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 April 30, 2008

                         Commission file number 0-11254


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


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


       900 Walt Whitman Road
            Melville, NY                                          11747
--------------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip Code)


                                 (631) 549-5900
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
                             Yes   X      No
                                 -----       -----

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
     Large accelerated filer [   ]      Accelerated filer  [ X ]
     Non-accelerated filer  [   ]       Smaller Reporting Company  [ X ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
                             Yes         No   X
                                 ----        -----

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

On June 4, 2008, the registrant had outstanding 130,159,351 shares of Common
Stock, par value $.01 per share, which is the registrant's only class of common
stock.

<PAGE>

<TABLE>
<CAPTION>


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


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

          Condensed Consolidated Balance Sheets as of April 30, 2008 (Unaudited)
             and October 31, 2007                                                     3

         Condensed Consolidated Statements of Operations (Unaudited) for the six
             months ended April 30, 2008 and 2007                                     4

         Condensed Consolidated Statements of Operations (Unaudited) for the three
             months ended April 30, 2008 and 2007                                     5

         Condensed Consolidated Statement of Shareholder's Equity (Unaudited)
             for the six months ended April 30, 2008                                  6

         Condensed Consolidated Statements of Cash Flows (Unaudited) for the six
             months ended April 30, 2008 and 2007                                     7

         Notes to Condensed Consolidated Financial Statements (Unaudited)             8 - 21

Item 2.  Management's Discussion and Analysis of Financial Condition and
             Results of Operations.                                                   22 - 33

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.                  33 - 34

Item 4.  Controls and Procedures.                                                     34


PART II.  OTHER INFORMATION

Item 1A. Risk Factors.                                                                35

Item 6.  Exhibits.                                                                    35

         SIGNATURES                                                                   35



                                       2
<PAGE>


                                         PART I. FINANCIAL INFORMATION
                                         -----------------------------

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

                                         COPYTELE, INC. AND SUBSIDIARIES
                                         -------------------------------
                                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                      -------------------------------------


                                                                                (Unaudited)
                                                                              ----------------
                                                                                  April 30,         October 31,
                                    ASSETS                                          2008              2007*
                                    ------                                    ----------------   ----------------

      <S>                                                                            <C>                <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                    $     763,752      $     669,141
   Short-term investments                                                             441,000            400,000
   Accounts receivable, net of allowance for doubtful accounts of $60,000
     and $-0-, respectively                                                           190,500            120,000
   Inventories                                                                        196,308            191,923
   Prepaid expenses and other current assets                                           30,329             34,555
                                                                              ----------------   ----------------
                    Total current assets                                            1,621,889          1,415,619

INVESTMENT in Videocon Industries Limited global depository receipts,
   at fair value                                                                   14,120,777                  -

INVESTMENT in Digital Info Security Co. Inc. common stock, at cost                    417,000            417,000

LOAN RECEIVABLE                                                                     5,000,000                  -

PROPERTY AND EQUIPMENT, net                                                            32,975             26,653

OTHER ASSETS                                                                           10,887             10,887
                                                                              ----------------   ----------------
                                                                                $  21,203,528      $   1,870,159
                                                                              ================   ================

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

CURRENT LIABILITIES:
   Accounts payable                                                             $     424,190      $     347,141
   Accrued liabilities                                                                 59,059            331,668
                                                                              ----------------   ----------------
                    Total current liabilities                                         483,249            678,809

LOAN PAYABLE                                                                        5,000,000                  -

SHAREHOLDERS' EQUITY:
   Preferred stock, par value $100 per share; 500,000 shares authorized; no
      shares issued or outstanding                                                          -                  -
   Common stock, par value $.01 per share; 240,000,000 shares authorized;
      130,022,696 and 106,911,315 shares issued and outstanding, respectively       1,300,227          1,069,113
   Additional paid-in capital                                                     106,992,688         86,088,974
   Accumulated deficit                                                            (90,493,413)       (85,966,737)
   Accumulated other comprehensive loss                                            (2,079,223)                 -
                                                                              ----------------   ----------------
                                                                                   15,720,279          1,191,350
                                                                              ----------------   ----------------
                                                                                $  21,203,528      $   1,870,159
                                                                              ================   ================


* Derived from audited balance sheet included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2007.

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

</TABLE>


                                       3
<PAGE>

<TABLE>
<CAPTION>

                         COPYTELE, INC. AND SUBSIDIARIES
                         -------------------------------
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
           -----------------------------------------------------------


                                                                For the Six Months Ended
                                                                        April 30,
                                                            ---------------------------------
                                                                 2008              2007
                                                            ---------------   ---------------

<S>                                                                <C>               <C>
NET SALES
    Sales of encryption products, net                         $    217,580      $    107,177
    Sales of encryption services, net                                    -           120,000
                                                            ---------------   ---------------
                                                                   217,580           227,177
                                                            ---------------   ---------------

COST OF SALES
    Cost of encryption products sold                                50,170            32,438
    Cost of encryption services sold                                     -            44,365
                                                            ---------------   ---------------
                                                                    50,170            76,803
                                                            ---------------   ---------------

    Gross profit                                                   167,410           150,374

OPERATING EXPENSES
    Research and development expenses                            2,444,004         1,919,214
    Selling, general and administrative expenses                 2,379,092         1,454,359
                                                            ---------------   ---------------
                  Total operating expenses                       4,823,096         3,373,573
                                                            ---------------   ---------------

LOSS FROM OPERATIONS                                            (4,655,686)       (3,223,199)

DIVIDEND INCOME                                                    130,887                 -

INTEREST INCOME                                                     13,081            17,869
                                                            ---------------   ---------------

LOSS BEFORE INCOME TAX EXPENSE                                  (4,511,718)       (3,205,330)

INCOME TAX EXPENSE                                                  14,958                 -
                                                            ---------------   ---------------

NET LOSS                                                      $ (4,526,676)     $ (3,205,330)
                                                            ===============   ===============


PER SHARE INFORMATION:
Net loss per share:
    Basic and Diluted                                         $      (0.04)     $      (0.03)
                                                            ===============   ===============

Shares used in computing net loss per share:
    Basic and Diluted                                          127,984,960       101,589,288
                                                            ===============   ===============


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

</TABLE>

                                       4
<PAGE>

<TABLE>
<CAPTION>

                         COPYTELE, INC. AND SUBSIDIARIES
                         -------------------------------
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
           -----------------------------------------------------------

                                                                  For the Three Months Ended
                                                                            April 30,
                                                                ---------------------------------
                                                                     2008              2007
                                                                ---------------   ---------------
    <S>                                                               <C>               <C>
NET SALES
    Sales of encryption products, net                             $    165,355      $     36,427
    Sales of encryption services, net                                        -            60,000
                                                                ---------------   ---------------
                                                                       165,355            96,427
                                                                ---------------   ---------------

COST OF SALES
    Cost of encryption products sold                                    37,272            12,147
    Cost of encryption services sold                                         -            23,460
                                                                ---------------   ---------------
                                                                        37,272            35,607
                                                                ---------------   ---------------

         Gross profit                                                  128,083            60,820

OPERATING EXPENSES
    Research and development expenses                                1,131,302           916,283
    Selling, general and administrative expenses                       959,935           584,648
                                                                ---------------   ---------------
                  Total operating expenses                           2,091,237         1,500,931
                                                                ---------------   ---------------

LOSS FROM OPERATIONS                                                (1,963,154)       (1,440,111)

DIVIDEND INCOME                                                        130,887                 -

INTEREST INCOME                                                          5,874             8,215
                                                                ---------------   ---------------

LOSS BEFORE INCOME TAX EXPENSE                                      (1,826,393)       (1,431,896)

INCOME TAX EXPENSE                                                      14,958                 -
                                                                ---------------   ---------------

NET LOSS                                                          $ (1,841,351)     $ (1,431,896)
                                                                ===============   ===============


PER SHARE INFORMATION:
Net loss per share:
         Basic and Diluted                                        $      (0.01)     $      (0.01)
                                                                ===============   ===============

Shares used in computing net loss per share:
         Basic and Diluted                                         129,258,495       102,287,372
                                                                ===============   ===============


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

</TABLE>


                                       5
<PAGE>

<TABLE>
<CAPTION>


                               CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                               --------------------------------------------------------
                                    FOR THE SIX MONTHS APRIL 30, 2008 (UNAUDITED)
                                    ---------------------------------------------



                                                                                                                     Accumulated
                                                                  Common Stock          Additional                      Other
                                                            --------------------------    Paid-in    Accumulated     Comprehensive
                                                              Shares       Par Value      Capital      Deficit           Loss
                                                            ------------ ------------- ------------- -------------- ----------------
     <S>                                                        <C>           <C>           <C>          <C>              <C>
BALANCE, October 31, 2007                                   106,911,315    $1,069,113  $ 86,088,974 $ (85,966,737)    $          -

 Stock option compensation to employees                               -             -     1,909,771             -                -
 Stock option compensation to consultants                             -             -       210,282             -                -
 Common stock issued upon exercise of stock options under
  stock option plans                                          2,094,200        20,942     1,677,663             -                -
 Common stock issued to employees pursuant to stock
  incentive plans                                               954,875         9,549     1,031,468             -                -
 Common stock issued to consultants pursuant to stock
  incentive plans                                                62,306           623        74,530             -                -
 Unregistered common stock issued to Videocon Industries
  Limited                                                    20,000,000       200,000    16,000,000             -                -
 Unrealized loss on investment in Videocon Industries
  Limited global depository receipts                                  -             -             -             -       (2,079,223)
 Net loss                                                             -             -             -    (4,526,676)               -
                                                           ------------ ------------- ------------- -------------- ----------------

BALANCE, April 30, 2008                                     130,022,696    $1,300,227  $106,992,688 $ (90,493,413)    $ (2,079,223)
                                                           ============ ============= ============= ============== ================


                                  The accompanying notes are an integral part of this statement.

