SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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


For the quarterly period ended  January 31, 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 March 10, 1999:     58,465,576 shares


<PAGE>


                                TABLE OF CONTENTS


Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

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

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

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

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

         Notes to Condensed Financial Statements (Unaudited)

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

Part II. OTHER INFORMATION

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

         Signatures.


                                       2
<PAGE>


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

Item 1. Financial Statements.
        ---------------------

<TABLE>
<CAPTION>

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


                                                                                                 January 31,        October 31,
                                           ASSETS                                                   1999               1998
                                           ------                                                 -----------       -----------
<S>                                                                                       <C>                   <C>    
CURRENT ASSETS:
  Cash (including cash equivalents and interest bearing accounts of
    $4,362,437 and $5,363,522, respectively)                                                     $ 4,379,269       $ 5,406,017
  Marketable securities, at cost                                                                     489,444              -
  Accrued interest receivable                                                                          6,927             3,983     
  Inventory                                                                                        2,991,510         2,719,215
  Prepaid expenses and other current assets (including amounts due from
    Joint Venture of approximately $677,000 and $825,000, respectively)                              776,676           904,656
                                                                                                -------------     -------------
                Total current assets                                                               8,643,826         9,033,871

PROPERTY AND EQUIPMENT (net of accumulated depreciation
  and amortization of $1,423,832  and $1,351,778, respectively)                                      704,615           766,106
                                                                                               
INVESTMENT IN JOINT VENTURE (Note  2)                                                                277,319           345,947

AMOUNTS DUE FROM JOINT VENTURE                                                                     2,979,645         3,091,628

OTHER ASSETS                                                                                         102,914            97,420

DEFERRED TAX BENEFITS (net of valuation allowance of $31,393,000
  and $30,910,000, respectively)                                                                        -                 -
                                                                                                --------------    -------------
                                                                                                 $12,708,319       $13,334,972
                                                                                                ==============    =============
                            LIABILITIES AND SHAREHOLDERS'EQUITY
                            -----------------------------------

CURRENT LIABILITIES:
Accounts payable (including amounts due to Joint Venture of
   approximately  $677,000 and $662,000, respectively)                                           $ 1,156,978       $ 1,392,321  
Accrued liabilities                                                                                  221,211            81,738
                                                                                                --------------    -------------
                        Total current liabilities                                                  1,378,189         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 58,430,276 and 57,871,176  shares, respectively                                      584,303           578,712
  Additional paid-in capital                                                                      53,871,819        52,977,110
  Accumulated (deficit) during development stage                                                 (43,125,992)      (41,694,909)
                                                                                                --------------    ------------- 
                                                                                                  11,330,130        11,860,913
                                                                                                --------------    -------------
                                                                                                 $12,708,319       $13,334,972
                                                                                                ==============    =============
 </TABLE>

The accompanying notes to condensed financial statements are an integral part of
these balance sheets.
 
                                      3
<PAGE>



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

                                                                               
<TABLE>
<CAPTION>
                                                                                                                 
                                                                                                               
                                                                      For the three months                     For the period from
                                                                        ended January 31,                         November 5,1982
                                                            ------------------------------------------         (inception) through
                                                                    1999                  1998                   January 31, 1999
                                                            ---------------------  -------------------      ------------------------

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

SALES                                                           $    -               $     -                      $     -

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, (including
  research and development expenses of approximately
  $728,000, $1,100,000 and $29,039,000,
  respectively)                                                   1,415,282            1,958,397                     47,005,416
                                                            ---------------------  -------------------      ------------------------
                                                            

LOSS FROM JOINT VENTURE                                              68,628              136,579                        947,681
                                                            ---------------------  -------------------       -----------------------

INTEREST INCOME                                                      52,827              158,150                      4,827,105
                                                            ---------------------  -------------------       -----------------------

NET (LOSS)                                                      ($1,431,083)         ($1,936,826)                  ($43,125,992)
                                                            =====================  ===================       =======================

NET (LOSS) PER SHARE OF COMMON STOCK: Basic and Diluted              ($0.02)              ($0.03)                        ($0.92)   
                                                            =====================  ===================       =======================
                                                           

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic and
  Diluted                                                         57,920,672           57,861,176                     46,822,862
                                                            =====================  ===================       =======================

