Unaudited) and
         October 31, 1998

         Condensed  Statements  of  Operations  (Unaudited)  for the nine months
         ended July 31, 1999 and July 31, 1998, and for the period from November
         5, 1982 (Inception) through July 31, 1999

         Condensed  Statements  of Operations  (Unaudited)  for the three months
         ended July 31, 1999 and July 31, 1998

         Condensed Statement of Shareholders'  Equity (Unaudited) for the period
         from November 5, 1982 (Inception) through July 31, 1999

         Condensed  Statements  of Cash Flows  (Unaudited)  for the nine  months
         ended July 31, 1999 and July 31, 1998, and for the period from November
         5, 1982 (Inception) through July 31, 1999

         Condensed  Statements  of Cash Flows  (Unaudited)  for the three months
         ended July 31, 1999 and July 31, 1998

         Notes to Condensed Financial Statements (Unaudited)

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

Part II. OTHER INFORMATION

Item 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,
                                           ASSETS                                  1999               1998
                                           ------                               -----------        -----------
<S>                                                                          <C>                <C>
CURRENT ASSETS:
  Cash (including cash equivalents and interest bearing accounts of
    $2,287,704 and $5,363,522, respectively)                                    $2,349,246         $5,406,017
  Marketable securities, at cost                                                   488,038               -
  Accrued interest receivable                                                        4,767              3,983
  Inventory                                                                      3,618,005          2,719,215
  Prepaid expenses and other current assets (including amounts due from
  Joint Venture of approximately $663,000 and $825,000, respectively)              744,699            904,656
                                                                                ------------       ------------
                      Total current assets                                       7,204,755          9,033,871

PROPERTY AND EQUIPMENT (net of accumulated depreciation
  and amortization of $1,559,131 and $1,351,778, respectively)                     599,036            766,106

INVESTMENT IN JOINT VENTURE (Note  2)                                              274,941            345,947

AMOUNTS DUE FROM JOINT VENTURE                                                   2,359,637          3,091,628

OTHER ASSETS                                                                       102,914             97,420

DEFERRED TAX BENEFITS (net of valuation allowance of
  $32,708,000 and $30,910,000, respectively)                                          -                  -
                                                                               ------------       ------------
                                                                               $10,541,283        $13,334,972
                                                                               ============       ============

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

CURRENT LIABILITIES:
  Accounts payable (including amounts due to Joint Venture of
    approximately $663,000 and $662,000, respectively)                          $1,319,285         $1,392,321
  Accrued liabilities                                                              272,916             81,738
                                                                                ------------       ------------
                       Total current liabilities                                 1,592,201          1,474,059

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 59,152,376 and 57,871,176  shares, respectively             591,524            578,712
  Additional paid-in capital                                                    54,971,178         52,977,110
  Accumulated (deficit) during development stage                               (46,613,620)       (41,694,909)
                                                                               ------------       ------------
                                                                                 8,949,082         11,860,913
                                                                               ------------      -------------
                                                                               $10,541,283        $13,334,972
                                                                               ============      =============

</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 nine months                  For the period from
                                                                              ended July 31,                       November 5, 1982
                                                              -----------------------------------------          (inception) through
                                                                     1999                     1998                   July 31, 1999
                                                              ------------------     ------------------         --------------------

<S>                                                          <C>                        <C>                      <C>
SALES                                                             $    -                  $     -                     $    -
                                                              ------------------     ------------------         --------------------

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, (including
  research and development expenses of approximately
  $2,203,000, $3,032,000 and $30,514,000, respectively)             4,909,332               5,530,414                  50,499,466
                                                              ------------------     ------------------         --------------------

LOSS FROM JOINT VENTURE                                               142,506                 301,546                   1,021,559
                                                              ------------------     ------------------         --------------------

INTEREST INCOME                                                       133,127                 394,954                   4,907,405
                                                              ------------------     ------------------         --------------------

NET (LOSS)                                                        ($4,918,711)            ($5,437,006)               ($46,613,620)
                                                              ==================     ==================         ====================

NET (LOSS) PER SHARE OF COMMON STOCK: Basic and Diluted                ($0.08)                 ($0.09)                     ($0.99)
                                                              ==================     ==================         ====================

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic and
  Diluted                                                          58,491,880              57,864,033                  47,177,199
                                                              ==================     ==================         ====================

</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 STATEMENTS OF OPERATIONS (UNAUDITED)
                 ----------------------------------------------

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

                                                                      1999                       1998
                                                            --------------------     --------------------

<S>                                                            <C>                         <C>
SALES                                                             $     -                     $    -
                                                            --------------------     --------------------

SELLING, GENERAL AND ADMINISTRATIVE
  EXPENSES, (including research and
  development expenses of approximately
  $724,000 and $926,000, respectively)                              1,897,197                1,697,141
                                                            --------------------     --------------------

LOSS FROM JOINT VENTURE                                                29,411                   94,165
                                                            --------------------     --------------------

INTEREST INCOME                                                        36,352                  106,187
                                                            --------------------     --------------------

NET (LOSS)                                                        ($1,890,256)             ($1,685,119)
                                                            ====================     ====================

NET (LOSS) PER SHARE OF COMMON
  STOCK: Basic and Diluted                                             ($0.03)                  ($0.03)
                                                            ====================     ====================

WEIGHTED AVERAGE NUMBER OF SHARES
  OUTSTANDING: Basic and Diluted                                   59,085,633               57,869,654
                                                            ====================     ====================

</TABLE>

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, 1999 (UNAUDITED)
 ----------------------------------------------------------------------------------



                                                                                                    Additional        Accumulated
                                                                           Common Stock              Paid-in       (Deficit) During
                                                                        Shares     Par Value         Capital       Development 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, 1999 (UNAUDITED)
 ----------------------------------------------------------------------------------