</TABLE>


                                       6
<PAGE>

<TABLE>
<CAPTION>

                                       COPYTELE, INC. AND SUBSIDIARIES
                                       -------------------------------
                         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                         -----------------------------------------------------------


                                                                                          For the Six Months Ended
                                                                                                 April 30,
                                                                                   ---------------------------------------
                                                                                         2008                  2007
                                                                                   ------------------    -----------------
     <S>                                                                                  <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Payments to suppliers, employees and consultants                                   $(1,782,720)        $ (1,518,281)
   Cash received from customers                                                            87,080              177,342
   Dividend received                                                                      130,887                    -
   Interest received                                                                       13,081               17,869
                                                                                   ------------------    -----------------
           Net cash used in operating activities                                       (1,551,672)          (1,323,070)
                                                                                   ------------------    -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Disbursements to acquire Videocon Industries Limited global depository
      receipts                                                                        (16,200,000)                   -
   Disbursement to acquire loan receivable                                             (5,000,000)                   -
   Proceeds from maturities of short-term investments (certificates of deposit)           400,000               38,000
   Disbursements to acquire short-term investments (certificates of deposit)             (441,000)            (425,000)
   Payments for purchases of property and equipment                                       (11,322)              (7,694)
                                                                                   ------------------    -----------------
           Net cash used in investing activities                                      (21,252,322)            (394,694)
                                                                                   ------------------    -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from sale of common stock to Videocon Industries Limited                   16,200,000                    -
   Proceeds from issuance of loan payable                                               5,000,000                    -
   Proceeds from exercise of stock options                                              1,698,605            1,202,099
                                                                                   ------------------    -----------------
           Net cash provided by financing activities                                   22,898,605            1,202,099
                                                                                   ------------------    -----------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                       94,611             (515,665)


CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                          669,141            1,281,660
                                                                                   ------------------    -----------------

CASH AND CASH EQUIVALENTS AT  END OF PERIOD                                         $     763,752        $     765,995
                                                                                   ==================    =================

RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES:

   Net loss                                                                         $  (4,526,676)       $  (3,205,330)
   Stock option compensation to employees                                               1,909,771              986,354
   Stock option compensation to consultants                                               210,282                    -
   Stock awards granted to employees pursuant to stock  incentive plans                 1,041,017            1,068,472
   Stock awards granted to consultants pursuant to stock  incentive plans                  75,153              105,744
   Provision for doubtful accounts                                                         60,000                    -
   Recovery of slow-moving inventory reserve                                              (16,440)                   -
   Depreciation and amortization                                                            5,000                5,499
   Change in operating assets and liabilities:
      Accounts receivable                                                                (130,500)             (49,835)
      Inventories                                                                          12,055               29,775
      Prepaid expenses and other current assets                                             4,226               (9,764)
      Other assets                                                                              -                    -
      Accounts payable and  accrued liabilities                                          (195,560)            (253,985)
                                                                                   -----------------     -----------------
           Net cash used in operating activities                                      $(1,551,672)        $( 1,323,070)
                                                                                   =================     =================

SUPPLEMENTAL DISCLOSURE  OF NON-CASH INVESTING ACTIVITIES:
    Unregistered common stock issued in connection with investment in
        Digital Info Security Co., Inc.                                             $          -          $      210,000
                                                                                   =================     =================



                                  The accompanying notes are an integral part of this statement.
</TABLE>

                                       7
<PAGE>


                         COPYTELE, INC. AND SUBSIDIARIES
                         -------------------------------

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

                                   (UNAUDITED)
                                   -----------


1.       BUSINESS AND FUNDING
         --------------------

Description of Business and Basis of Presentation
-------------------------------------------------

         Our principal operations are the development,  production and marketing
of thin,  flat,  low-voltage  phosphor  display  technology and the development,
production and marketing of  multi-functional  encryption  products that provide
information  security for domestic and international  users over virtually every
communications media.

         The condensed consolidated financial statements are unaudited, and have
been prepared in accordance with accounting principles generally accepted in the
United States of America ("US GAAP") for interim financial  reporting,  and with
the rules and  regulations of the Securities and Exchange  Commission  regarding
interim  financial  reporting.  Accordingly,  they  do  not  include  all of the
information and footnotes required by US GAAP for complete financial statements.
The information  contained  herein is for the six-month and three-month  periods
ended  April  30,  2008 and  2007.  In  management's  opinion,  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.  Certain  prior year  amounts  have been  reclassified  to conform  with
current year presentation.

         The condensed consolidated financial statements include the accounts of
CopyTele,  Inc. and its wholly owned subsidiaries,  CopyTele  International Ltd.
("CopyTele  International") and CopyTele Marketing Inc. ("CopyTele  Marketing").
CopyTele  International and CopyTele  Marketing were incorporated in the British
Virgin  Islands  in  July  2007  and  September  2007,  respectively.   CopyTele
International  was formed for the  purpose  of holding an  investment  in global
depository   receipts  of  Videocon   Industries   Limited,  an  Indian  company
("Videocon").  As of April  30,  2008,  CopyTele  Marketing  was  inactive.  All
significant intercompany transactions have been eliminated in consolidation.

         The  results  of  operations  for  interim  periods  presented  are not
necessarily  indicative  of the results  that may be expected for a full year or
any interim period.  Reference is made to the audited  financial  statements and
notes  thereto  included  in our Annual  Report on Form 10-K for the fiscal year
ended October 31, 2007, for more extensive  disclosures  than contained in these
condensed financial statements.

Technology License Agreement with Videocon Industries Limited
-------------------------------------------------------------

         In November  2007, we entered into a Technology  License  Agreement (as
amended, the "License Agreement") with Videocon. Under the License Agreement, we


                                       8
<PAGE>


provide Videocon with a  non-transferable,  worldwide  license of our technology
for thin, flat, low voltage phosphor displays (the "Licensed  Technology"),  for
Videocon (or a Videocon Group company) to produce and market products, including
TVs, incorporating displays utilizing the Licensed Technology. Under the License
Agreement,  we will receive a license fee of $11 million from Videocon,  payable
in installments  over a 27 month period and an agreed upon royalty from Videocon
based on  display  sales by  Videocon.  In April  2008,  the  Indian  Government
approved  the  License  Agreement  and  in  May  2008,  we  received  the  first
installment of the license fee of $2 million.

         We will  continue  to have the  right to  produce  and  market,  and to
utilize  Volga Svet Ltd.,  a Russian  display  company that we have been working
with for more than ten years,  and an Asian  company  that we have been  working
with for more than four years,  to produce and market,  products  utilizing  the
Licensed  Technology.  Additional  licenses of the Licensed  Technology to third
parties require our joint agreement with Videocon.

         In November 2007, we also entered into a Share  Subscription  Agreement
(the  "Subscription  Agreement")  with Mars  Overseas  Limited,  an affiliate of
Videocon ("Mars  Overseas").  Under the  Subscription  Agreement,  Mars Overseas
purchased  20,000,000 shares of our common stock (the "CopyTele Shares") from us
for an aggregate  purchase  price of  $16,200,000.  The purchase of the CopyTele
Shares pursuant to the Subscription Agreement closed in November 2007.

         Also  in  November  2007,  our  wholly-owned   British  Virgin  Islands
subsidiary,  CopyTele International,  entered into a GDR Purchase Agreement (the
"Purchase Agreement") with Global EPC Ventures Limited ("Global"),  for CopyTele
International to purchase from Global 1,495,845  global  depository  receipts of
Videocon (the "Videocon  GDRs") for an aggregate  purchase price of $16,200,000.
Videocon's  global  depository  receipts  are  listed  on the  Luxembourg  Stock
Exchange.  The purchase of the Videocon GDRs pursuant to the Purchase  Agreement
closed in December 2007.

         For the  purpose  of  effecting  a lock  up of the  Videocon  GDRs  and
CopyTele Shares  (collectively,  the  "Securities") for a period of seven years,
and  therefore  restricting  both  parties  from  selling  or  transferring  the
Securities during such period,  CopyTele International and Mars Overseas entered
into two Loan and Pledge  Agreements in November  2007. The Videocon GDRs are to
be held as  security  for a loan in  principal  amount of  $5,000,000  from Mars
Overseas to CopyTele  International,  and the CopyTele Shares are similarly held
as  security  for a  loan  in  principal  amount  of  $5,000,000  from  CopyTele
International  to Mars Overseas.  The loans are for a term of seven years and do
not bear interest.  Prepayment of each loan requires payment of a premium by the
borrower and, in any event, the lien on the Securities securing the prepaid loan
will not be released  until the seventh  anniversary of the closing of the loans
and the  prepaid  amount  would be held in  escrow  until  such  date.  The loan
agreements  required the parties to enter into an escrow  agreement  under which
the parties  deposited the  Securities  with an escrow agent for the term of the
loans.  The loan agreements  also provide for customary  events of default which
may result in forfeiture of the Securities by the defaulting party. The loan and
escrow agreements also provide for the transfer to the respective parties,  free
and  clear  of  any   encumbrances   under  the   agreements,   any   dividends,

                                       9
<PAGE>


distributions, rights or other proceeds or benefits received by the escrow agent
in respect of the  Securities.  The  closing of the loans took place in December
2007.

Investment in Videocon
----------------------

         Although the Videocon GDRs are held as security for the loan payable to
Mars  Overseas and  prepayment  of the loan will not release the  Videocon  GDRs
securing the loan until the seventh  anniversary of the closing of the loan, our
investment  in Videocon is classified  as an  "available-for-sale  security" and
reported  at  fair  value,  with  unrealized  gains  and  losses  excluded  from
operations  and  reported  as a component  of  accumulated  other  comprehensive
income,  net of the  related  tax  effects,  in  shareholders'  equity.  Cost is
determined  using the  specific  identification  method.  The fair  value of the
Videocon GDRs is based on the underlying price of Videocon's equity shares which
are traded on stock  exchanges in India with prices quoted in rupees.  The cost,
unrealized  loss and fair value of our  investment  in  Videocon as of April 30,
2008 are as follows:

                                                 April 30,
                                                   2008
                                           -------------------
                    Cost                       $16,200,000
                    Unrealized loss             (2,079,223)
                                           -------------------
                    Fair Value                 $14,120,777
                                           ===================

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

         From our inception,  we have met our liquidity and capital  expenditure
needs  primarily  through the proceeds from sales of common stock in our 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.  In addition,  commencing  in the fourth  quarter of
fiscal 1999, we have generated cash flows from sales of our encryption  products
and in May 2008 we  commenced  receiving  license  fees  related to our  display
technology from Videocon pursuant to the License Agreement.

          During the six months ended April 30, 2008, our cash used in operating
activities  was  approximately  $1,552,000.   This  resulted  from  payments  to
suppliers,  employees and  consultants of  approximately  $1,783,000,  which was
offset by cash of  approximately  $87,000  received from collections of accounts
receivable related to sales of encryption products, and approximately $13,000 of
interest  income and  $131,000 of  dividend  income  received.  Our cash used in
investing   activities   during  the  six  months   ended  April  30,  2008  was
approximately $21,252,000, which resulted from a disbursement of $16,200,000 for
the purchase of Videocon GDRs, a disbursement $5,000,000 to issue a loan to Mars
Overseas,  purchases of short-term  investments  consisting of  certificates  of
deposit of $441,000 and purchases of approximately $11,000 of equipment,  offset
by $400,000  received upon  maturities of short-term  investments  consisting of
certificates of deposit.  Our cash provided by financing  activities  during the
six months ended April 30, 2008 was  approximately  $22,899,000,  which resulted
from the sale of our common  stock to Videocon  for  $16,200,000,  the  proceeds
received  of  $5,000,000  upon  obtaining  a loan  from Mars  Overseas  and cash
received  upon  the  exercise  of stock  options  of  approximately  $1,699,000.

                                       10
<PAGE>


Accordingly,  during  the six months  ended  April 30,  2008,  our cash and cash
equivalents  increased by approximately  $95,000 and our short-term  investments
increased by $41,000.  As a result,  our cash, cash equivalents,  and short-term
investments,  at April 30,  2008  increased  to  approximately  $1,205,000  from
approximately $1,069,000 at the end of fiscal 2007.