</TABLE>

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

                                       4

<PAGE>                                                                    
<TABLE>
<CAPTION>


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

<PAGE>
<TABLE>
<CAPTION>



                                 COPYTELE, INC.
                                 --------------
                         (Development Stage Enterprise)
                         ------------------------------
                   CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
                   -------------------------------------------
 FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION) THROUGH JANUARY 31, 1999 (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 1996 to January, 1999 under stock option
  plans, net of  registration costs                                1,444,300         14,443          3,903,603            -
Common stock issued upon purchase of equipment                        15,000           150              74,850            -       
Stock options granted to consultants                                     -              -              251,250            -      
Accumulated (deficit) during development stage                           -              -                 -          ($43,125,992)
                                                               ---------------   ---------------   ---------------- ---------------
BALANCE, January 31, 1999                                          58,430,276     $584,303         $53,871,819       ($43,125,992)
                                                               ===============   ===============   ================ ===============

</TABLE>

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

                                       6
     
<PAGE>


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


                                                                              For the three                        
                                                                               months ended                      For the period from
                                                                               January 31,                         November 5, 1982
                                                               ----------------------------------------------    (inception) through
                                                                      1999                      1998               January 31, 1999
                                                               --------------------      --------------------    -------------------
<S>                                                              <C>                       <C>                      <C>    
Payments to suppliers, employees and             
 consultants                                                        ($1,417,535)             ($ 2,049,250)           ($50,864,877)
Interest received                                                        49,883                   190,107               4,820,179  
                                                               --------------------      --------------------    -------------------
Net cash (used in) operating activities                              (1,367,652)               (1,859,143)            (46,044,698)
                                                               --------------------      --------------------    -------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and
  equipment                                                              (8,302)                 (254,380)             (1,991,461)
Disbursements to acquire certificates of deposit and
  marketable securities                                                (489,444)                     -                (13,535,443)
Proceeds from maturities of investments                                     -                     970,808              13,045,999  
Investment made in Joint Venture                                            -                        -                 (1,225,000)
                                                               --------------------      --------------------    -------------------
Net cash (used in) provided by investing activities                    (497,746)                  716,428              (3,705,905)
                                                               --------------------      --------------------    -------------------

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                                            838,650                      -                 36,547,133
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                               838,650                      -                 54,129,872
                                                               --------------------      --------------------    -------------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                 (1,026,748)               (1,142,715)              4,379,269
                                                                      

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                      5,406,017                12,329,171                     -
                                                               --------------------      --------------------    -------------------
                                                              
CASH AND CASH EQUIVALENTS AT END OF
  PERIOD                                                             $4,379,269               $11,186,456              $4,379,269
                                                               ====================      ====================    ===================
                                                                                                                        Continued
                                       7

<PAGE>                                                                                                                   
</TABLE>




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

                                    Continued
                                    ---------
<TABLE>
<CAPTION>


                                                                          For the three                       
                                                                          months ended                           For the period from
                                                                           January 31,                          November 5, 1982
                                                              -----------------------------------------         (inception) through
                                                                  1999                     1998                  January 31, 1999
                                                              ----------------         ----------------        ---------------------
<S>                                                         <C>                      <C>                           <C>   
RECONCILIATION OF NET (LOSS) TO NET CASH (USED IN)
  OPERATING ACTIVITIES:
Net (loss)                                                       ($1,431,083)             ($1,936,826)               ($43,125,992)
Stock option compensation to consultants                              61,650                  179,700                     251,250
Loss from Joint Venture                                               68,628                  136,579                     947,681
Depreciation and amortization                                         72,054                   70,818                   1,439,490
Amortization of discount on marketable
   securities                                                             -                    26,365                       -
(Increase) decrease in accrued interest
   receivable                                                         (2,944)                   5,592                      (6,927)
(Increase) in inventory                                             (272,295)                (446,325)                 (2,991,510)
Decrease (increase) in prepaid expenses and other current
assets                                                               127,980                 (210,101)                   (776,676)
Decrease (increase) in long term amount due from Joint
  Venture                                                            111,983                     -                     (2,979,645)
(Increase) decrease in other assets                                   (5,494)                  13,969                    (102,914)
(Decrease) increase in accounts payable and
   accrued liabilities                                               (98,131)                 301,086                   1,300,545
                                                              ----------------         ----------------        ---------------------
Net cash (used in) operating activities                          ($1,367,652)             ($1,859,143)               ($46,044,698)
                                                              ================         ================        =====================