                                    Continued
                                    ---------

                                                                                                   Additional        Accumulated
                                                                           Common Stock              Paid-in       (Deficit) During
                                                                        Shares    Par Value          Capital       Development 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 purchase of equipment                            15,000       150             74,850               -
Common stock issued upon  exercise of stock  options from
  July 1996 to July 1999 under stock option plans, net
  of  registration costs                                              1,766,400    17,664          4,406,962                -
Sale of common stock, at market, to a related party and an
unrelated party on April 30, 1999                                        400,000     4,000            596,000               -
Stock options granted to consultants                                        -          -              251,250               -
Accumulated (deficit) during development stage                              -          -                  -          ( 46,613,620)
                                                                    ------------ ------------    --------------    ---------------
BALANCE, July 31, 1999                                                59,152,376  $591,524        $54,971,178        ($46,613,620)
                                                                    ============ ============    ==============    ===============

</TABLE>

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

                                       7
<PAGE>
<TABLE>
<CAPTION>

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


                                                                               For the nine
                                                                               months ended                      For the period from
                                                                                 July 31,                          November 5, 1982
                                                               -------------------------------------------      (inception) through
                                                                      1999                   1998                   July 31, 1999
                                                               --------------------   --------------------    ----------------------
<S>                                                              <C>                  <C>                          <C>
Payments to suppliers, employees and consultants                    ($4,533,039)          ($6,513,801)                 ($53,980,381)
Interest received                                                       132,343               410,654                     4,902,639
                                                               --------------------   --------------------    ----------------------
Net cash (used in) operating activities                              (4,400,696)           (6,103,147)                  (49,077,742)
                                                               --------------------   --------------------    ----------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and
  equipment                                                             (41,767)             (105,805)                   (2,024,926)
Disbursements to acquire certificates of deposit
  and marketable securities                                            (488,038)             (972,469)                  (13,534,037)
Proceeds from maturities of investments                                    -                  970,808                    13,045,999
Investment made in Joint Venture                                        (71,500)                  -                      (1,296,500)
                                                               --------------------      -----------------     ---------------------
Net cash (used in) investing activities                                (601,305)             (107,466)                   (3,809,464)
                                                               --------------------      -----------------     ---------------------

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                                       600,000                  -                       18,247,369
Proceeds from exercise of stock options and warrants, net of
  registration disbursements                                          1,345,230                28,125                    37,053,713
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                             1,945,230                28,125                    55,236,452
                                                               --------------------      -----------------       -------------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                 (3,056,771)           (6,182,488)                    2,349,246


CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                      5,406,017            12,329,171                         -
                                                               --------------------      -----------------       -------------------

CASH AND CASH EQUIVALENTS AT END OF
  PERIOD                                                             $2,349,246            $6,146,683                    $2,349,246
                                                               ====================      =================      ===================
                                                                                                                          Continued

</TABLE>

                                       8
<PAGE>
<TABLE>
<CAPTION>


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

                                    Continued
                                    ---------

                                                                          For the nine
                                                                          months ended                        For the period from
                                                                            July 31,                            November 5, 1982
                                                           --------------------------------------------       (inception) through
                                                                  1999                     1998                 July 31, 1999
                                                           -------------------      -------------------      ---------------------
<S>                                                              <C>                  <C>                     <C>
RECONCILIATION OF NET (LOSS) TO NET CASH (USED IN)
  OPERATING ACTIVITIES:
Net (loss)                                                     ($4,918,711)             ($5,437,006)              ($46,613,620)
Loss from Joint Venture                                            142,506                  301,546                  1,021,559
Stock option compensation to consultants                            61,650                  255,000                    251,250
Depreciation and amortization                                      207,353                  219,684                  1,574,789
Amortization of discount on marketable
   securities                                                         -                       9,729                       -
(Increase) decrease in accrued interest
   receivable                                                         (784)                   5,971                     (4,767)
(Increase) in inventory                                           (898,790)              (1,709,832)                (3,618,005)
Decrease (increase) in prepaid expenses and
  other current assets                                             159,957                    8,848                   (744,699)
Decrease (increase) in long term amount due from Joint
  Venture                                                          731,991                      -                   (2,359,637)
 (Increase) decrease in other assets                                (5,494)                  14,610                   (102,914)
Increase in accounts payable and accrued
  liabilities                                                      119,626                  228,303                  1,518,302
                                                           -------------------      -------------------      ---------------------
Net cash (used in) operating activities                        ($4,400,696)             ($6,103,147)              ($49,077,742)
                                                           ===================      ===================      =====================


</TABLE>

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

                                       9
<PAGE>
<TABLE>
<CAPTION>


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

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

                                                                               1999                            1998
                                                                    ---------------------------     -------------------------
<S>                                                                     <C>                          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Payments to suppliers, employees and
  consultants                                                               ($1,803,893)                   ($1,914,301)
Interest received                                                                45,178                         91,007
                                                                    ---------------------------     -------------------------
Net cash (used in) operating activities                                      (1,758,715)                    (1,823,294)
                                                                    ---------------------------     -------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and equipment                                (17,312)                       (15,477)
Proceeds from maturities of investments                                           1,406                           -
Investment made in Joint Venture                                                (71,500)                          -
                                                                    ---------------------------     -------------------------
Net cash (used in) investing activities                                         (87,406)                       (15,477)
                                                                    ---------------------------     -------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and
  warrants, net of registration disbursements                                   453,630                         28,125
                                                                    ---------------------------     -------------------------
Net cash provided by financing activities                                       453,630                         28,125
                                                                    ---------------------------     -------------------------

NET (DECREASE)  IN CASH AND CASH
  EQUIVALENTS                                                                (1,392,491)                    (1,810,646)

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                                                         3,741,737                      7,957,329
                                                                    ---------------------------     -------------------------

CASH AND CASH EQUIVALENTS AT END OF
  PERIOD                                                                     $2,349,246                     $6,146,683
                                                                    ===========================     =========================