         We  believe  that  our  existing  cash,  cash  equivalents,  short-term
investments  and accounts  receivable,  together  with cash flows from  expected
sales of our  encryption  products  and  revenue  relating  to our  thin,  flat,
low-voltage  phosphor display  technology,  including license fees and royalties
from Videocon,  and other potential sources of cash flows, will be sufficient to
enable us to continue our marketing,  production,  and research and  development
activities.  However,  our  projections  of future cash needs and cash flows may
differ  from  actual  results.  It is  management's  intention  to  continue  to
compensate employees by issuing stock or stock options. If current cash and cash
equivalents,  and cash that may be generated from operations are insufficient to
satisfy  our  liquidity  requirements,  we may  seek  to  sell  debt  or  equity
securities  or to  obtain  a line  of  credit.  The  sale of  additional  equity
securities or convertible debt could result in dilution to our stockholders.  We
currently have no arrangements with respect to additional  financing.  There can
be no assurance that we will generate sufficient revenues in the future (through
sales,  license fees and  royalties,  or  otherwise) to improve our liquidity or
sustain future  operations,  that our production  capabilities will be adequate,
that other products will not be produced by other companies that will render our
products  obsolete,  or that other  sources of funding  would be  available,  if
needed,  on favorable terms or at all. If we cannot obtain such funds if needed,
we would need to curtail or cease some or all of our operations.

2.       STOCK-BASED COMPENSATION
         ------------------------

         We  maintain  stock  equity  incentive  plans  under which we may grant
non-qualified stock options, incentive stock options, stock appreciation rights,
stock  awards,  performance  and  performance-based  awards,  or stock  units to
employees, non-employee directors and consultants.

Stock Option Compensation Expense
---------------------------------

         We account for stock options  granted to employees and directors  using
Financial  Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") No. 123 (revised 2004),  "Share-Based Payment" ("SFAS 123R").
We recognize  compensation  expense for stock option  awards on a  straight-line
basis over the requisite  service period of the grant.  We recorded  stock-based
compensation  expense,  related  to  stock  options  granted  to  employees  and
non-employee  directors,  of  approximately  $1,910,000 and $986,000  during the
six-month  periods  ended  April  30,  2008  and  2007,  respectively,   and  of
approximately  $821,000 and $278,000 during the three-month  periods ended April
30, 2008 and 2007, respectively, in accordance with SFAS 123R. Such compensation
expense is included in the  accompanying  condensed  consolidated  statements of
operations in either research and development  expenses or selling,  general and
administrative  expenses, as applicable based on the functions performed by such
employees and directors.  Such stock-based  compensation  expense increased both
basic and diluted net loss per share for the  six-month  periods ended April 30,
2008 and 2007 by $0.01 and $0.01, respectively,  and for the three-month periods
ended April 30, 2008 and April 30, 2007 by $0.01 and $0.00, respectively.

                                       11
<PAGE>


         Included in the stock-based  compensation cost related to stock options
granted to employees and directors  recorded during the six-month  periods ended
April 30, 2008 and 2007 was approximately  $-0- and $13,000,  respectively,  and
during the three-month  periods ended April 30, 2008 and 2007 was  approximately
$-0- and  $6,000,  respectively,  of  expense  related  to the  amortization  of
compensation  cost for stock options granted prior to, but not yet vested as of,
the end of the prior fiscal year. As of April 30, 2008, there was  approximately
$300,000 of  unrecognized  compensation  cost related to non-vested  share-based
compensation  arrangements for stock options granted to employees and directors.
Approximately  $127,000 of this  unrecognized  cost is expected to be  amortized
over  the  remaining  portion  of the  current  fiscal  year  and  approximately
$121,000,  $51,000,  and  $1,000 of this  unrecognized  cost is  expected  to be
amortized during fiscal 2009, 2010 and 2011, respectively.

         We also account for stock  options  granted to  consultants  using SFAS
123R.  We  recognized  consulting  expense for options  granted to  non-employee
consultants,  during the  six-month  periods  ended April 30, 2008 and 2007,  of
approximately  $210,000,  and $-0-,  respectively,  and during  the  three-month
periods  ended  April 30,  2008 and 2007,  of  approximately  $3,000,  and $-0-,
respectively.  As  of  April  30,  2008,  there  was  approximately  $20,000  of
unrecognized  consulting expense related to non-vested share-based  compensation
arrangements for stock options granted to consultants.  Approximately  $7,000 of
this  unrecognized  consulting  expense is  expected  to be  amortized  over the
remaining  portion  of the  current  fiscal  year and  approximately  $13,000 is
expected to be amortized during fiscal 2009. Such consulting expense is included
in the accompanying  condensed  consolidated  statements of operations in either
research  and  development  expenses  or  selling,  general  and  administrative
expenses, as applicable based on the functions performed by such consultants.

Fair Value Determination
------------------------

         In  accordance  with SFAS No. 123R, we estimate the fair value of stock
options granted to employees, non-employee directors and consultants on the date
of grant using the  Black-Scholes  pricing model. We separate the individuals we
grant  stock  options  to into  three  relatively  homogenous  groups,  based on
exercise and post-vesting  employment  termination  behaviors.  To determine the
weighted  average  fair value of stock  options on the date of grant,  we take a
weighted average of the assumptions used for each of these groups. Stock options
we granted during the six-month  period ended April 30, 2008 consisted of awards
of options with 10-year  terms which vested  either  immediately  or over future
periods of from three months to three years. All of the stock options we granted
during the six-month  period ended April 30, 2007 consisted of awards of options
with 10-year terms which vested immediately.


                                       12
<PAGE>


         We estimated  the fair value of stock option awards using the following
assumptions:
<TABLE>
<CAPTION>
                                                 For the Six Months   For the Three Months
                                                    Ended April 30,      Ended April 30,
                                                -------------------   -------------------
                                                 2008         2007      2008        2007
                                                --------   --------   --------    -------
  <S>                                             <C>         <C>       <C>         <C>
Expected term (in years)                          3.9         3.3       1.7         2.0
Volatility                                        92%         94%       87%         84%
Risk-free interest rate                          3.44%       4.61%     1.51%       4.60%
Dividend yield                                    0            0         0           0
Weighted average fair value at grant date       $0.63        $0.39     $0.33       $0.37

</TABLE>

         The expected  term of stock  options  represents  the weighted  average
period the stock options are expected to remain outstanding. Because we consider
our  options to be "plain  vanilla",  we  estimated  the  expected  term using a
modified version of the simplified method of calculation, as prescribed by Staff
Accounting  Bulletin No. 107,  "Share-Based  Payment" ("SAB 107"). This modified
calculation  uses the actual  life for  options  that have been  settled,  and a
uniform  distribution  assumption for the options still  outstanding.  Under SAB
107,  options are  considered  to be "plain  vanilla" if they have the following
basic  characteristics:  granted  "at-the-money";  exercisability is conditioned
upon service  through the vesting date;  termination of service prior to vesting
results in forfeiture; limited exercise period following termination of service;
and options are  non-transferable  and  non-hedgeable.  In  December  2007,  the
Securities  and  Exchange  Commission  ("SEC")  staff  issued  Staff  Accounting
Bulletin No. 110,  "Share-Based Payment" ("SAB 110"). SAB 110 permits the use of
the simplified  method in SAB 107 for employee  option grants after December 31,
2007 for  companies  whose  historical  data  about  their  employees'  exercise
behavior does not provide a reasonable basis for estimating the expected term of
the options.  We have adopted SAB 110 and continued to use the simplified method
to estimate  the expected  term for options  granted  after  December  2007,  as
adequate  historical  experience  is  not  available  to  provide  a  reasonable
estimate.  We intend to continue  applying  the  simplified  method until enough
historical  experience is readily available to provide a reasonable  estimate of
the expected term for employee option grants.

         We  estimated  the  expected  volatility  of our shares of common stock
based upon the  historical  volatility  of our share price over a period of time
equal to the expected life of the options.

         We estimated  the  risk-free  interest  rate based on the implied yield
available on the applicable grant date of a U.S. Treasury note with a term equal
to the expected term of the underlying grants.

         We made the  dividend  yield  assumption  based on our  history  of not
paying dividends and our expectation not to pay dividends in the future.

         Under SFAS No. 123R,  the amount of  stock-based  compensation  expense
recognized is based on the portion of the awards that are ultimately expected to
vest.  Accordingly,  we reduce  the fair  value of the stock  option  awards for
expected  forfeitures,   which  are  forfeitures  of  the  unvested  portion  of
surrendered  options.  We estimate expected  forfeitures based on our historical
experience.

                                       13
<PAGE>


         We will reconsider use of the Black-Scholes pricing model if additional
information  becomes  available in the future that indicates another model would
be more appropriate,  or if grants issued in future periods have characteristics
that cannot be reasonably estimated using this model.

Stock Option Activity
---------------------

         During the six-month  periods ended April 30, 2008 and 2007, we granted
options to purchase  3,875,000  shares and 2,505,000  shares,  respectively,  to
employees,  non-employee  directors and  consultants of common stock at weighted
average  exercise prices of $.98 and $.67 per share,  respectively,  pursuant to
the CopyTele, Inc. 2003 Share Incentive Plan (the "2003 Share Plan"). During the
six-month  periods  ended  April 30,  2008 and 2007,  stock  options to purchase
2,094,200  shares  and  2,277,230  shares,  respectively,  of common  stock were
exercised with aggregate  proceeds of  approximately  $1,699,000 and $1,202,000,
respectively.


Stock Option Plans
------------------

         As of April 30, 2008, we have three stock option  plans:  the CopyTele,
Inc.  1993 Stock Option Plan (the "1993 Plan"),  the  CopyTele,  Inc. 2000 Share
Incentive  Plan (the "2000  Share  Plan") and the 2003  Share  Plan,  which were
adopted by our Board of Directors  on April 28, 1993,  May 8, 2000 and April 21,
2003, respectively.

           On July 14, 1993, our  shareholders  approved the 1993 Plan. The 1993
Plan was  amended as of May 3, 1995 and May 10,  1996 to,  among  other  things,
increase the number of shares  available for issuance  thereunder from 6,000,000
shares to 20,000,000  shares,  after giving  consideration to stock splits.  The
1993 Plan  provided  for the  granting  of  incentive  stock  options  and stock
appreciation rights to key employees,  and non-qualified stock options and stock
appreciation rights to key employees and consultants of the Company.

         The 1993 Plan was  administered  by the Stock Option  Committee,  which
determined the option price,  term and provisions of each option.  However,  the
purchase price of shares  issuable upon the exercise of incentive  stock options
could not be less than the fair market value of such shares at the date of grant
and incentive  stock options are not  exercisable  for more than 10 years.  Upon
approval of the 2000 Share Plan by our  shareholders in July 2000, the 1993 Plan
was terminated with respect to the grant of future options. Since June 2004, the
1993 Plan has been administered by the Board of Directors.