</TABLE>

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

                                       8
<PAGE>



 
                                 COPYTELE, INC.
                                 --------------
                         (Development Stage Enterprise)
                         ------------------------------
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     ---------------------------------------
                          JANUARY 31, 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 development,
production    and    marketing   of   a   telephone    based    multi-functional
telecommunications   product   incorporating  the  Company's   patented  compact
ultra-high resolution charged particle E-Paper(TM) Flat Panel Display technology
and the  operations  of Shanghai  CopyTele  Electronics  Co.,  Ltd.  (the "Joint
Venture" or "SCE"),  the Company's  55% owned joint  venture in Shanghai,  China
with Shanghai Instrumentation and Electronics Holding Group Company and Shanghai
International  Trade and Investment  Developing Corp. The Company is also in the
process of  developing  three new products:  (i) a compact and portable  digital
encryption device which could provide  high-grade  information  security for any
telephone,  computer, fax machine, MAGICOM(R) 2000 or "e-way"; (ii) a peripheral
product  called  "e-way"  which could be used with a telephone,  computer or fax
machine to provide  internet  e-mail,  simultaneous  voice and  handwriting  and
caller ID all over a single telephone line; and (iii) coated  particles  derived
from its  E-Paper(TM)  Flat Panel  Display  which could  potentially  be used by
manufacturers  of toners  and  pigments.  The  Company  also is  continuing  its
research and development  activities for additional  ultra-high resolution video
and color flat panel displays.
 
The Company is producing its telephone based multi-functional telecommunications
product, called MAGICOM(R) 2000, incorporating the Company's flat panel display,
called E-Paper(TM),  and associated proprietary hardware and software technology
and  marketing  the  product   through  its  United  States  and   international
distributor/dealer  network. The Company has also developed, in conjunction with
a Japanese company,  a small portable printer called MAGIC PRINTER.  The printer
is being  produced for the Company by the Japanese  company  which is also being
marketed through the Company's  marketing  network,  including in China, for use
with MAGICOM(R) 2000 or in conjunction with personal or laptop computers.

The Company plans to sell its products to end-users through a distributor/dealer
network.  All of the critical  elements of the earnings process will be complete
when a distributor/dealer sells these products to end-users. The Company has had
no sales since its inception other than sales of a limited  quantity of products
to certain distributors. Revenue will not be recorded on sales until the Company
determines  that its products 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.
 
           Basis of Presentation
           ---------------------
 
The  condensed  financial  statements  have been  prepared  in  accordance  with
generally  accepted  accounting  principles  for  interim  financial  reporting.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
The information  contained herein is for the three months ended January 31, 1999
and 1998 and for the period from November 5, 1982  (inception)  through  January
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.

Effective  October 31, 1998,  the Company  adopted SFAS No. 128,  "Earnings  Per
Share".  In accordance  with SFAS 128, basic net (loss) per common share ("Basic
EPS") is computed  by  dividing  net (loss) by the  weighted  average  number of
common shares  outstanding.  Diluted net (loss) per common share ("Diluted EPS")
is computed  by dividing  net (loss) by the  weighted  average  number of common
shares and dilutive common share  equivalents  and  convertible  securities then
outstanding.  SFAS No.  128  requires  the  presentation  of both  Basic EPS and
Diluted  EPS on the face of the  statements  of  operations.  The  impact of the
adoption of this statement was not material to previously  reported EPS amounts.
Diluted EPS for all years  presented is the same as Basic EPS, as the  inclusion
of  the  impact  of  common  stock   equivalents  then   outstanding   would  be
anti-dilutive.

                                       9
<PAGE>
 
           Realizability of Assets
           -----------------------

During  fiscal 1998 and the three  months ended  January 31,  1999,  the Company
increased  its  inventory  to  approximately   $3,000,000  to  prepare  for  the
distribution of its products. 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 units,  and  provides  for no
further  reductions of the selling price of the product.  To date,  shipments of
the Company's product have been limited. Accordingly,  there can be no assurance
that the Company will not be required to further reduce the selling price of the
MAGICOM(R) 2000 below its current carrying value to accomplish  certain business
strategies, which would require a further reduction of such carrying value.

In addition, amounts due from SCE totaled approximately $3,657,000 as of January
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 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.

Since  MAGICOM(R)  2000's  introduction  in early  1997,  the  Company  has been
developing and incorporating into the product a number of enhanced features. The
most  significant  features of MAGICOM(R) 2000 include the capability,  with the
addition of a Company  developed  keyboard,  to  communicate  by e-mail over the
internet;  to provide all  functions  over a single  telephone  line,  including
simultaneous voice and electronic  handwriting and editing of documents ("SVD");
to input and retrieve documents to and from a computer's storage device; to edit
and transmit received documents; to send and receive full page paperless fax; to
rapidly scan  documents,  pictures,  and drawings  into a computer;  to send and
receive  handwritten  information;   and  to  provide  peripheral  functions  to
computers.  MAGICOM(R) 2000 is compatible  with and can send  information to fax
machines and computers,  has the ability to transmit  alpha-numeric  messages to
pagers, and possess all basic telephone features, including digital voice mail.