RECONCILIATION OF NET (LOSS) TO NET CASH (USED IN) OPERATING
ACTIVITIES:
Net (loss)                                                                  ($1,890,256)                   ($1,685,119)
Loss from Joint Venture                                                          29,411                         94,165
Stock option compensation to consultants                                           -                            75,300
Depreciation and amortization                                                    67,911                         72,749
Decrease (increase) in accrued interest receivable                                8,826                         (1,636)
(Increase) in inventory                                                        (794,378)                    (1,102,208)
Amortization of discount on marketable
  securities                                                                       -                           (13,544)
(Increase) decrease in prepaid expenses and  other
  current assets                                                                (78,162)                       430,959
Decrease in long term amount due from Joint
  Venture                                                                       621,133                           -
Decrease in other assets                                                            -                              321
Increase in accounts payable and accrued liabilities                            276,800                        305,719
                                                                    ---------------------------     -------------------------
Net cash (used in) operating activities                                     ($1,758,715)                   ($1,823,294)
                                                                    ===========================     =========================

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

</TABLE>

                                       10
<PAGE>

                                 COPYTELE, INC.
                                 --------------
                         (Development Stage Enterprise)
                         ------------------------------
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     ---------------------------------------
                            JULY 31, 1999 (UNAUDITED)
                            -------------------------

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

CopyTele, Inc. (the "Company"), which was incorporated on November 5, 1982, is a
development stage enterprise whose principal  activities  include the production
and marketing of the USS-900,  a hardware based  peripheral  digital  encryption
device; the SCS-700 which combines the USS-900 with MAGICOM(R) 2000, a telephone
based  multi-functional  telecommunications  product incorporating the Company's
E-Paper(TM) Flat Panel Display technology to provide a secure  telecommunication
system;  and the  operations  of Shanghai  CopyTele  Electronics  Co., Ltd. (the
"Joint  Venture" or "SCE"),  the  Company's 55% owned joint venture in Shanghai,
China.  The Company is also continuing its research and  development  activities
for additional  ultra-high  resolution flat panel displays,  including video and
color  displays,  and  coated  particles  which  could  potentially  be  used by
manufacturers of toners and pigments.

The Company is producing and has commenced a marketing  program for the USS-900,
with  technical  assistance  from  Harris  Corporation  ("Harris").  This device
utilizes  Harris'  digital  cryptographic  chip - the Citadel(TM) CCX - which is
capable of providing  high-grade  information  encryption.  A limited  number of
USS-900  devices have been produced by the Company with the assistance of a U.S.
based sub-contractor.  SCE is supplying quantities of materials,  sub-assemblies
and accessories.  Harris is supplying the Citadel(TM) CCX chip under a new three
year agreement at a negotiated  price based in part on sales of USS-900 with all
units to contain the designation of "Secured by Harris".

The Company  continues  to produce  additional  limited  quantities  of modified
MAGICOM(R)  2000 which are  configured for the SCS-700  system.  The Company has
also developed, in conjunction with a Japanese company, a small portable printer
called MAGIC PRINTER.  The printer is being marketed by the Company for use with
the SCS-700 or in conjunction with personal or laptop computers.

The Company  plans to sell its USS-900,  SCS-700 and MAGIC  PRINTER  products to
end-users directly and through a distributor/dealer network. All of the critical
elements  of  the  earnings  process  for a  product  will  be  complete  when a
distributor/dealer  sells the product to end-users. The Company has had no sales
since its  inception  other  than sales  (which  were not  material)  of limited
quantities  of the  MAGICOM(R)  2000  and  MAGIC  PRINTER  products  to  certain
distributors. In late August 1999, the Company began initial shipment of limited
quantities of its USS-900 product for sale to office equipment suppliers, dealer
and  end-users.  Revenue  will  not be  recorded  on  sales  until  the  Company
determines that the product(s) have been accepted by the end-users.  There is no
assurance  that the Company will  generate  significant  revenues in the future,
will have  sufficient  revenues to generate a profit or that other products will
not be produced by other  companies that will render the products of the Company
and SCE  obsolete.  See "Safe  Harbor  Statement  Under the  Private  Securities
Litigation  Reform  Act of  1995"  contained  in  "Management's  Discussion  and
Analysis of  Financial  Condition  and Results of  Operations"  for  discussions
regarding uncertainties that may significantly affect the results of operations,
future liquidity and capital resources.

                                       11
<PAGE>

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

The  Company's  inventory  of  approximately  $3,618,000  consists  of  USS-900,
MAGICOM(R)  2000  units  for  the  SCS-700  system,  MAGIC  PRINTER  and  parts.
Management  has recorded the Company's  inventory at its current net  realizable
value,  which  is  based  upon  the  current  anticipated  selling  price of the
products. To date, shipments of the Company's products have been limited.  There
can be no assurance  that the Company will not be required to further reduce the
inventory  carrying value of the modified  MAGICOM(R) 2000 units for the SCS-700
system below its current  value in the future,  in order to  accomplish  certain
business strategies.

In addition,  amounts due from SCE totaled  approximately  $3,023,000 as of July
31, 1999.  The advances to SCE have  primarily  funded the purchase of inventory
components  to  manufacture   the  Company's   MAGICOM(R)   2000.  The  ultimate
realizability of amounts due from SCE are dependent, in part, on future sales of
the Company's  products.  The Company's  proportionate share of future losses in
the Joint Venture will continue to reduce the carrying  value of the  investment
in the Joint Venture until such amount is exhausted. If, after the Company fully
writes off its investment, it makes any additional investments,  such additional
investments will be charged directly to the statement of operations.