                                       14
<PAGE>

         Information  regarding the 1993 Plan for the six months ended April 30,
2008 is as follows:
<TABLE>
<CAPTION>

                                                                Current Weighted       Aggregate
                                                                Average Exercise       Intrinsic
                                                 Shares          Price Per Share         Value
                                            --------------    --------------------  --------------
   <S>                                             <C>                 <C>                <C>
Shares Under Option at October 31, 2007         2,614,000             $2.33
  Expired                                        (975,000)            $3.38
  Exercised                                        (5,000)            $1.31
                                            --------------
Shares Under Option and Exercisable at
  April 30, 2008                                1,634,000             $1.72             $13,550
                                            --------------
</TABLE>

         The  following  table  summarizes   information   about  stock  options
outstanding under the 1993 Plan as of April 30, 2008:


                                    Options Outstanding and Exercisable
                                   --------------------------------------
                                                 Weighted
                                                 Average        Weighted
                                                Remaining        Average
           Range of               Number       Contractual      Exercise
        Exercise Prices        Outstanding         Life           Price
   ----------------------------------------------------------------------
        $0.84 to $1.56           779,000           1.54           $1.10
             $2.28               855,000           0.20           $2.28

         The exercise price with respect to all of the options granted under the
1993  Plan,  since  its  inception,  was equal to the fair  market  value of the
underlying common stock at the grant date.

         On July 25, 2000,  our  shareholders  approved the 2000 Share Plan. The
maximum  number of shares of common  stock  that may be  granted  was  5,000,000
shares.  On July 6, 2001 and July 16,  2002,  the 2000 Share Plan was amended by
our Board of Directors to increase the maximum  number of shares of common stock
that may be granted to 10,000,000  shares and 15,000,000  shares,  respectively.
These  amendments  were  approved  by our  shareholders  on August 16,  2001 and
September 12, 2002, respectively.  The 2000 Share Plan provides for the grant of
incentive stock options,  nonqualified stock options, stock appreciation rights,
stock  awards,   performance  awards  and  stock  units  to  key  employees  and
consultants of the Company.

         The 2000  Share Plan was  administered  by the Stock  Option  Committee
through  June 2004 and since  that  date has been  administered  by the Board of
Directors,  which  determines  the option  price,  term and  provisions  of each
option;  however,  the purchase  price of shares  issuable  upon the exercise of
incentive  stock  options  will not be less than the fair  market  value of such
shares at the date of grant and incentive  stock options will not be exercisable
for more than 10 years.


                                       15
<PAGE>


         Information  regarding  the 2000 Share  Plan for the six  months  ended
April 30, 2008 is as follows:
<TABLE>
<CAPTION>
                                                                Current Weighted       Aggregate
                                                                Average Exercise       Intrinsic
                                                 Shares          Price Per Share         Value
                                            --------------    --------------------  --------------
   <S>                                             <C>                 <C>                <C>

Shares Under Option at October 31, 2007         2,182,466            $0.82
  Exercised                                      (410,000)           $0.95
                                            --------------
Shares Under Option and Exercisable at
  April 30, 2008                                1,772,466            $0.79             $441,910
                                            --------------

</TABLE>

         The  following  table  summarizes   information   about  stock  options
outstanding under the 2000 Share Plan as of April 30, 2008:

                                    Options Outstanding and Exercisable
                                    -----------------------------------
                                                   Weighted
                                                   Average       Weighted
                                                  Remaining       Average
             Range of              Number        Contractual     Exercise
         Exercise Prices         Outstanding        Life           Price
       ----------------------------------------------------------------------

              $0.40                  445,000        3.39            $0.40
              $0.69                  505,466        2.67            $0.69
          $0.94 - $1.09              822,000        1.81            $1.06

         The exercise price with respect to all of the options granted under the
2000 Share Plan since its  inception  was equal to the fair market  value of the
underlying  common stock at the grant date. As of April 30, 2008,  21,508 shares
were available for future grants under the 2000 Share Plan.

         The 2003  Share  Plan  provides  for the  grant of  nonqualified  stock
options,  stock appreciation rights, stock awards,  performance awards and stock
units to key employees and  consultants  of the Company.  The maximum  number of
shares of  common  stock  available  for  issuance  under  the 2003  Share  Plan
initially was 15,000,000 shares. On October 8, 2004, February 9, 2006 and August
22,  2007,  the 2003 Plan was amended by our Board of  Directors to increase the
maximum  number of shares of common  stock  that may be  granted  to  30,000,000
shares,  45,000,000  shares and  55,000,000  shares,  respectively.  Current and
future  non-employee  directors are  automatically  granted  nonqualified  stock
options to purchase 60,000 shares of common stock upon their initial election to
the Board of Directors and at the time of each subsequent  annual meeting of our
shareholders at which they are elected to the Board of Directors. The 2003 Share
Plan was administered by the Stock Option Committee  through June 2004 and since
that date has been administered by the Board of Directors,  which determines the
option price, term and provisions of each option.


                                       16
<PAGE>


        Information regarding the 2003 Share Plan for the six months ended April
30, 2008 is as follows:
<TABLE>
<CAPTION>
                                                              Current Weighted     Aggregate
                                                              Average Exercise     Intrinsic
                                                  Shares      Price Per Share        Value
                                             -------------   -----------------    ----------
      <S>                                           <C>             <C>               <C>
Shares Under Option at October 31, 2007         14,476,245         $0.74
  Expired                                          (60,000)        $0.84
  Granted                                        3,875,000         $0.98
  Exercised                                     (1,679,200)        $0.78
                                             -------------
Shares Under Option at April 30, 2008           16,612,045         $0.80           $3,897,464
                                             -------------
Options Exercisable at April 30, 2008           15,127,045         $0.76           $3,888,964
                                             -------------

</TABLE>

         The  following  table  summarizes   information   about  stock  options
outstanding under the 2003 Share Plan as of April 30, 2008:

<TABLE>
<CAPTION>


                                            Options Outstanding                            Options Exercisable
                                ----------------------------------------------  -------------------------------------------
                                                  Weighted                                      Weighted
                                                   Average        Weighted                       Average       Weighted
                                                  Remaining       Average                      Remaining       Average
             Range of              Number        Contractual      Exercise          Number     Contractual     Exercise
         Exercise Prices         Outstanding        Life           Price          Exercisable     Life           Price
     ----------------------------------------------------------------------------------------------------------------------
               <S>                   <C>             <C>             <C>              <C>          <C>             <C>
          $0.25 - $0.43            1,170,000        5.45            $0.33          1,170,000      5.45            $0.33
          $0.52 - $0.77            5,375,970        7.16            $0.63          5,375,970      7.16            $0.63
          $0.81 - $1.46           10,066,075        7.93            $0.94          8,581,075      7.65            $0.90

</TABLE>

         The exercise price with respect to all of the options granted under the
2003 Share Plan since its  inception  was equal to the fair market  value of the
underlying  common  stock at the grant  date.  As of April 30,  2008,  5,512,906
shares were available for future grants under the 2003 Share Plan.

Stock Grants
------------

         We account for stock awards granted to employees and consultants  based
on their grant date fair value.  During the  six-month  periods  ended April 30,
2008 and 2007, we issued 954,875 shares and 1,509,580 shares,  respectively,  of
common stock to certain employees for services rendered,  principally in lieu of
cash  compensation,  pursuant to the 2003 Share Plan.  We recorded  compensation
expense for the six-month periods ended April 30, 2008 and 2007 of approximately
$1,041,000 and $1,068,000,  respectively,  and for the three-month periods ended
April 30, 2008 and 2007 of  approximately  $484,000 and $647,000,  respectively,
for the shares of common stock  issued to  employees.  In  addition,  during the
six-month  periods  ended April 30, 2008 and 2007,  we issued  62,306 shares and
149,020  shares,  respectively,  of common  stock to  consultants  for  services
rendered pursuant to the 2003 Share Plan. We recorded consulting expense for the
six-month  periods  ended April 30, 2008 and 2007 of  approximately  $75,000 and
$106,000, respectively, and for the three-month periods ended April 30, 2008 and
2007 of  approximately  $15,000  and  $11,000,  respectively,  for the shares of
common stock issued to consultants.


                                       17
<PAGE>


3.       CONCENTRATION OF CREDIT RISK
         ----------------------------

         Financial  instruments that potentially subject us to concentrations of
credit  risk  consist  principally  of  accounts  receivable  from  sales in the
ordinary  course of business.  Management  reviews our accounts  receivable  and
other receivables for potential doubtful accounts and maintains an allowance for
estimated  uncollectible  amounts.  Generally,  no  collateral  is received from
customers  for our  accounts  receivable.  During the six months ended April 30,
2008, one customer in the Encryption  Products and Services Segment  represented
60% of total  net  sales.  During  the six  months  ended  April 30,  2007,  two
customers in the Encryption  Products and Services  Segment  represented 53% and
24%,  respectively,  of total net sales.  At April 30, 2008 two customers in the
Encryption Products and Services Segment represented 69% and 31%,  respectively,
of net  accounts  receivable  and at  October  31,  2007,  one  customer  in the
Encryption  Products  and  Services  Segment  represented  100% of net  accounts
receivable.

4.       SHORT-TERM INVESTMENTS
         ----------------------

         Short-term investments represent  certificates of deposits,  carried at
amortized cost,  with maturities of less than twelve months.  The fair values of
the certificates of deposits,  including  accrued  interest,  approximate  their
carrying value due to their short maturities.

5. INVESTMENT IN AND RELATED PARTY  TRANSACTIONS  WITH DIGITAL INFO SECURITY CO.
   -----------------------------------------------------------------------------
INC.
----

         In February 2006, we entered into a Software  License and  Distribution
Agreement (the "DISC License Agreement") to license to Digital Info Security Co.
Inc.  ("DISC"),  an encryption system that integrates our encryption  technology
into DISC's e-mail  services.  The system allows companies to encrypt all e-mail
transactions in a manner  transparent to the individual user.  Concurrently with
entering  into the DISC  License  Agreement  with DISC,  we  acquired a minority
interest in DISC by exchanging 100,000  unregistered  shares of our common stock
for 5,000,000  shares of DISC's common stock. In May and July 2006, we purchased
an additional  1,000,000 shares and 1,200,000  shares,  respectively,  of DISC's
common stock for $50,000 and $60,000 in cash, respectively. In November 2006, we
acquired an additional  5,000,000  shares of DISC's common stock in exchange for
300,000  unregistered shares of our common stock.  Accordingly,  as of April 30,
2008,  we held  12,200,000  shares of DISC's  common  stock,  all of which  were
restricted  securities.   DISC's  common  stock  is  not  registered  under  the
Securities Exchange Act of 1934, but is quoted on the Pink Sheets.  According to
DISC's most recent  public  financial  report,  as of December  31, 2007 we held
approximately  12% of the  outstanding  common stock of DISC.  Our investment in
DISC as of April 30, 2008, is recorded in the accompanying  consolidated balance
sheet at cost of $417,000, based on the closing price of our common stock on the
dates we acquired  DISC common stock in exchange for our common  stock,  and the
price paid for the shares purchased for cash.