           Amounts Due from Joint Venture
           ------------------------------
 
The  amounts  due  from  the  Joint  Venture  of  approximately  $3,657,000  and
$3,917,000, respectively, on the accompanying Condensed Balance Sheets 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.
                                       10
<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 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 January  31, 1999 and October 31, 1998 and
Condensed Statements of Operations for the three month periods ended January 31,
1999 and 1998 are as follows:

<TABLE>
<CAPTION>

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

                                                                                 January31,              October 31, 
                                                                                   1999                     1998
                                                                            -----------------       -----------------
        <S>                                                                <C>                      <C>    
          Cash                                                                 $  157,080              $   51,760
          Accounts receivable from CopyTele, Inc.                                 677,400                 661,592                 
          Inventories                                                           3,255,004               3,568,202
          Other current assets                                                     19,756                  68,581
          Land occupancy rights, net of amortization; fixed assets,
            net of depreciation and other non-current  assets                   2,061,267               2,105,583
                                                                            -----------------       ------------------
                   Total Assets                                                $6,170,507              $6,455,718
                                                                            =================       ==================

          Short term loans                                                     $1,120,147              $  999,316
          Accounts payable and accrued liabilities                                316,372                 338,052
          Due to CopyTele, Inc.                                                 3,657,045               3,916,628
          Capital                                                               1,076,943               1,201,722
                                                                            =================       ==================
                   Total Liabilities and Capital                            $   6,170,507              $6,455,718
                                                                            =================       ==================
                                                                             
                       Condensed Statements of Operations
                       ----------------------------------
                                   (Unaudited)
                                   -----------

                                                                                      For the three months ended
                                                                            ------------------------------------------
                                                                              January 31,               January 31,
                                                                                 1999                      1998
                                                                            -----------------       ------------------

          Net Sales                                                          $     -                 $       -
          Operating (Loss)                                                     (104,471)                 (243,266)
          Other Income (Expense)                                                (20,308)                   (5,060)
                                                                            =================       ==================
                   Net (Loss)                                                $ (124,779)                $(248,326)
                                                                            =================       ==================
</TABLE>
                                       11
<PAGE>
The short term loans from a Chinese  bank bear  interest  at  floating  rates of
approximately  7.23% to 8.64% per annum at October  31,  1998.  These loans will
mature in April, May and August 1999 and 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 $(1,723,057).

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.

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

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

Options  granted  to  non-employee  consultants  are  accounted  for  using  the
fair-value method required by SFAS No. 123.  Compensation  expense recognized in
the three  months  ended  January  31, 1999 and January 31, 1998 was $61,650 and
$179,700,  respectively,  and is included in general and administrative expenses
for the periods.
 
                                       12
<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:  production capability by SCE and the Japanese supplier of MAGICOM(R)
2000 and MAGIC  PRINTER,  respectively;  the  ability  of a second  supplier  to
produce and supply a lower cost printer;  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;  the ability
of the Company to reduce the cost of  MAGICOM(R)  2000 and the related  printer;
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 new products  under  development;  the possible  development  of competitive
products that could render the Company's products obsolete or unmarketable;  and
the ability of the Company to obtain  additional  financing.  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   a   telephone    based    multi-functional
telecommunications   product   incorporating  the  Company's   patented  compact
ultra-high resolution charged particle E-Paper(TM) Flat Panel Display technology
and the  operations  of SCE, the  Company's 55% owned joint venture in Shanghai,
China which is accounted for under the equity method of accounting.  The Company
is also in the  process of  developing  three new  products:  (i) a compact  and
portable digital  encryption device which could provide  high-grade  information
security for a telephone,  computer,  fax machine,  MAGICOM(R)  2000 or "e-way";
(ii) a peripheral  product  called "e-way" which could be used with a telephone,
computer  or fax  machine to provide  internet  e-mail,  simultaneous  voice and
handwriting  and Caller ID all over a single  telephone  line;  and (iii) coated
particles  derived from its E-PaperTM Flat Panel Display which could potentially
be used by manufacturers of toners and pigments.  The Company also is continuing
its research and  development  activities for additional  ultra-high  resolution
flat panel display technologies including video and color displays. There can be
no  assurance,  however,  that the  Company's  efforts  in these  areas  will be
successful.   There  is  also  no  assurance  that  the  Company  will  generate
significant  revenues in the future,  will have sufficient  revenues to generate
profit or that other products will not be produced by other  companies that will
render the products of the Company or SCE obsolete or unmarketable.