The Company believes that the ultimate realizability of its current inventory of
modified   MAGICOM(R)  2000  units  is  dependent  upon  its   salability/market
acceptance  through the SCS-700  system.  Accordingly,  if the SCS-700  does not
result in measurable market acceptance, a full value or significant writedown of
its present modified MAGICOM(R) 2000 inventory may be required and SCE's ability
to repay the amount due the Company would be directly  impaired,  as both assets
are  inter-dependent  (Note 2).  The  Company  is  continuing  to  evaluate  the
realizability   of  these  assets  on  an  ongoing  basis  and  will  make  such
adjustments,  as necessary,  to reflect estimated net realizable values based on
current facts and circumstances.

         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 nine and three month periods ended
July 31,  1999 and 1998 and for the period  from  November  5, 1982  (inception)
through  July  31,  1999.  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 October 31, 1998
audited financial  statements and notes thereto included in the Company's Annual
Report on Form  10-K for the  fiscal  year  ended  October  31,  1998,  for more
extensive disclosures than contained in these condensed financial statements.

             Amounts Due from Joint Venture
             ------------------------------

The  amounts  due  from  the  Joint  Venture  of  approximately  $3,023,000  and
$3,917,000,  respectively,  as of  July  31,  1999  and  1998,  represent  parts
inventory, such as the flat panel assembly components,  purchased by the Company
on behalf of SCE which are incorporated into the MAGICOM(R) 2000 product.

                                       12
<PAGE>
(2)          Joint Venture:
            ---------------

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

The Company has  contributed to SCE $1,225,000 in cash, and technology  that has
been valued for purposes of the Joint Venture at $700,000.  SCE does not reflect
the $700,000 in  technology  as an asset or equity  investment  in the condensed
financial  statements  presented  below. The other parties have contributed cash
aggregating  $1,575,000.  The Company advanced an additional  $71,500 in cash to
SCE as of July 31, 1999.  The Company has reflected its  investment in SCE under
the equity method of accounting and will  recognize  losses in SCE to the extent
of its cash investment. If future losses result in the write-off of the original
cash investment, and the Company makes additional investments,  such investments
will be charged directly to the statement of operations.


         Condensed Financial Information
         -------------------------------

Condensed  Balance  Sheets for SCE at July 31,  1999 and  October  31,  1998 and
Condensed  Statements  of  Operations  for the nine month periods ended July 31,
1999 and 1998 are as follows:

<TABLE>
<CAPTION>

                                            Condensed Balance Sheets
                                            -------------------------
                                                  (Unaudited)
                                                  -----------
                                                                                 July 31,               October 31,
                                                                                  1999                     1998
                                                                            -----------------       ------------------
         <S>                                                               <C>                      <C>
          Cash                                                                 $   26,115              $   51,760
          Accounts receivable from CopyTele, Inc.                                 663,060                 661,592
          Inventory                                                             2,748,999               3,568,202
          Other current assets                                                     22,566                  68,581
          Land occupancy rights, net of amortization; fixed assets, net
          of depreciation; and other non-current  assets                        1,972,583               2,105,583
                                                                            -----------------        ---------------
                   Total Assets                                                $5,433,323              $6,455,718
                                                                            =================        ===============

          Short term loans                                                     $1,080,268              $  999,316
          Accounts payable and accrued liabilities                                316,296                 338,052
          Due to CopyTele, Inc.                                                 3,022,637               3,916,628
          Advances from CopyTele, Inc.                                             71,500                    -
          Capital                                                                 942,622               1,201,722
                                                                            -----------------       ------------------
                   Total Liabilities and Capital                               $5,433,323              $6,455,718
                                                                            =================       ==================

                    Condensed Statements of Operations
                    ----------------------------------
                             (Unaudited)
                             -----------                                             For the nine months ended
                                                                            ------------------------------------------
                                                                                 July 31,                July 31,
                                                                                   1999                    1998
                                                                            -----------------       ------------------

          Net Sales                                                            $     -                 $     -
          Operating (Loss)                                                       (201,203)               (513,365)
          Other Income (Expense)                                                  (57,897)                (34,901)
                                                                            -----------------       ------------------
                   Net (Loss)                                                  $ (259,100)             $ (548,266)
                                                                            =================       ==================

</TABLE>
The short term loans bear interest at floating rates ranging from  approximately
5.86% to 7.13% per annum at July 31,  1999.  These loans will mature in November
1999, February 2000, and May 2000. Approximately $1,000,000 in loans are secured
by a land-use contract and building owned by SCE.

The cumulative net (loss)  incurred by SCE since its inception on April 10, 1995
is $(1,857,378).

Any  valuation  reserves  related to the  Company's  inventory  will result in a
similar  charge to the  statement of operations  of SCE, as the  operations  and
certain assets of both entities are inter-dependent.  Such a charge would result
in a decrease to the Company's investment in SCE.

                                       13
<PAGE>
(3)      Shareholders' Equity:
         ---------------------

         Stock option plans:
         -------------------

The Company has two stock option plans,  the 1987 Stock Option Plan,  adopted by
the Board of Directors  on April 1, 1987 (the "1987  Plan"),  and the  CopyTele,
Inc. 1993 Stock Option Plan, adopted by the Board of Directors on April 28, 1993
(the "1993 Plan").

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

Options  granted  to  non-employee  consultants  are  accounted  for  using  the
fair-value method required by SFAS No. 123.  Compensation  expense recognized in
the nine months ended July 31, 1999 and July 31, 1998 was $61,650 and  $255,000,
respectively,  and is included in general and  administrative  expenses  for the
periods.

         Sales of common stock and issuance of warrants:
         -----------------------------------------------

On April 30 1999,  the Company  sold  400,000  shares of its common stock in two
private  placements for $1.50 per share,  or an aggregate of $600,000,  of which
300,000  shares were sold to a nominee for  election to the  Company's  Board of
Directors at the 1999 Annual Meeting of  Stockholders.  In conjunction  with the
sales of common stock, the Company issued warrants to purchase 400,000 shares of
common  stock at an exercise  price of $1.50 per share which expire on April 30,
2001.