         Net sales for the six months ended April 30, 2007 included  billings to
DISC for engineering services of $120,000.  We had no net sales relating to DISC
for the six months ended April 30, 2008.  Net accounts  receivable  at April 30,
2008 and October 31, 2007 include $60,000 and $120,000, respectively, from DISC.

                                       18
<PAGE>


6.       INVENTORIES
         -----------

         Inventories consist of the following as of:
                                                   April 30,     October 31,
                                                     2008           2007
                                                -----------    -------------
             Component parts                      $  95,071     $    113,458
             Work-in-process                          8,184           26,597
             Finished products                       93,053           51,868
                                                -----------    -------------
                                                  $ 196,308     $    191,923
                                                ===========    =============

7.       NET LOSS PER SHARE OF COMMON STOCK
         ----------------------------------

         In accordance with SFAS No. 128, "Earnings Per Share" ("SFAS No. 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.  Diluted  EPS for  all  periods
presented  is the same as Basic EPS,  as the  inclusion  of the effect of common
stock  equivalents then  outstanding  would be  anti-dilutive.  For this reason,
excluded from the  calculation of Diluted EPS for the six month and  three-month
periods  ended April 30,  2008 and 2007,  were  options to  purchase  20,018,511
shares and 21,202,711 shares, respectively.


8.       EFFECT OF RECENTLY ISSUED PRONOUNCEMENTS
         ----------------------------------------

         In  September   2006,  the  FASB  issued  SFAS  No.  157,  "Fair  Value
Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework
for  measuring  fair value in  generally  accepted  accounting  principles,  and
expands  disclosures  about fair value  measurements.  SFAS 157 applies to other
accounting  pronouncements that require or permit fair value  measurements.  The
provisions of SFAS 157 are effective for fiscal years  beginning  after November
15, 2007. We are currently  evaluating the effect,  if any, that the adoption of
SFAS 157 will have on our financial statements.

         In February  2007, the FASB issued SFAS No. 159, "The Fair Value Option
for Financial Assets and Financial  Liabilities"  ("SFAS 159"). SFAS 159 expands
opportunities to use fair value  measurement in financial  reporting and permits
entities to choose to measure many financial instruments and certain other items
at fair value.  SFAS 159 is effective for fiscal years  beginning after November
15, 2007. We are currently  evaluating the effect,  if any, that the adoption of
SFAS 159 will have on our financial statements.

         In  December  2007,  the FASB  issued  SFAS  No.  141  (revised  2007),
"Business  Combinations" ("SFAS 141R"), which changes how an entity accounts for
the acquisition of a business.  When effective,  SFAS 141R will replace existing
SFAS No. 141, "Business  Combinations" ("SFAS 141"), in its entirety.  SFAS 141R
carries   forward  the  existing   requirements  to  account  for  all  business
combinations using the acquisition method (formerly called the purchase method).
In general,  SFAS 141R will require  acquisition-date  fair value measurement of
identifiable assets acquired,  liabilities assumed, and noncontrolling  interest

                                       19
<PAGE>


in the acquired entity. SFAS 141R will eliminate the current cost-based purchase
method  under SFAS 141.  SFAS 141R is  effective  for fiscal  years and  interim
periods  within those fiscal years  beginning on or after December 15, 2008. The
adoption of SFAS 141R is not expected to have a material effect on our financial
statements.

9.       INCOME TAXES
         ------------

         Income tax expense for the  six-month  and  three-month  periods  ended
April 30, 2008  represents  income taxes  withheld by India on dividends paid by
Videocon  related to the Videocon  GDRs we hold. We did not incur any income tax
expense in fiscal  2007.  We file Federal and New York State income tax returns.
Due to net operating losses,  the statute of limitations  remains open since the
fiscal  year ended  October 31,  1992.  We account for  interest  and  penalties
related to income tax matters in selling, general and administrative expenses.

         On November 1, 2007, we adopted FASB Interpretation No. 48, "Accounting
for  Uncertainty in Income Taxes," an  interpretation  of FASB Statement No. 109
("FIN 48"). FIN 48 clarifies the accounting  for  uncertainties  in income taxes
recognized in an enterprise's  financial statements.  There were no unrecognized
tax  benefits as of the date of our  adoption of FIN 48 and its adoption did not
have a material effect on our financial statements.

10.      SEGMENT INFORMATION
         -------------------

         We follow the provisions of SFAS No. 131,  "Disclosures  about Segments
of an Enterprise and Related Information" ("SFAS No. 131"). Reportable operating
segments are determined based on management's approach. The management approach,
as  defined  by SFAS No.  131,  is based  on the way  that the  chief  operating
decision-maker  organizes the segments within an enterprise for making operating
decisions  and  assessing  performance.  While our  results  of  operations  are
primarily reviewed on a consolidated  basis, the chief operating  decision-maker
also manages the  enterprise in two segments:  (i)  Flat-panel  display and (ii)
Encryption  products and services.  The following  represents selected financial
information  for our segments for the  six-month and  three-month  periods ended
April 30, 2008 and 2007:
<TABLE>
<CAPTION>

                                                        Encryption Products
          Segment Data             Flat-Panel Display       and Services             Total
---------------------------------  -------------------  --------------------  -------------------
      <S>                                   <C>                  <C>                  <C>
Six Months Ended April 30, 2008:
   Net sales                           $            -          $    217,580        $     217,580
   Net loss                               ( 2,551,223)           (1,975,453)          (4,526,676)

Six Months Ended April 30, 2007:
   Net sales                           $            -          $    227,177        $     227,177
   Net loss                                (1,596,106)           (1,609,224)          (3,205,330)

</TABLE>


                                       20
<PAGE>

<TABLE>
<CAPTION>

                                                        Encryption Products
          Segment Data             Flat-Panel Display       and Services             Total
---------------------------------  -------------------  --------------------  -------------------
            <S>                             <C>                   <C>                 <C>
Three Months Ended April 30, 2008:
   Net sales                            $           -            $  165,355         $    165,355
   Net loss                                (1,054,950)             (786,401)          (1,841,351)

Three Months Ended April 30, 2007:
   Net sales                            $           -            $   96,427         $     96,427
   Net loss                                  (661,765)             (770,131)          (1,431,896)
</TABLE>



                                       21
<PAGE>


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

GENERAL
-------

         Our principal operations are the development,  production and marketing
of thin,  flat,  low-voltage  phosphor  display  technology and the development,
production and marketing of  multi-functional  encryption  products that provide
information  security for domestic and international  users over virtually every
communications media.

         We have  pioneered the basic  development  of an innovative new type of
flat panel  display  technology,  which is  brighter,  has higher  contrast  and
consumes  less power than our prior  display  technology.  This new  proprietary
display is a color phosphor based display having a unique lower voltage electron
emission  system  to  excite  the color  phosphors.  As with our  prior  display
technology,  the new  technology  emits light to display color  images,  such as
movies from DVD players. In addition,  we are also developing another version of
our new type low  voltage  and low  power  display  having  a  different  matrix
configuration  and phosphor  excitation  system.  These new type of displays are
expected to be lower in cost than our prior displays.

         In November 2007, we entered into a Technology  License  Agreement (the
"License  Agreement")  with  Videocon  Industries  Limited,  an  Indian  company
("Videocon").   Under  the  License  Agreement,   we  provide  Videocon  with  a
non-transferable,  worldwide  license  of our  technology  for thin,  flat,  low
voltage  phosphor  displays  (the  "Licensed  Technology"),  for  Videocon (or a
Videocon  Group  company)  to  produce  and  market  products,   including  TVs,
incorporating  displays  utilizing  the Licensed  Technology.  Under the License
Agreement,  we will receive a license fee of $11 million from Videocon,  payable
in installments  over a 27 month period and an agreed upon royalty from Videocon
based on  display  sales by  Videocon.  In April  2008,  the  Indian  Government
approved  the  License  Agreement  and  in  May  2008,  we  received  the  first
installment of the license fee of $2 million.

         Videocon Industries Limited is the $3.5 billion flagship company of the
Videocon Group,  one of India's  leading  business  houses.  Videocon Group is a
fully  integrated  consumer  electronics  and home  appliances  enterprise  with
backward  integration in plasma panel, CRT glass,  color picture tubes and other
key  components  for the consumer  electronics,  home  appliances and components
industries.  The company also  operates in the oil & gas sector  through its 25%
participating  interest in Ravva Oil Field which produces  50,000 barrels of oil
per day. The group also has participating interests in exploration activities in
Oman,  Timor,  Brazil,  and Australia.  The Videocon Group has sales and service
networks  throughout  India supporting  seventeen  locally-based  factories.  In
addition,  the Videocon Group operates facilities in Italy,  Poland, Oman, China
and Mexico. For more information on Videocon, visit www.videoconworld.com.

         CopyTele and Videocon are working  together to implement our technology
into production displays. Under the License Agreement, Videocon, with assistance
from  CopyTele,  is to provide  the design and process  engineering  required to
produce  display  modules based on our technology  and has a dedicated  group of
display specialists  assigned to this program. In addition,  Videocon also is to

                                       22
<PAGE>


provide all tooling and fixtures required for the production  process.  CopyTele
and  Videocon  are also  working  together to  incorporate  advancements  to our
display technology for various sizes of displays. Improvements to the technology
will be jointly owned by CopyTele and Videocon.

         We will  continue  to have the  right to  produce  and  market,  and to
utilize  Volga Svet Ltd.,  a Russian  display  company that we have been working
with for more than ten years  ("Volga"),  and an Asian company that CopyTele has
been  working  with for more than four years,  to produce  and market,  products
utilizing our technology. Additional licenses of our technology to third parties
require the joint agreement of CopyTele and Videocon.

         In connection with the License  Agreement,  for the term of the license
granted under the License  Agreement,  Videocon and CopyTele have each appointed
one senior  advisor to the other's  board of directors to advise with respect to
strategic planning and technology in the display field.

         At the same time as we entered into the License  Agreement,  we entered
into a  Share  Subscription  Agreement  with an  affiliate  of  Videocon  ("Mars
Overseas") for Mars Overseas to purchase  20,000,000 shares of our common stock,
and   a   subsidiary   of   ours,   CopyTele   International   Ltd.   ("CopyTele
International"),  entered  into a GDR Purchase  Agreement to purchase  1,495,845
global  depository  receipts  ("GDRs")  of  Videocon.   Both  transactions  were
completed  in our  first  fiscal  quarter  of  fiscal  2008.  See  Note 1 to the
Condensed Consolidated Financial Statements.