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.

                                       13
<PAGE>

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

The Company plans to sell its products to end-users through a distributor/dealer
network.  All of the critical  elements of the earnings process will be complete
when a distributor/dealer sells these products to end users. The Company has had
no sales since its inception other than sales of a limited  quantity of products
to its distributors. Revenue will not be recorded on these sales, which were not
material,  until the Company  determines that its products have been accepted by
the end-users.

Selling, general and administrative  expenses,  excluding the loss from SCE, for
the three month  periods ended January 31, 1999 and 1998 and for the period from
November  5, 1982  (inception)  through  January  31,  1999  were  approximately
$1,415,000,  $1,958,000 and  $47,005,000,  respectively.  These amounts  include
research,  development and tooling costs of approximately  $728,000,  $1,100,000
and $29,039,000, respectively, as well as normal operating expenses.

Selling,  general  and  administrative  expenses,  excluding  the loss from SCE,
decreased  approximately $543,000 during the three months ended January 31, 1999
as compared to the same  period in the fiscal  1998 period  resulting  primarily
from  decreases  in  expenditures  for  research  and  development,  engineering
supplies, marketing, and professional fees.

Research and development costs decreased  principally as a result of lower costs
incurred in connection  with the  development  of the Company's  solid state and
thin film flat panel displays programs.  These costs vary over time depending on
the phase of  development of each product or  technology.  Engineering  supplies
decreased  in the fiscal  1999  period as  compared  to the fiscal  1998  period
primarily  as a result  of  reduced  purchases  of  components  used to  develop
engineering changes to MAGICOM(R) 2000. This decrease was offset somewhat by the
cost to eliminate used components as a result of these changes.  Marketing costs
decreased  in the fiscal  1999 period as compared to the fiscal 1998 period as a
result of the  elimination  of  non-recurring  costs  associated  with marketing
start-up costs.  Professional  fees were also lower in the fiscal 1999 period as
compared to the fiscal 1998 period as a result of lower fees incurred for legal,
accounting  and  patent  related  services.  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  period as  compared  to the fiscal  1998  period.
Communication   and  travel   costs   decreased  as  a  result  of  the  Company
concentrating its efforts on United States based distributors and dealers.


Employee  compensation  and related costs increased  slightly in the fiscal 1999
period over the fiscal 1998 period as a result of one  additional  paid employee
and higher payroll taxes associated with stock option  exercises.  Some employee
benefit programs incurred a slight increase in rates for the fiscal 1999 period.
Rents  also  increased  slightly  as a result of annual  escalations  in certain
leases. A charge to earnings was recorded in order to bring the valuation of new
inventory purchases in line with current estimates.

The  Company's  portion of SCE's loss for the three month  periods ended January
31, 1999 and 1998 and for the period from November 5, 1982  (inception)  through
January  31,  1999  were   approximately   $69,000,   $137,000   and   $948,000,
respectively. The decrease in the loss for the fiscal 1999 period as compared to
the  prior  year's  period  of  approximately  $68,000  was the  result  of cost
reductions,   production   efficiencies  and  limited  production   activity  to
incorporate  engineering  enhancements.  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.

                                       14
<PAGE>

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.

The decrease in interest income of $105,000 from $158,000 during the fiscal 1998
period as compared to $53,000 during the fiscal 1999 period  resulted  primarily
from a decrease in average funds  available for  investment  aided slightly by a
small increase in interest  rates.  Funds  available for  investment  during the
three month  periods  ended  January 31,  1999 and 1998,  on a monthly  weighted
average basis, were approximately $4,641,000 and $11,377,000,  respectively. The
investment  instruments  selected by the Company are  principally  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 process of determining  its risks  regarding the Year 2000
issue. Once the assessment is complete,  the Company will formulate and begin to
implement  a plan to  correct  or  establish  contingencies  for any  Year  2000
problems it uncovers. 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.  An initial 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  their  initial  assessment  and will
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 also planning to contact its key customers,  suppliers
and vendors regarding their readiness.