                                       14
<PAGE>

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


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

Certain   statements  in  this   Quarterly   Report  on  Form  10-Q   constitute
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown  risks,  uncertainties  and other  factors  which  may cause the  actual
results,  performance or achievements of the Company to be materially  different
from any future  results,  performance or  achievements  expressed or implied by
such  forward-looking  statements.  Such  factors  include,  among  others,  the
following:  the  ability of the Company to  successfully  market its new digital
encryption  system called the USS-900 and its SCS-700  system  consisting of the
MAGICOM(R)  2000  telecommunications  product as modified to include  encryption
based on the USS-900;  the production  capability required for the USS-900,  the
modified MAGICOM(R) 2000 and MAGIC PRINTER; the ability of the Company to reduce
the cost of the modified MAGICOM(R) 2000 and the related printer; the ability of
the Company to obtain additional  financing;  long-term product  performance and
the  capability  of the  Company,  SCE,  its  distributors  and its  dealers  to
adequately  service the  Company's  products;  the ability of  distributors  and
dealers to market their contracted quantities of the Company's products in their
respective  territories;  the  ability  of the  Company  and SCE to  obtain  all
required  foreign  government  approvals;  the  volatility  of foreign  currency
exchange  rates;   political  and  economic   stability  in  targeted  marketing
territories;  political  and  economic  stability  in China and  Russia in which
research, development or production activities are taking place on behalf of the
Company;  the ability of the  Company to  commercially  develop and  establish a
market for its  products  under  development;  and the possible  development  of
competitive  products  that could  render the  Company's  products  obsolete  or
unmarketable.  See "Business" and Note 1 to the Company's  Financial  Statements
contained in the Company's  Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 for discussions regarding  uncertainties that may significantly
affect the results of operations, future liquidity and capital resources.

         General
         -------

The Company,  which is a  development  stage  enterprise,  was  incorporated  on
November 5, 1982. The Company's  principal  activities  include the development,
production  and  marketing  of  USS-900,  a hardware  based  peripheral  digital
encryption device; the SCS-700,  which combines the USS-900 with MAGICOM(R) 2000
to provide a secure telephone based multi-functional  telecommunications product
incorporating the Company's  E-Paper(TM) Flat Panel Display technology;  and the
operations of Shanghai  CopyTele  Electronics  Co., Ltd. (the "Joint Venture" or
"SCE"), the Company's 55% owned joint venture in Shanghai, China. The Company is
also  continuing  its  research  and   development   activities  for  additional
ultra-high  resolution flat panel displays,  including video and color displays,
and coated particles which could  potentially be used by manufacturers of toners
and pigments. There can be no assurance,  however, that the Company's efforts in
these areas will be successful. There is also no assurance that the Company will
generate  significant  revenues in the future,  will have sufficient revenues to
generate  profit or that other products will not be produced by other  companies
that will render the products of the Company or SCE obsolete or unmarketable.

                                       15
<PAGE>
The Company is producing and has commenced a marketing  program for the USS-900,
a hardware based peripheral digital encryption system, with technical assistance
from  Harris  Corporation  ("Harris").  This  device  utilizes  Harris'  digital
cryptographic  chip - the  Citadel(TM)  CCX -  which  is  capable  of  providing
high-grade information encryption. A limited number of USS-900 devices have been
produced by the Company with the assistance of a U.S. based sub-contractor.  SCE
is supplying quantities of materials,  sub-assemblies and accessories. Harris is
supplying  the  Citadel(TM)  CCX chip  under a new  three  year  agreement  at a
negotiated price based in part on sales of USS-900 with all units to contain the
designation of "Secured by Harris".  The agreement  provides that neither Harris
nor  the  Company  will  participate  with  any  other  entity  in  the  design,
development or manufacture of a product functionally  equivalent to the USS-900.
This exclusivity is for the term of the agreement.

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.

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

The Company  plans to sell its USS-900,  SCS-700 and MAGIC  PRINTER  products to
end-users directly and through a distributor/dealer network. All of the critical
elements  of  the  earnings  process  for a  product  will  be  complete  when a
distributor/dealer  sells the product to end users. The Company has had no sales
since its  inception  other  than sales  (which  were not  material)  of limited
quantities  of  the   MAGICOM(R)   2000  and  MAGIC  PRINTER   products  to  its
distributors. Beginning in late August, 1999, the Company began initial shipment
of  limited  quantities  of its  USS-900  product  for sale to office  equipment
suppliers, dealer and end-users. Revenue will not be recorded on sales until the
Company determines that the product(s) have been accepted by the end-users.

Selling, general and administrative  expenses,  excluding the loss from SCE, for
the nine month periods ended July 31, 1999 and 1998  decreased by  approximately
$621,000,   to   approximately   $4,909,000  in  the  fiscal  1999  period  from
approximately  $5,530,000  in the fiscal  1998  period.  These  amounts  include
research,   development  and  tooling  costs  of  approximately  $2,203,000  and
$3,032,000 for the fiscal 1999 and 1998 periods, respectively, as well as normal
operating expenses. Selling, general and administrative expenses,  excluding the
loss  from  SCE,  for the  three  month  periods  ended  July 31,  1999 and 1998
increased by approximately  $200,000, to approximately  $1,897,000 in the fiscal
1999 period  from  approximately  $1,697,000  in the fiscal  1998  period.  Also
included  in these  amounts  are  research,  development  and  tooling  costs of
approximately  $724,000  and  $926,000  for the  fiscal  1999 and 1998  periods,
respectively,  as well as  normal  operating  expenses.  From  November  5, 1982
(inception) through July 31, 1999 selling,  general and administrative expenses,
excluding  the  loss  from  SCE,  were   approximately   $50,499,000   including
approximately  $30,514,000 for research,  development and tooling costs, as well
as normal operating expenses.