         Our new display  technology has been  incorporated into display modules
which are brighter,  have higher  contrast and consume less power than our prior
carbon nanotube and proprietary low voltage color phosphor  display  technology.
We have developed various engineering models using such prior technology,  which
demonstrated  the  display's   ability  to  show  movies  from  DVD  players  by
controlling the brightness of selected  individual pixels. The carbon nanotubes,
which are supplied to us by a U.S.  company,  require a low voltage for electron
emission and are extremely small -  approximately  10,000 times thinner than the
width of a human hair.  The 5.5 inch  (diagonal)  display we developed has 960 x
234 pixels and utilizes a new  memory-based  active matrix thin film  technology
with each pixel phosphor  activated by electrons emitted by a proprietary carbon
nanotube network located  approximately 10 microns (1/10th of a human hair) from
the pixels.  As a result,  each pixel phosphor  brightness is controlled using a
maximum of only 40 volts. The carbon  nanotubes and proprietary  color phosphors
are  precisely  placed and  separated  utilizing  our  proprietary  nanotube and
phosphor  deposition  technology.  We have  developed  a process of  maintaining
uniform carbon nanotube deposition  independent of phosphor deposition.  We have
also developed a method of enhancing  nanotube electron emission to increase the
brightness of this type of display.

         Some other characteristics of our display technology are as follows:

          o    We  have  developed  a  proprietary  system  which  allows  us to
               evacuate  our  display;  to  rapidly  vacuum  seal  it  at a  low
               temperature to accommodate the matrix; and to create lithographic
               type spacers to assemble our display  utilizing only 0.7mm glass.

                                       23
<PAGE>


               We thus obtain a display thickness of approximately  1/16th of an
               inch,   thinner  than  LCD  (liquid  crystal)  and  PDP  (plasma)
               displays.

          o    The display matrix,  phosphor  excitation system, and drivers are
               all on one substrate.

          o    Our display is able to select and change the  brightness  of each
               individual pixel,  requiring only 40 volts on each pixel phosphor
               to change the  brightness  from black to white.  This compares to
               thousands  of volts  required  for  other  video  phosphor  based
               displays, which leads to inherent breakdowns and short life.

          o    Our display has no backlight. Because power is only consumed when
               a pixel is turned on, low power is needed to  activate  the whole
               display.  The display requires less power than an LCD. This lower
               power  consumption  could  potentially  allow use of rechargeable
               batteries to operate TV products for  wireless  applications  and
               extend the battery operation time for portable devices.

          o    The same basic display  technology could  potentially be utilized
               in various size applications, from hand-held to TV size displays.

          o    Our  proprietary  matrix  structures  can be produced by existing
               mass production TFT (thin film  technology)  LCD  facilities,  or
               portions of these facilities.

          o    Our display eliminates display flicker.

          o    Our  display  has  an  approximately  1,000  times  faster  video
               response  time than an LCD,  and matches the  response  time of a
               cathode ray tube (CRT).

          o    Our display can be viewed with high contrast over approximately a
               180 degree  viewing  angle,  in both the  horizontal and vertical
               directions, which exceeds the viewing angle of LCDs.

          o    Also like  CRTs,  our  display is  capable  of  operating  over a
               temperature range (-40(degree)C to 85(degree)C) which exceeds the
               range  over  which  LCDs  can  operate,   especially  under  cold
               temperature conditions.

         We believe our displays could  potentially have a cost similar to a CRT
and thus less than current LCD or PDP  displays  (our display does not contain a
backlight,  or color filter or polarizer,  which represent a substantial portion
of the cost of an LCD).

         We have actively continued to pursue our encryption  business.  We have
sought encryption  opportunities in both the commercial and government  security
markets.

         Our government  market has been primarily handled by The Boeing Company
("Boeing")  and its large  distributors  of the Thuraya  satellite  phones.  The
Thuraya  Satellite  Network has grown as a  communications  provider  due to its
geographic  coverage,  quality of service and cost  effective  usage.  The third
Thuraya Geo-mobile satellite was successfully launched in January 2008, allowing
Thuraya to embark on major  expansion  plans to provide  their mobile  satellite
services in the Asia-Pacific  region,  thus potentially  opening new markets for
CopyTele security solutions that are designed for the Thuraya network.

         During  fiscal 2007,  we entered into a new three year  agreement  with
Boeing.  Boeing now  distributes  13 of our  products,  including  our DCS-1400D
(docker voice encryption  device),  USS-900T  (satellite fax encryption device),
USS-900TL  (landline to satellite fax encryption device),  USS-900WF  (satellite
and cellular  fax  encryption  device),  USS-900WFL  (landline to satellite  and
cellular fax  encryption  device) and  USS-900TC  (satellite  fax  encryption to

                                       24
<PAGE>


computer)  products,  which were specifically  designed for the Thuraya network.
Boeing sells these products under the brand name of Thuraya.

         We are continuing to promote our Thuraya  encryption  solutions through
other Thuraya  developers and resellers  beside  Boeing,  including Asia Pacific
Satellite  Industries  ("APSI").  We offer a full  line of  voice,  fax and data
encryption products that secure these communications, and our products are being
used  by  government   agencies,   military,   and  domestic  and  international
non-governmental  organizations  (NGOs) in the Middle East, Europe, Far East and
Africa.

         APSI has manufactured new Thuraya handsets and docking units that allow
satellite and GSM cellular  communications  both outdoors and indoors.  CopyTele
and APSI have developed  connecting cables and  compatibility  arrangements that
customers can easily set up and utilize to secure their  communications over the
Thuraya network and which are compatible with landline telephone systems. APSI's
new FDU-3500  docking unit for its SO-2510 phone is now available in the market.
This unit allows for outdoor and indoor  operation of the satellite phone on the
Thuraya  network.  Our new PA-3500 and  PA-3500T  products  allow  compatibility
between our  DCS-1200,  DCS-1400  and USS-900T  encryption  devices and the APSI
FDU-3500  docking unit and SO-2510  phone.  We have continued to work on further
designs for encrypting the SO-2510 phone that we believe will increase  customer
attraction to security by reducing the size of the  encryption  unit and greatly
improving the customer's graphical interface.

         Our  products  provide  secure   communications   with  many  different
satellite  phones,  including the Thuraya  7100/7101/SO-2510  handheld  terminal
("HHT"),   Globalstar   GSP-1600  HHT,   Telit   SAT-550/600   HHT,   Globalstar
GSP-2800/2900 fixed phone, Iridium 9500/9505/9505A HHT, Inmarsat M4 and Mini "M"
HHT units  from  Thrane & Thrane  and  Nera.  Through  the use of our  products,
encrypted satellite communications are available for many Thuraya docking units,
including  Teknobil's  Next Thuraya  Docker,  Thuraya's  Fixed Docking  Adapter,
APSI's  FDU-2500 and FDU-3500  Fixed Docking Units,  and  Sattrans's  SAT-OFFICE
Fixed Docking Unit and SAT-VDA Hands-Free Car Kit.

         We have recently  uncovered new  opportunities  to secure  landline and
wireless voice and fax communications.  Our USS-900AF,  USS-900WF and USS-900WFL
products  are being  evaluated  for use by two Middle  Eastern  governments  for
encrypting fax communications.  Also, a Far Eastern government is in the process
of determining the system requirements necessary to encrypt voice communications
utilizing our DCS-1200 and DCS-1400 products.

         In the  commercial  field,  the Voice  over  Internet  Protocol  (VoIP)
function that has been added to the DCS-1200 is now being  evaluated for rollout
by a large commercial organization in South America.

         We also  licensed  our  encryption  system for  e-mail to Digital  Info
Security Co. Inc. ("DISC"),  located in Westminster,  Colorado.  The system, our
DCS-2200, integrates into DISC's e-mail services and allows companies to encrypt
all e-mail  transactions  in a manner  transparent  to the  individual  user. In
furtherance  of our  relationship  with DISC,  during  fiscal 2006 and 2007,  we
acquired  shares of DISC's common stock  constituting,  according to DISC's most
recent public financial  report,  as of December 31, 2007,  approximately 12% of

                                       25
<PAGE>


the  outstanding  shares.  More  information  on DISC can be  obtained  on their
website www.disecurityco.com. See Note 5 to the Condensed Consolidated Financial
Statements.

         Our  operations  and the  achievement  of our  objectives in marketing,
production,  and research and  development  are dependent  upon an adequate cash
flow.  Accordingly,   in  monitoring  our  financial  position  and  results  of
operations,  particular  attention  is  given to cash  and  accounts  receivable
balances and cash flows from operations.  Since our initial public offering, our
cash flows have been  primarily  generated  through the sales of common stock in
private  placements and upon exercise of stock options.  Since 1999 we have also
generated cash flows from sales of our encryption products and services.  We are
continuing to direct our encryption  marketing  efforts to opportunities in both
the commercial and government  security markets and have recently  uncovered new
opportunities  with Middle  Eastern and Far Eastern  governments to secure voice
and fax communications. In addition, in fiscal 2008, we entered into the License
Agreement  with Videocon and in May 2008, we commenced  receiving  from Videocon
license fees related to our display technology.

CRITICAL ACCOUNTING POLICES
---------------------------

         Our financial  statements  are prepared in conformity  with  accounting
principles  generally accepted in the United States of America.  As such, we are
required to make certain  estimates,  judgments and assumptions  that management
believes are reasonable  based upon the information  available.  These estimates
and  assumptions  affect the reported  amounts of assets and liabilities and the
disclosure of contingent  assets and  liabilities  at the dates of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods.

         We believe the following  critical  accounting  polices affect the more
significant  judgments and estimates  used in the  preparation  of our financial
statements.  For  additional  discussion on the  application  of these and other
accounting polices, refer to the financial statements and notes thereto included
in our Annual Report on Form 10-K for the year ended October 31, 2007.

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

         Revenues  from  sales  are  recorded  when  all  four of the  following
criteria  are met:  (i)  persuasive  evidence  of an  arrangement  exists;  (ii)
delivery has occurred and title has  transferred or services have been rendered;
(iii) our price to the buyer is fixed or determinable;  and (iv)  collectibility
is reasonably assured.

Inventories
-----------

         Inventories are stated at the lower of cost, including material,  labor
and  overhead,  determined  on a first-in,  first-out  basis,  or market,  which
represents  our best estimate of market  value.  We regularly  review  inventory
quantities  on hand,  particularly  finished  goods,  and record a provision for
excess and obsolete  inventory  based  primarily on forecasts of future  product
demand.  Our net loss is  directly  affected  by  management's  estimate  of the
realizability of inventories.  To date, sales of our products have been limited.
Accordingly,  there can be no  assurance  that we will not be required to reduce

                                       26
<PAGE>


the  selling  price of our  inventory  below our current  carrying  value in the
future.

Stock Based Compensation
------------------------

         We account  for stock  options  granted  to  employees,  directors  and
consultants  using Financial  Accounting  Standards Board Statement of Financial
Accounting  Standards  No. 123  (revised  2004),  "Share-Based  Payment"  ("SFAS
123R").  We  recognize  compensation  expense  for  stock  option  awards  on  a
straight-line basis over the requisite service period of the grant.  Determining
the  appropriate  fair value model and calculating the fair value of stock-based
awards  requires   judgment,   including   estimating  stock  price  volatility,
forfeiture  rates and expected life. If factors  change and we employ  different
assumptions  in the  application  of  SFAS  No.  123R  in  future  periods,  the
compensation expense that we record under SFAS No. 123R may differ significantly
from what we have recorded in the current period.