The initial cost to begin 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 operation and
cash flow 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  contemplates  formulating a Year 2000 contingency plan in the event
of  possible  interruptions  in  business  operations.  This  plan is  currently
expected to be  completed by the middle of calendar  year 1999.  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.

                                       15
<PAGE>

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

Since its inception,  the Company has met its liquidity and capital  expenditure
needs  primarily  from the  proceeds of sales of its common stock in its initial
public  offering,  in private  placements,  upon exercise of warrants  issued in
connection with the private placements and public offering and upon the exercise
of stock options pursuant to the 1987 Plan and the 1993 Plan.
 
For the three  months  ended  January 31, 1999,  the Company  received  proceeds
aggregating  approximately $839,000 from the exercise of stock options under the
1993 Plan to  purchase  shares of its  common  stock.  During  the  period  from
February 1, 1999 through March 10, 1999 the Company received additional proceeds
aggregating approximately $53,000 from the exercise of stock options pursuant to
the  1993  Plan.  Working  capital  decreased  by  approximately  $300,000  from
approximately  $7,600,000  at October 31, 1998 to  approximately  $7,300,000  at
January 31, 1999 as a result of the loss incurred for the quarter  offset by the
proceeds received in the period.

The Company's operations used approximately $1,365,000 in cash during the fiscal
quarter  ended  January  31,  1999.  The  current   working   capital   includes
approximately  $4,870,000 of cash and marketable  securities,  and approximately
$700,000  (net of  approximately  $677,000  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,  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.

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 units, and provides for no further  reductions of the
selling price of the product.  To date,  shipments of the Company's product have
been limited.  Accordingly,  there can be no assurance that the Company will not
be required to further reduce the selling price of the MAGICOM(R)2000  below its
current  carrying value to accomplish  certain  business  strategies which would
require a further  reduction of such carrying  value.  In addition,  amounts due
from SCE totaled  approximately  $3,657,000 as of January 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 also dependent,  in part, on future sales of the Company's products. The
Company  will  continue  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.

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 stimulate  sales,  the Company has reduced the selling  price of
MAGICOM(R)  2000 and  MAGIC  PRINTER  and is  attempting  to  lower  the cost of
producing  these  products so that further  price  reductions  may be made.  The
Company  is  hopeful,  although  there is no  assurance,  that  with  the  price
reductions  and the  addition of the  encryption  device,  which is still in the
process of being developed, sales of MAGICOM(R) 2000 will increase.

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  $165,000 in November  1998.  As of January 31, 1999,  the Company
owed SCE  approximately  $677,000  which when paid would 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  units  are then  sold by the  Company  in the
ordinary course of its business.

                                       16
<PAGE>
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 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.

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.

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
$1,120,000 has been borrowed to date.  Three  short-term  loans  aggregating the
$1,120,000  are from a Chinese bank and are secured by a land-use  contract with
the Land Administration Bureau of Shanghai County and the building.  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.  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.

                                       17
<PAGE>
 Item 6.  Exhibits and Reports on Form 8-K.
         ----------------------------------

         (a)      Exhibits
                  --------
 
                  10.10 - Agreement dated March 3, 1999 between
                           Harris Corporation and 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 January 31, 1999.


                                       18
<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 
March 16, 1999                       Executive Officer)

                                     By:/s/ Frank J. DiSanto
                                     ---------------------------               
                                     Frank J. DiSanto
March 16, 1999                       President and Director                    
               
                                     By:/s/ Gerald J. Bentivegna   
                                     ---------------------------               
                                     Gerald J. Bentivegna 
                                     Vice President - Finance,
                                     Chief Financial Officer and
                                     Director (Principal Financial
March 16, 1999                       and Accounting Officer)



                                       19
<PAGE>

                                                                
       
                                                               
                                                        
                               PURCHASE AGREEMENT

Buyer:   CopyTele, Inc.
         900 Walt Whitman Road
         Huntington Station, NY  11746


Seller:  Harris Corporation
         RF Communications 
         1680 University Avenue
         Rochester, NY  14610


1.       GENERAL

1.1
A  Confidentiality  Agreement was entered into August 18, 1998 between  CopyTele
and Harris  Corporations  RF  Communications  Division  (Harris)  to discuss the
development of a technically  viable and cost  effective  solution for providing
digital  voice  and data  cryptographic  security  to  CopyTele's  Magicom  2000
communications product.
         