The decreases in selling,  general and  administrative  expenses,  excluding the
loss from SCE,  of  approximately  $621,000  during the nine month  fiscal  1999
period as compared to the same period in fiscal  1998  resulted  primarily  from
decreases  in  expenditures   for   engineering   supplies,   marketing   costs,
professional  fees, and research and  development for video and color flat panel
displays.  The  increases  in  selling,  general  and  administrative  expenses,
excluding the loss from SCE, of  approximately  $200,000  during the three month
fiscal  1999  period as  compared  to the same  period in fiscal  1998  resulted
primarily  from charges to earnings to bring the  valuation of inventory in line
with current estimates and for obsolete, spare and scrap parts.

                                       16
<PAGE>
Engineering  supplies  decreased  in the fiscal 1999  periods as compared to the
fiscal 1998  periods  primarily as a result of reduced  purchases of  components
used  to  develop  engineering  changes  to  MAGICOM(R)  2000  in  fiscal  1998.
Engineering  service  costs  increased in the fiscal 1999 periods as compared to
the fiscal 1998 periods as a result of the USS-900 development effort. Marketing
costs for the  MAGICOM(R)  2000 decreased in the fiscal 1999 periods as compared
to the fiscal 1998 periods as a result of the elimination of non-recurring costs
associated  with marketing  start-up costs and reduced travel and  entertainment
costs.  Professional fees were also lower in the fiscal 1999 periods as compared
to the  fiscal  1998  periods  as a result of lower  fees  incurred  for  legal,
accounting and patent related services.  Research and development costs for flat
panel  displays  decreased  in  the  aggregate  during  the  comparable  periods
principally  as a  result  of  lower  costs  incurred  in  connection  with  the
development  of the Company's  solid state and optical video and color  display.
This decrease was offset  somewhat by higher costs in the field emission  (FED),
vacuum  fluorescent  (VFD) and liquid crystal (LCD) flat panel displays programs
under  development.  These  costs  vary  over  time  depending  on the  phase of
development of each product or technology.

Employee  compensation  and related  costs  increased in the fiscal 1999 periods
over the fiscal 1998 periods as a result of the hiring of three additional sales
and marketing  employees and one additional paid engineering  employee.  Payroll
taxes  increased as a result of the additional  compensation  costs and employee
stock option exercises.  Other employee benefit programs increased  commensurate
with the additional employees as well as some rate increases for the fiscal 1999
periods.  Rents  also  increased  as a result of annual  escalations  in certain
leases and the leasing of storage  space.  A charge to earnings  was recorded in
the nine and three  month  periods  ending  July 31,  1999 in order to bring the
valuation of inventory in line with current  estimates and for  obsolete,  spare
and scrap  parts.  The Company  also  incurred a charge to earnings for interest
expense  relating to certain  prior year tax payments.  The  Company's  non-cash
charge to earnings for stock based compensation to consultants  mandated by SFAS
No. 123 was lower in the fiscal  1999  periods as  compared  to the fiscal  1998
periods.

The  Company's  portion of SCE's loss for the nine month  periods ended July 31,
1999 and 1998 decreased by approximately  $159,000 to approximately  $143,000 in
the fiscal 1999 period from  approximately  $302,000 in the fiscal 1998  period.
The  Company's  portion of SCE's loss for the three month periods ended July 31,
1999 and 1998 decreased by approximately $65,000 to approximately $29,000 in the
fiscal  1999  period as compared  to the prior  year's  period of  approximately
$94,000. The decrease in the losses was primarily the result of cost reductions,
production  efficiencies  and limited  production  activity  with respect to the
MAGICOM(R) 2000. From April 10, 1995 (SCE's inception) through July 31, 1999 the
Company's portion of SCE's losses were approximately $1,022,000.

SCE continues to produce additional  limited  quantities of modified  MAGICOM(R)
2000  and  panel   assemblies   while  supplying  the  Company  with  materials,
sub-assembles and accessories for the USS-900. The modified MAGICOM(R) 2000s are
configured for the SCS-700 system. The Company's  proportionate  share of future
losses  in SCE will  continue  to reduce  the  carrying  value of the  Company's
investment  in SCE until such amount is  exhausted.  If, after the Company fully
writes off its investment, it makes any additional investments,  such additional
investments will be charged directly to the statement of operations.

While there is no formal agreement,  the Company's Chairman of the Board and its
President have waived salary and related  pension  benefits for an  undetermined
period of time commencing  November 1985. Four other  individuals,  including an
officer and three senior level personnel,  then employed at the Company,  waived
salary and related  pension  benefits from January 1987 through  December  1990.
While there are no formal agreements,  commencing January 1991 these individuals
waived such rights for an  undetermined  period of time and they did not receive
salary or related pension benefits through December 1992. The Company's Chairman
of the Board,  its President and the three senior level  personnel  continued to
waive such rights commencing in January 1993 for an undetermined period of time.
From February 1993 to September  1998 one  additional  employee also waived such
salary and benefit rights.

                                       17
<PAGE>
Interest  income  during the nine  month  periods  ended July 31,  1999 and 1998
decreased by  approximately  $262,000  from  approximately  $395,000  during the
fiscal 1998 period as compared to $133,000 during the fiscal 1999 period.  There
was also a  decrease  of  approximately  $70,000 in the three  month  comparable
periods ended July 31, 1999 and 1998.  The decreases  resulted  primarily from a
decrease in average funds  available for  investment and slightly lower interest
rates.  Funds  available for investment  during the nine and three month periods
ended  July 31,  1999 and  1998,  on a  monthly  weighted  average  basis,  were
approximately $4,000,000,  $9,492,000, $3,194,000 and $7,621,000,  respectively.
The investments  selected by the Company are principally  treasury bills,  money
market accounts and commercial paper.