RESULTS OF OPERATIONS
---------------------

Six months ended April 30, 2008 compared with six months ended April 30, 2007
-----------------------------------------------------------------------------

         Net Sales and Gross Profit

         Net Sales. Net sales decreased by approximately $9,000 in the six-month
period  ended  April  30,  2008,  to  approximately  $218,000,  as  compared  to
approximately  $227,000 in the comparable prior-year period.  Revenue during the
current period was from encryption products, while revenue during the prior year
period was from  encryption  products  and  services.  The increase in net sales
resulted  from  an  increase  in  unit  sales  of  approximately   $111,000,  to
approximately  $218,000, as compared to approximately $107,000 in the comparable
prior-year  period  and a decrease  in revenue  from  encryption  services  from
$120,000 in the comparable  prior-year period to none in the current period. The
revenue  from  encryption  services  in the  prior  year  period  resulted  from
engineering  services billed to DISC. Our encryption sales have been limited and
are sensitive to individual large transactions. We believe that changes in sales
between periods generally represent the nature of the early stage of our product
and sales channel development.

         Gross Profit.  Gross profit from net sales of  encryption  products and
services increased by approximately  $17,000 in the six-month period ended April
30,  2008,  to  approximately  $167,000,  as  compared  to  a  gross  profit  of
approximately  $150,000 in the  comparable  prior-year  period.  The increase in
gross  profit is  primarily  due to sales  during the current  period  including
inventory  having a cost of  approximately  $19,000  for which a  provision  for
excess  inventory  was recorded in prior  periods and  accordingly,  the cost of
encryption  products sold during the current  period was reduced by that amount.
Gross profit as a percent of net sales in the  six-month  period ended April 30,
2008 was  approximately  77%, as compared to approximately 66% in the comparable
prior-year  period.  The  increase in gross  profit as a percent of net sales is
primarily  due to the sale during the current  period of  inventory  for which a
provision  for excess  inventory was recorded in prior  periods.  Because of the
limited  number  of  transactions  during  each  of the  periods,  gross  profit
percentages are sensitive to individual transactions.

                                       27
<PAGE>


         Research and Development Expenses

         Research and development  expenses increased by approximately  $525,000
in the six-month period ended April 30, 2008, to approximately $2,444,000,  from
approximately  $1,919,000 in the comparable  prior-year  period. The increase in
research and development expenses was principally due to an increase in employee
stock option  compensation  expense of  approximately  $450,000,  an increase in
outside  research  and  development  expense  of  approximately  $75,000  and an
increase  in  consultant  stock  option  compensation  expense of  approximately
$45,000,  offset by a decrease in employee compensation and related costs, other
than stock option expense, of approximately $31,000.

         Selling, General and Administrative Expenses

         Selling, general and administrative expenses increased by approximately
$925,000 to  approximately  $2,379,000 in the  six-month  period ended April 30,
2008, from  approximately  $1,454,000 in the comparable  prior-year  period. The
increase in selling,  general and administrative expenses was principally due to
an increase in  employee  stock  option  compensation  expense of  approximately
$473,000,  an  increase  in  consultant  stock  option  compensation  expense of
approximately  $165,000,  an  increase  in  professional  fees of  approximately
$117,000,  an increase in the  provision  for doubtful  accounts of $60,000,  an
increase in travel expense of approximately  $41,000 and an increase in employee
compensation   and  related  costs,   other  than  stock  option   expense,   of
approximately $39,000.

         Dividend Income

         Dividend  income,  which was received in  connection  with the Videocon
GDRs we acquired in December 2007, was approximately  $131,000 in the six months
ended April 30, 2008. We received no dividend income in the prior-year period.

         Interest Income

         Interest income was approximately $13,000 in the six-month period ended
April 30, 2008, compared to approximately  $18,000 in the comparable  prior-year
period.  The  decrease in interest  income was  primarily  due to a reduction in
prevailing interest rates.

         Income Tax Expense

         Income tax expense  for the  six-month  period  ended April 30, 2008 of
approximately $15,000 represents income taxes withheld by India on the dividends
paid by Videocon  related to the  Videocon  GDRs we hold.  We did not record any
income tax expense in the prior-year period.


                                       28
<PAGE>


Three months ended April 30, 2008 compared with three months ended April 30,
----------------------------------------------------------------------------
2007
----
         Net Sales and Gross Profit

         Net  Sales.  Net  sales  increased  by  approximately  $69,000  in  the
three-month period ended April 30, 2008, to approximately  $165,000, as compared
to approximately $96,000 in the comparable prior-year period. Revenue during the
current period was from encryption products, while revenue during the prior year
period was from  encryption  products  and  services.  The increase in net sales
resulted  from  an  increase  in  unit  sales  of  approximately   $129,000,  to
approximately  $165,000,  as compared to approximately $36,000 in the comparable
prior-year  period  and a decrease  in revenue  from  encryption  services  from
$60,000 in the comparable  prior-year period to none in the current period.  The
revenue  from  encryption  services  in the  prior  year  period  resulted  from
engineering  services billed to DISC. Our encryption sales have been limited and
are sensitive to individual large transactions. We believe that changes in sales
between periods generally represent the nature of the early stage of our product
and sales channel development.

         Gross Profit.  Gross profit from net sales of  encryption  products and
services  increased by  approximately  $67,000 in the  three-month  period ended
April 30,  2008,  to  approximately  $128,000,  as compared to a gross profit of
approximately $61,000 in the comparable prior-year period. The increase in gross
profit is  primarily  due to the  increase in net sales.  The  increase in gross
profit also reflected sales during the current period including inventory having
a cost of  approximately  $15,000 for which a provision for excess inventory was
recorded in prior periods and accordingly,  the cost of encryption products sold
during the current period was reduced by that amount.  Gross profit as a percent
of net sales in the  three-month  period ended April 30, 2008 was  approximately
78%, as compared to approximately 63% in the comparable  prior-year  period. The
increase in gross profit as a percent of net sales is primarily  due to the sale
during  the  current  period of  inventory  for  which a  provision  for  excess
inventory  was  recorded  in prior  periods  and also  results  from  encryption
services  in the prior  period  having a gross  profit  percentage  of less than
encryption  products.  Because of the limited number of transactions during each
of  the  periods,   gross  profit   percentages   are  sensitive  to  individual
transactions.

         Research and Development Expenses

         Research and development  expenses increased by approximately  $215,000
in the  three-month  period ended April 30, 2008, to  approximately  $1,131,000,
from approximately $916,000 in the comparable prior-year period. The increase in
research and development expenses was principally due to an increase in employee
stock option compensation  expense of approximately  $245,000 and an increase in
outside research and development of approximately $59,000,  offset by a decrease
in employee  compensation and related costs, other than stock option expense, of
approximately $99,000.

         Selling, General and Administrative Expenses

         Selling, general and administrative expenses increased by approximately
$375,000 to  approximately  $960,000 in the  three-month  period ended April 30,
2008,  from  approximately  $585,000 in the comparable  prior-year  period.  The

                                       29
<PAGE>


increase in selling,  general and administrative expenses was principally due to
an increase in  employee  stock  option  compensation  expense of  approximately
$298,000, an increase in travel expense of approximately $45,000 and an increase
in professional fees of approximately $42,000,  offset by a decrease in employee
compensation   and  related  costs,   other  than  stock  option   expense,   of
approximately $43,000.

         Dividend Income

         Dividend  income,  which was received in  connection  with the Videocon
GDRs we acquirer  in  December  2007,  was  approximately  $131,000 in the three
months ended April 30, 2008.  We received no dividend  income in the  prior-year
period.

         Interest Income

         Interest  income was  approximately  $6,000 in the  three-month  period
ended  April 30,  2008,  compared  to  approximately  $8,000  in the  comparable
prior-year  period.  The  decrease in  interest  income was  primarily  due to a
reduction in prevailing interest rates.

         Income Tax Expense

         Income tax expense for the  three-month  period ended April 30, 2008 of
approximately $15,000 represents income taxes withheld by India on the dividends
paid by Videocon  related to the  Videocon  GDRs we hold.  We did not record any
income tax expense in the prior year period.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

         From our inception,  we have met our liquidity and capital  expenditure
needs  primarily  through the proceeds from sales of common stock in our 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.  In addition,  commencing  in the fourth  quarter of
fiscal 1999, we have generated cash flows from sales of our encryption  products
and in May 2008,  we  commenced  receiving  license  fees related to our display
technology from Videocon pursuant to the License Agreement.

          During the six months ended April 30, 2008, our cash used in operating
activities  was  approximately  $1,552,000.   This  resulted  from  payments  to
suppliers,  employees and  consultants of  approximately  $1,783,000,  which was
offset by cash of  approximately  $87,000  received from collections of accounts
receivable related to sales of encryption products, and approximately $13,000 of
interest  income and  $131,000 of  dividend  income  received.  Our cash used in
investing   activities   during  the  six  months   ended  April  30,  2008  was
approximately $21,252,000, which resulted from a disbursement of $16,200,000 for
the purchase of Videocon GDRs, a disbursement $5,000,000 to issue a loan to Mars
Overseas,  purchases of short-term  investments  consisting of  certificates  of
deposit of $441,000 and purchases of approximately $11,000 of equipment,  offset
by $400,000  received upon  maturities of short-term  investments  consisting of
certificates of deposit.  Our cash provided by financing  activities  during the
six months ended April 30, 2008 was  approximately  $22,899,000,  which resulted
from the sale of our common  stock to Videocon  for  $16,200,000,  the  proceeds
received  of  $5,000,000  upon  obtaining  a loan  from Mars  Overseas  and cash

                                       30
<PAGE>


received  upon  the  exercise  of stock  options  of  approximately  $1,699,000.
Accordingly,  during  the six months  ended  April 30,  2008,  our cash and cash
equivalents  increased by approximately  $95,000 and our short-term  investments
increased by $41,000.  As a result,  our cash, cash equivalents,  and short-term
investments,  at April 30,  2008  increased  to  approximately  $1,205,000  from
approximately $1,069,000 at the end of fiscal 2007.

         Net  accounts  receivable  increased  by  approximately  $71,000,  from
$120,000 at the end of fiscal 2007 to approximately  $191,000 at April 30, 2008.
The  increase  is a  result  of an  account  receivable  from  one  customer  of
approximately  $131,000,  offset by a provision for doubtful accounts of $60,000
related to $120,000 of accounts receivable from DISC.  Inventories  increased by
approximately  $4,000  from  approximately  $192,000  at  October  31,  2007  to
approximately $196,000 at April 30, 2008, primarily as a result of the timing of
shipments and production  schedules.  Investment in Videocon is recorded at fair
value and  increased  to  $14,121,000  at April 30, 2008 from zero at the end of
fiscal 2007, as a result of our purchase of Videocon global depository  receipts
for  $16,200,000  in December 2007 and the  recording of an  unrealized  loss of
approximately $2,079,000 as of April 30, 2008. Investment in DISC is recorded at
cost of  $417,000  and has not  changed at April 30, 2008 from the end of fiscal
2007. Loan receivable increased to $5,000,000 at April 30, 2008 from zero at the
end of  fiscal  2007,  as a result  of  issuing  a loan in that  amount  to Mars
Overseas in December 2007. Accounts payable and accrued liabilities decreased by
approximately  $196,000 from approximately $679,000 at the end of fiscal 2007 to
approximately  $483,000 at April 30,  2008,  as a result the timing of payments.
Loan payable  increased to  $5,000,000 at April 30, 2008 from zero at the end of
fiscal 2007, as a result obtaining a loan from Mars Overseas in December 2007.