1.2 
As a result of these  discussions,  a product  concept  has  emerged  which will
utilize the Harris Citadel  cryptographic engine. The product is being developed
by  CopyTele  under code name "The  Bump."  "The Bump" is being  developed  as a
stand-alone  product  with broad  market  applications.  The device will provide
security  to  numerous  products  within  the   telecommunications,   facsimile,
computer, cellular, internet, and radio industries.
        
1.3 
The  incorporation  of Citadel  will allow for  high-grade  security  capable of
serving both domestic and international  markets.  Citadel was developed for and
has been  approved  for export  applications.  Overseas  delivery  of Citadel or
Citadel  based product is subject to an approved  Department of Commerce  Export
License.
        
1.4 
The product  development  is underway  and Harris has provided  CopyTele  with a
number of prototype Citadel IC's, a Citadel embedment manual and limited product
definition  and  embedment   engineering  support.   Certain  of  the  foregoing
information provided is Harris Proprietary Information.
       
1.5 
It is the parties'  mutual desire to develop a broader  relationship  that would
potentially include joint Marketing,  Sales, Distribution,  Product Enhancement,
Manufacturing and possibly Joint Ownership or Joint Venturing of "The Bump."
       
1.6 
Upon completion of "The Bump"  prototype  unit,  CopyTele and Harris will define
their future relationship. The options will include:
                 
1.6.1
Enter into a broader agreement for the purpose of bringing "The Bump" to market.
                
1.6.2 
Terminate the program completely (if both CopyTele and Harris agree).
                
1.6.3 
In the event that Harris  elects not to enter into a broader  agreement  (option
1), Harris will,  subject to agreement on mutually agreeable terms, enter into a
long  term  supply   agreement  with  CopyTele  to  provide  CopyTele  with  its
requirements  for  the  Citadel  IC and  the  necessary  technical  support  and
technology   license(s)   for   CopyTele  to  develop,   manufacture   (or  have
manufactured), market and sell commercial versions of "The Bump."
         
1.7 
During the Term of this  Agreement  (as  defined in section  3.4) and during the
term of any agreement  pursuant to Section  1.6.1,  Harris and CopyTele agree to
participate exclusively with each other in pursuing the development described in
paragraph 1.2. During the period of exclusivity,  neither party will participate
with any other entity in the design,  development,  nor manufacture of a product
equivalent  to "The Bump"  unless  such other  participation  has been  mutually
agreed upon in writing by the parties hereto. However,  nothing contained herein
shall be deemed to restrict either party from quoting, offering to sell, or sale
to others of standard  commercial  product or services  regularly offered to the
public at published  prices.  It is further the intention of the parties  hereto
that this working  relationship will apply to any other contracts emanating from
or  awards  made  later  in  connection  with  "The  Bump"  by way of a  change,
amendment, modification, or enlargement thereof.

                                       20
<PAGE>
        
1.8 
Should  CopyTele,  within 15  months of this  agreement,  not bring  "The  Bump"
product  to  market,  Harris  will be free to work with  other  companies  on an
equivalent product.
       
1.9 
The goal of this  effort  is to  create  a viable  secure  product,  which  both
companies  will  jointly  own and launch  successfully  into the  market.  It is
anticipated  that  this  joint  ownership  will  include  a  sharing  of cost to
Manufacture,  Market,  Sell,  Promote,  Distribute and Support the product as it
enters the  marketplace.  Additionally,  if the parties  proceed  under  Section
1.6.1,  it is  anticipated  that  CopyTele  and  Harris  shall  jointly  own any
intellectual  property  rights in "The  Bump"  arising  from the work  performed
pursuant to this Agreement.
        
1.10  
Jointly made  inventions  shall be owned by CopyTele and Harris.  Any  ownership
rights  provided for by this  paragraph  shall  survive the  completion  of this
purchase  agreement.   Any  intellectual   property,   which  includes  patents,
trademarks,  copyrights,  tradesecrets,  and any  other  confidential  technical
information  developed  or  provided by CopyTele  shall  remain the  property of
CopyTele.  Any  intellectual  property,  which  includes  patents,   trademarks,
copyrights,  tradesecrets,  and any  other  confidential  technical  information
developed  or  provided  by Harris  shall  remain the  property  of Harris.  The
expiration  date  specified in paragraph 6 of the  Confidentiality  Agreement is
hereby revised to coincide with the expiration date of this Agreement.


2.       SCOPE OF WORK

2.1 
This  purchase  agreement  shall  provide a vehicle  whereby  Harris can provide
reasonable  engineering  support to CopyTele  for the purpose of  embedding  the
Citadel IC into "The Bump" and completion of a prototype device.
      