         Year 2000 Issue
         ---------------

The Year 2000 issue  relates to computer  systems  programmed  to use two digits
rather  than four digits to define the  applicable  year.  Computer  systems and
other programmable devices utilizing  date/time-sensitive  software and hardware
may  recognize  a date using "00" as the year 1900  rather  than Year 2000 which
could  result in the  computer or device  shutting  down,  performing  incorrect
computations or performing inconsistently.

The Company is in the final stages of determining  its risks  regarding the Year
2000 issue.  The Company has begun to  implement a plan to correct or  establish
contingencies  for any Year 2000  problems it  uncovered to date.  However,  the
Company  cannot  guarantee  that  its  remediation   efforts  will  prevent  the
occurrence of all Year 2000 problems.

The  Company   utilizes   brand  name  personal   computers  and   predominately
off-the-shelf  software to perform its daily  functions.  The  assessment of the
hardware  indicates  that the  hardware  is  already  Year 2000  compliant,  and
non-compliant  system operating software will be compliant with the installation
of readily available updates.  The Company's financial software has already been
upgraded to be Year 2000  compliant.  The Company's  MAGICOM(R)  2000 product is
Year 2000 compliant. SCE has performed an assessment and will begin to implement
a plan to correct deficiencies which do not appear to be material.

The Company has  several  material  third  party  relationships  primarily  with
financial institutions, utilities, and telecommunications companies. The Company
is planning to take reasonable  steps to verify the Year 2000 readiness of these
companies. The Company is still in the process of contacting (although many have
already replied) its key customers,  suppliers and vendors regarding their state
of readiness.

                                       18
<PAGE>
The cost of the  assessment  process and the cost  expended to update some items
has not been material to date. The Company  believes that its total cost to test
and  correct  any Year  2000  deficiencies  will be in line  with  its  annually
budgeted  expense for  computerization  and is estimating the cost not to exceed
$20,000.

Failure by the Company to resolve a material Year 2000 issue could result in the
interruption or failure of certain business activities or operations,  and could
materially adversely affect the financial  condition,  results of operations and
cash flows of the Company.  If an interruption or failure does occur, the extent
of the  Company's  exposure  would  depend  primarily  upon the time it takes to
remedy the problem.  Based on the  Company's  current  knowledge of its systems,
operations and third party  relationships,  the Company does not anticipate that
the Year 2000 issue will have a material adverse impact on the Company.

The Company is in the process of formulating a Year 2000 contingency plan in the
event of possible  interruptions in business operations.  The first draft of the
plan is completed and will be revised and updated as necessary.  There can be no
assurance,  however,  that the  Company  will be able to develop or  implement a
successful  contingency  plan addressing the Year 2000 issue or that such a plan
will be economically feasible.

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

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

During the nine month period ended July 31, 1999, the Company received  proceeds
aggregating  approximately  $1,345,000  from the exercise of stock options under
the 1993 Plan to purchase  shares of its common stock and $600,000 from sales of
its common  stock in private  placements.  During the period from August 1, 1999
through September 10, 1999 the Company received additional proceeds  aggregating
approximately  $7,500 from the  exercise of stock  options  pursuant to the 1993
Plan and $900,000 from sales of its common stock in private placements.  Working
capital decreased by approximately  $1,947,000 from approximately  $7,560,000 at
October 31, 1998 to approximately $5,613,000 at July 31, 1999 as a result of the
loss  incurred  for the nine  month  period  ended July 31,  1999  offset by the
proceeds received in the same period.

                                       19
<PAGE>
The Company's  operations used approximately  $4,401,000 in cash during the nine
month  period  ended  July  31,  1999.  The  current  working  capital  includes
approximately  $2,837,000 of cash and marketable  securities,  and approximately
$929,000  (net of  approximately  $663,000  due to SCE) of accounts  payable and
accrued liabilities.  The Company believes that these net cash resources will be
sufficient to continue its operations,  as presently being conducted and without
taking into consideration  potential revenue from sales, into the second quarter
of  fiscal  2000  after  giving  effect  to  anticipated   reductions  in  SCE's
requirements  for  components  purchases,  which  amounted to $1,275,000  during
fiscal  1998,  and  reductions  in  administrative  and  support  personnel,  if
necessary, and the cash proceeds from the sales of its common stock in September
1999.

The Company  advanced an additional  $105,500 in cash to SCE to date in 1999 for
the  purpose  of having  SCE  continue  the  production  of a limited  number of
modified MAGICOM(R) 2000 units for the SCS-700 system and panel assemblies.  The
Company,  at its option, may elect to have these advances increase its ownership
percentage in SCE or have the amount  satisfy a portion of its accounts  payable
to SCE.  Additionally,  the  Company  has  reacquired  from SCE a portion of its
MAGICOM(R) 2000 inventory of parts for the purpose of minimizing  Chinese import
duty and value added taxes.  The account  receivable due from SCE was reduced by
the value of the inventory. The parts inventory will be made available to SCE in
the future based on SCE's production requirements.

Management  has recorded the Company's  inventory at its current net  realizable
value,  which  is  based  upon  the  current  anticipated  selling  price of the
Company's MAGICOM(R) 2000 as modified for the SCS-700 system. To date, shipments
of the Company's MAGICOM(R) 2000 product have been limited. The Company believes
that the ultimate  realizabilty of its current inventory of modified  MAGICOM(R)
2000  units is  dependent  upon its  salability/market  acceptance  through  the
SCS-700 system. Accordingly, if the SCS-700 does not result in measurable market
acceptance,  a full value or  significant  writedown of its  presently  modified
MAGICOM(R)  2000 inventory may be required and SCE's ability to repay the amount
due the Company  which  totaled  approximately  $3,023,000  as of July 31, 1999,
would be  directly  impaired.  The  advances  to SCE have  primarily  funded the
purchase of inventory  components to manufacture the Company's  MAGICOM(R) 2000.
The Company  will  continue to evaluate the  realizabilty  of these assets on an
ongoing basis and will make such adjustments, as necessary, to reflect estimated
net realizable values based on current facts and circumstances.