         Working capital at April 30, 2008 increased to approximately $1,139,000
from  approximately  $737,000 at the end of fiscal  2007.  Our  working  capital
includes inventory of approximately  $196,000 at April 30, 2008.  Management has
recorded our  inventory at the lower of cost or our current best estimate of net
realizable value. To date, sales of our products have been limited. Accordingly,
there can be no  assurance  that we will not be  required  to reduce the selling
price of our inventory below our current carrying value.

         During the  six-month  periods ended April 30, 2008 and 2007, we issued
954,875 shares and 1,509,580  shares,  respectively,  of common stock to certain
employees  for  services  rendered,  principally  in lieu of cash  compensation,
pursuant  to the  CopyTele,  Inc.  2003 Share  Incentive  Plan (the "2003  Share
Plan"). We recorded  compensation  expense for the six-month periods ended April
30, 2008 and 2007 of approximately $1,041,000 and $1,068,000,  respectively, and
for the  three-month  periods  ended  April 30,  2008 and 2007 of  approximately
$484,000  and  $647,000,  respectively  for the shares of common stock issued to
employees.  In addition,  during the six-month  periods ended April 30, 2008 and
2007, we issued 62,306 shares and 149,020 shares, respectively,  of common stock
to  consultants  for  services  rendered  pursuant  to the 2003 Share  Plan.  We
recorded  consulting  expense for the six-month periods ended April 30, 2008 and
2007  of  approximately  $75,000  and  $106,000,   respectively,   and  for  the
three-month  period  ended April 30, 2008 and 2007 of $15,000 and  approximately
$11,000, respectively, for the shares of common stock issued to consultants.

                                       31
<PAGE>


         During the six-month  periods ended April 30, 2008 and 2007, we granted
options to purchase  3,875,000  shares and 2,505,000  shares,  respectively,  to
employees,  non-employee  directors and  consultants of common stock at weighted
average  exercise prices of $.98 and $.67 per share,  respectively,  pursuant to
the 2003 Share Plan. During the six-month periods ended April 30, 2008 and 2007,
stock options to purchase  2,094,200 shares and 2,277,230 shares,  respectively,
of  common  stock  were  exercised  with  aggregate  proceeds  of  approximately
$1,699,000 and $1,202,000, respectively.

         During the six-month period ended April 30, 2008, we issued  20,000,000
shares of our common stock to an affiliate of Videocon for an aggregate purchase
price of $16,200,000 and we purchased  1,495,845  Videocon GDRs for an aggregate
purchase  price of  $16,200,000.  In April  2008,  we  received  a  dividend  of
approximately $131,000 on the Videocon GDRs we hold. While the Videocon GDRs are
held as security for the loan payable to Mars Overseas,  the agreement governing
such loan provides that any dividends,  distributions,  rights or other proceeds
or benefits in respect of the Videocon GDRs shall be promptly  transferred to us
free and clear of any encumbrances under the agreements.

         We  believe  that  our  existing  cash,  cash  equivalents,  short-term
investments  and accounts  receivable,  together  with cash flows from  expected
sales of our  encryption  products  and  revenue  relating  to our  thin,  flat,
low-voltage  phosphor display  technology,  including license fees and royalties
from Videocon,  and other potential sources of cash flows, will be sufficient to
enable us to continue our marketing,  production,  and research and  development
activities.  However,  our  projections  of future cash needs and cash flows may
differ  from  actual  results.  It is  management's  intention  to  continue  to
compensate  their  employees by issuing stock or stock options.  If current cash
and  cash  equivalents,  and cash  that may be  generated  from  operations  are
insufficient to satisfy our liquidity requirements,  we may seek to sell debt or
equity  securities or to obtain a line of credit.  The sale of additional equity
securities or convertible debt could result in dilution to our stockholders.  We
currently have no arrangements with respect to additional  financing.  There can
be no assurance that we will generate sufficient revenues in the future (through
sales,  license fees and  royalties,  or  otherwise) to improve our liquidity or
sustain future  operations,  that our production  capabilities will be adequate,
that other products will not be produced by other companies that will render our
products  obsolete,  or that other  sources of funding  would be  available,  if
needed,  on favorable terms or at all. If we cannot obtain such funds if needed,
we would need to curtail or cease some or all of our operations.

         We are  seeking to improve our  liquidity  through  increased  sales or
license of products  and  technology.  In an effort to generate  sales,  we have
marketed  our   encryption   products   directly  to  U.S.   and   international
distributors,  dealers  and  original  equipment  manufacturers  that market our
encryption  products  and to  end-users.  In fiscal  2008,  we entered  into the
License Agreement with Videocon.  Under the License Agreement, we will receive a
license fee of $11 million  from  Videocon,  payable in  installments  over a 27
month period and an agreed upon royalty from Videocon  based on display sales by
Videocon.  During the six-month  period ended April 30, 2008, we have recognized
revenue from sales of encryption  products of approximately  $218,000 and in May
2008,  we received  the first  installment  of the license fee from  Videocon of
$2,000,000.

                                       32
<PAGE>


         The  following  table  presents  our  expected  cash  requirements  for
contractual obligations outstanding as of April 30, 2008:
<TABLE>
<CAPTION>

                                                             Payments Due by Period
                                                             ----------------------

      <S>                        <C>               <C>             <C>              <C>                  <C>
                                 Less
Contractual                      than             1-3              4-5              After
Obligations                     1 year           years            years            5 years               Total

 Consulting
 Agreement                   $   42,500            -                -                 -             $     42,500

Noncancelable  Operating
Leases                       $  162,197            -                -                 -             $    162,197

Loan Payable                      -                -                -            $5,000,000         $  5,000,000
                             -------------    -------------    ------------    ----------------     --------------

Total Contractual
Cash Obligations             $ 204,697             -                -            $5,000,000         $  5,204,697
                             -------------    -------------    ------------    ----------------     --------------
</TABLE>

FORWARD-LOOKING STATEMENTS
--------------------------

         Information  included in this Quarterly Report on Form 10-Q may contain
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation Reform Act of 1995.  Forward-looking statements are not statements of
historical facts, but rather reflect our current expectations  concerning future
events and results. We generally use the words "believes," "expects," "intends,"
"plans,"  "anticipates,"  "likely,"  "will" and similar  expressions to identify
forward-looking  statements.  Such forward-looking  statements,  including those
concerning our  expectations,  involve risks,  uncertainties  and other factors,
some of which are  beyond  our  control,  which may  cause our  actual  results,
performance or achievements,  or industry  results,  to be materially  different
from any future results,  performance,  or achievements  expressed or implied by
such forward-looking statements. These risks, uncertainties and factors include,
but are not  limited  to,  those  factors  set forth in Part II, Item 1A - "Risk
Factors"  below and Note 1 to Condensed  Financial  Statements.  You should read
this  discussion  and analysis along with our Annual Report on Form 10-K for the
year ended October 31, 2007 and the condensed  financial  statements included in
this  Report.  We  undertake  no  obligation  to  publicly  update or revise any
forward-looking  statements,  whether  as a result  of new  information,  future
events  or   otherwise.   You  are   cautioned   not  to  unduly  rely  on  such
forward-looking  statements when  evaluating the  information  presented in this
Report.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.
         -----------------------------------------------------------

         We have  invested  a portion of our cash on hand in  short-term,  fixed
rate and highly liquid  instruments that have  historically been reinvested when
they mature  throughout  the year.  Although  our existing  instruments  are not
considered  at risk with  respect to changes in  interest  rates or markets  for

                                       33
<PAGE>


these  instruments,  our rate of return on these securities could be affected at
the time of reinvestment, if any.

         At April 30, 2008,  our investment in Videocon GDRs is recorded at fair
value of approximately $14,121,000 including an unrealized loss of approximately
$2,079,000  and has exposure to price risk.  The fair value of the Videocon GDRs
is based on the underlying price of Videocon's equity shares which are traded on
stock  exchanges in India with prices  quoted in rupees.  Accordingly,  the fair
value of the Videocon GDRs is subject to price risk and foreign  exchange  risk.
The  potential  loss in fair value  resulting  from a  hypothetical  10% adverse
change in prices of Videocon  equity shares quoted by Indian stock exchanges and
in  foreign   currency   exchange  rates,  as  of  April  30,  2008  amounts  to
approximately $1,412,000.

Item 4.  Controls and Procedures.
         ------------------------

         We  carried  out an  evaluation,  under  the  supervision  and with the
participation  of our  management  including our Chairman of the Board and Chief
Executive Officer and our Vice President - Finance and Chief Financial  Officer,
of the effectiveness of the design and operation of our disclosure  controls and
procedures  pursuant to Rule 13-15(b) of the Securities Exchange Act of 1934, as
amended.  Based  upon  that  evaluation,  our  Chairman  of the  Board and Chief
Executive  Officer and our Vice President - Finance and Chief Financial  Officer
concluded  that our  disclosure  controls and procedures are effective as of the
end of the period covered by this report.

         There was no change in our internal  control over  financial  reporting
during the  quarter  ended April 30, 2008 that has  materially  affected,  or is
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.



                                       34
<PAGE>


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

Item 1A.  Risk Factors.
          ------------

         There  have been no  material  changes in our risk  factors  from those
disclosed in our Annual Report on Form 10-K for the year ended October 31, 2007.

Item 6.  Exhibits.
         ---------

                  31.1     Certification of Chief Executive Officer, pursuant to
                           Section 302 of the  Sarbanes-Oxley Act of 2002, dated
                           June 9, 2008.

                  31.2     Certification of Chief Financial Officer, pursuant to
                           Section 302 of the  Sarbanes-Oxley Act of 2002, dated
                           June 9, 2008.

                  32.1     Statement of Chief Executive  Officer,  pursuant to
                           Section 1350 of Title 18 of the United States Code,
                           dated June 9, 2008.

                  32.2     Statement of Chief Financial  Officer,  pursuant to
                           Section 1350 of Title 18 of the United States Code,
                           dated June 9, 2008.

                                   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 and
                                         Chief Executive Officer
June 9, 2008                             (Principal Executive Officer)



                                         By: /s/ Henry P. Herms
                                             ----------------------------
                                         Henry P. Herms
                                         Vice President - Finance and
                                         Chief Financial Officer (Principal
June 9, 2008                             Financial and Accounting Officer)




                                       35