2.2 
Harris  shall  evaluate  "The Bump" and  provide  recommendations  or  alternate
technical approaches for CopyTele's consideration.
      
2.3 
Harris shall provide independent technical advice,  including but not limited to
electrical, mechanical, software, firmware and security related matters.
      
2.4 
Harris shall provide specific assistance and direction under the direction of an
appointed CopyTele technical representative or manager.

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2.5 
Harris shall evaluate the  manufacturability  of "The Bump" and provide CopyTele
an estimate of the recurring cost to produce the device in Harris'  Rochester NY
factory.
        
2.6 
Harris shall assist CopyTele in presenting "The Bump" to appropriate individuals
in the Department of Commerce,  State Department or National  Security Agency as
necessary to gain approval for the exportability of the device.
         
2.7 

Harris shall provide  support on a time and material basis as defined in section


3.       TERMS AND CONDITIONS

3.1  
This purchase agreement is established at a "not to exceed" value of $50,000.00.
        
3.2 
Harris has been providing technical  assistance for some time in anticipation of
this purchase agreement. Harris will not invoice for any of the time spent prior
to January  1,1999.  Time spent since  January 1, 1999,  will be invoiced in the
first month's invoice.
        
3.3 
This purchase agreement shall be governed by Harris Corporations  standard Terms
and Conditions of Sale, as attached, solely for purposes of this agreement.
        
3.4 
The Term of this agreement shall be 15 months from the date of execution of this
purchase  agreement  unless  mutually  agreed  and  extended  in writing by both
parties.
        
3.5 
Harris  will  submit  invoices  on a monthly  basis per the rates as  defined in
section 4.
        
3.6  
Citadel  pricing is included as a "not to exceed" figure  primarily for planning
purposes.  It is  desired  and  expected  that the  price  will be lower  should
CopyTele and Harris agree to enter into a broader  agreement upon  completion of
the  prototype  unit.  There is a  minimum  order  requirement  of 500 units for
purchase of the Citadel.

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4.       PRICE

4.1 
Harris will  invoice  CopyTele  for  technical  support at Harris  standard  sub
contract rates or as negotiated in a future agreement.
       
4.2 
Harris will  invoice  CopyTele for Citadel  IC's at Harris  standard  commercial
price or as negotiated in a future agreement.

5.       COMPLETE AGREEMENT

5.1 
Each party hereto acknowledges (i) the risks of its undertakings hereunder, (ii)
the  uncertainty  of the  benefits  and  obligations  hereunder,  and  (iii) its
assumption of such risks and  uncertainty.  Each party has conducted its own due
diligence and requested and reviewed such contracts,  business plans,  financial
documents and any other written material as in such party's opinion shall be the
basis of said party's decision to enter into this Agreement.

5.2 
Each party has consulted  such legal,  financial,  technical or other experts it
deems necessary or desirable before entering into this  transaction.  Each party
represents and warrants that it has read, knows, understands and agrees with the
terms and conditions of this transaction. Neither party has relied upon any oral
representation  of the  other  party in  entering  into  this  transaction.  All
discussions,  negotiations, estimates or projections developed by a party during
the course of negotiating  the terms and conditions of this  transaction  are by
way of illustration only, and, unless  specifically  contained in this Agreement
or one of its Exhibits or  Attachments,  are not binding or enforceable  against
the other party in law or in equity.

5.3 
Each party hereto is an  independent  contractor  and nothing  herein  contained
shall be construed to be inconsistent with this relationship or status.  Neither
party owes a fiduciary duty to the other.  Nothing in this Agreement shall be in
any  way  construed  to  constitute  either  party  as the  agent,  employee  or
representative of the other. As an independent contractor, each party has relied
on its own  expertise  or the  expertise of its legal,  financial,  technical or
other agents.

5.4 
This Purchase  Agreement,  consisting  of sections 1 through 5  constitutes  the
complete agreement between CopyTele and Harris. No other additions, alterations,
modifications  or waiver of any of the  provisions  herein shall be valid unless
made in writing  and  executed by  authorized  representatives  of CopyTele  and
Harris.



Date:  2-25-99


By: Denis A. Krusos                         By:  Chris Fedde

Denis A. Krusos                             Chris Fedde
Chairman of the Board                       Director,  Secure Products Group
CopyTele, Inc.                              Harris Corporation




                                            Richard M. Mattei 3/2/99
                                             
                                            RMM  3/2/99
                                            DAK  3/3/99



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