The Company is seeking to improve its  liquidity  through the sale of  products,
the collection of amounts due from SCE, and through possible sales of its common
stock, each as more fully described below.

In an effort to generate sales, the Company has commenced  marketing the USS-900
to major U.S. office equipment distributors and government agencies. The Company
also has commenced  marketing the SCS-700 system  utilizing the MAGICOM(R) 2000,
as modified to function as a secure communication system, to government agencies
and units of the armed  forces.  The  Company is hopeful,  although  there is no
assurance,  that by  marketing  the USS-900  encryption  device and the modified
MAGICOM(R) 2000 SCS-700 system sales will be generated.

                                       20
<PAGE>
The amounts due from SCE are  primarily  costs related to the purchase by SCE of
components for use in MAGICOM(R) 2000 units. It is expected,  although there can
be no assurance, that SCE will pay the Company during the current and succeeding
year through the sales of units and financing from banks. SCE repaid the Company
approximately  $226,000 in the nine months ended July 31,  1999.  As of July 31,
1999, the Company owed SCE approximately  $663,000 which when paid could be used
by SCE to repay the Company.  Sales of units by SCE to the Company may result in
an increase  in the  Company's  inventory  before the units are then sold by the
Company in the ordinary course of its business.

The Company may also attempt to raise  additional  funds, if necessary,  through
private sales of its common stock at offering  prices at or near the then market
price of the Company's  stock.  The market price of the  Company's  stock at the
time of the sales  would  affect the  amount of  dilution  that would  result to
stockholders  from such  sales.  There can be no  assurance,  however,  that the
Company will be able to consummate any future private sales of its common stock.

The NASD  requires  that the  Company  maintain  a minimum  of $4 million of net
tangible assets to maintain its NASDAQ-NMS  listing. If the Company's stock were
delisted, the delisting could potentially have an adverse affect on the price of
the  Company's  common  stock and could  adversely  affect the  liquidity of the
shares held by the Company's stockholders.  The Company anticipates that it will
seek additional sources of funding, when necessary, in order to satisfy the NASD
requirements.

NASDAQ-NMS  also requires  that an issuer  maintain a minimum bid price of $1.00
for continued listing. If at any time the bid price for an issuer's common stock
falls below $1.00 per share for a period of thirty  consecutive  business  days,
NASDAQ-NMS  has the right to delist the 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 the Company's stock were delisted,  the delisting
could  potentially  have an adverse affect on the price of the Company's  common
stock and  could  adversely  affect  the  liquidity  of the  shares  held by the
Company's stockholders.

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  to  continue  its
research and development  activities,  maintain the NASD funding requirement and
participate  in SCE beyond its  initial  capital  contribution.  There can be no
assurance  that  adequate  funds will be  available  to the Company or that,  if
available,  the Company will be able to obtain such funds on favorable terms and
conditions. The Company currently has no definitive arrangements with respect to
additional financing.

                                       21
<PAGE>
SCE required an initial  aggregate  capital  investment of  $3,500,000  from the
parties  to the joint  venture.  The Joint  Venture  Agreement  contemplates  an
additional  $3,500,000  of funding  which may be borrowed  from banks,  of which
$1,080,000  has  been  borrowed  to  date.   Short-term  loans  aggregating  the
$1,080,000  are from a Chinese  bank,  secured  by the  building  and a land-use
contract with the Land Administration Bureau of Shanghai County, and from one of
the Chinese  parties.  The  Company  has  contributed  $1,225,000  in cash,  and
technology  valued for the purposes of SCE at $700,000,  and the Chinese parties
contributed $1,575,000 in cash to SCE. SCE may require additional capitalization
depending  upon the  nature and extent of its  business  activities.  To date in
1999, the Company  advanced an additional  $105,500 in cash to SCE. There can be
no assurance that adequate funds will be available to SCE,  including any future
capital contributions, if any, beyond its initial capital contributions or that,
if  available,  SCE will be able to obtain  such  funds on  favorable  terms and
conditions.

                                       22
<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 28, 1999,  six
directors  were elected 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, 1999 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           50,533,657                 1,380,970
                  Frank J. DiSanto          50,533,907                 1,380,720
                  John R. Shonnard          50,533,657                 1,380,970
                  George P. Larounis        50,533,907                 1,380,720
                  Gerald J. Bentivegna      50,533,907                 1,380,720
                  Lewis H. Titterton        50,533,907                 1,380,720

On August 18,1999,  Mr. John R. Shonnard,  a Director of the Company since 1988,
retired from the Board for health reasons.

(b) Ratification of selection of Arthur Andersen LLP as Independent Auditors for
the Fiscal Year Ending October 31, 1999:

                    For                  Against             Abstain

                    50,514,194           1,322,331           78,102


                                       23
<PAGE>

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

                  (a)      Exhibits

                           27 - Financial Data Schedule

                  (b)      Reports on Form 8-K.

                           The  Company  filed a Report on Form 8-K,  dated July
                           28, 1999, which included a press release with respect
                           to the Business Agreement between CopyTele,  Inc. and
                           Harris RF Communications, together with a copy of the
                           agreement.


                                       24
<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:/s/ DENIS A. KRUSOS
                                 ----------------------
                                 Denis A. Krusos
                                 Chairman of the Board,
                                 Chief Executive Officer
                                 and Director (Principal
September 13, 1999               Executive Officer)

                                 By:/s/  FRANK J. DISANTO
                                 -------------------------
                                 Frank J. DiSanto
September 13, 1999               President and Director

                                 By:/s/  GERALD J. BENTIVEGNA
                                 -----------------------------
                                 Gerald J. Bentivegna
                                 Vice President - Finance,
                                 Chief Financial Officer and
                                 Director (Principal Financial
September 13, 1999               and Accounting Officer)









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