SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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


                  For the quarterly period ended July 31, 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 September 12, 2008, the registrant had outstanding 131,405,356 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.

<S>                                                                                             <C>
         Condensed Consolidated Balance Sheets as of July 31, 2008 (Unaudited)
             and October 31, 2007                                                               3

         Condensed Consolidated Statements of Operations (Unaudited) for the
             nine months ended July 31, 2008 and 2007                                           4

         Condensed Consolidated Statements of Operations (Unaudited) for the
             three months ended July 31, 2008 and 2007                                          5

         Condensed Consolidated Statement of Shareholder's Equity (Unaudited)
             for the nine months ended July 31, 2008                                            6

         Condensed Consolidated Statements of Cash Flows (Unaudited) for the
             nine months ended July 31, 2008 and 2007                                           7

         Notes to Condensed Consolidated Financial Statements (Unaudited)                       8 - 22

Item 2.  Management's Discussion and Analysis of Financial Condition and
             Results of Operations.                                                             23 - 34

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.                            34 - 35

Item 4.  Controls and Procedures.                                                               35


PART II.  OTHER INFORMATION

Item 1A. Risk Factors.                                                                          36

Item 6.  Exhibits.                                                                              36

         SIGNATURES                                                                             36
</TABLE>


                                       2
<PAGE>

<TABLE>
<CAPTION>
                          PART I. FINANCIAL INFORMATION
                          -----------------------------
Item 1.  Financial Statements.
         ---------------------
                         COPYTELE, INC. AND SUBSIDIARIES
                         -------------------------------
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      -------------------------------------
                                                                                             (Unaudited)
                                                                                          ------------------
                                                                                               July 31,             October 31,
                                         ASSETS                                                  2008                  2007*
                                         ------                                           ------------------    ------------------
CURRENT ASSETS:
                                <S>                                                               <C>                   <C>
   Cash and cash equivalents                                                               $       457,517       $       669,141
   Short-term investments in certificates of deposit and U.S. government securities              1,440,321               400,000
   Accounts receivable, net of allowance for doubtful accounts of $120,000
       and $-0-, respectively                                                                      207,400               120,000
   Inventories                                                                                     185,301               191,923
   Prepaid expenses and other current assets                                                        25,619                34,555
                                                                                          ------------------    ------------------
                        Total current assets                                                     2,316,158             1,415,619

INVESTMENT in Videocon Industries Limited global depository receipts,
   at fair value                                                                                10,052,078                     -

INVESTMENT in Digital Info Security Co. Inc. common stock, at fair value and
   cost, respectively                                                                            1,220,000               417,000

INVESTMENT in Government Securities, noncurrent, at amortized cost                                 999,538                     -

PROPERTY AND EQUIPMENT, net                                                                         31,198                26,653

OTHER ASSETS                                                                                         4,887                10,887
                                                                                          ------------------    ------------------
                                                                                           $    14,623,859       $     1,870,159
                                                                                          ==================    ==================

                            LIABILITIES AND SHAREHOLDERS' EQUITY
                            ------------------------------------
CURRENT LIABILITIES:
   Accounts payable                                                                        $       308,291       $       347,141
   Accrued liabilities                                                                              56,055               331,668
   Deferred revenue, non-refundable deposit                                                      1,230,000                     -
                                                                                          ------------------    ------------------
                        Total current liabilities                                                1,594,346               678,809

LOAN PAYABLE TO RELATED PARTY                                                                    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;
      131,128,746 and 106,911,315 shares issued and outstanding, respectively                    1,311,287             1,069,113
   Additional paid-in capital                                                                  108,285,727            86,088,974
   Loan receivable from related party                                                           (5,000,000)                    -
   Accumulated deficit                                                                         (91,222,579)          (85,966,737)
   Accumulated other comprehensive loss                                                         (5,344,922)                    -
                                                                                          ------------------    ------------------
                                                                                                 8,029,513             1,191,350
                                                                                          ------------------    ------------------
                                                                                           $    14,623,859       $     1,870,159
                                                                                          ==================    ==================
</TABLE>

* 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.

                                       3
<PAGE>

<TABLE>
<CAPTION>
                         COPYTELE, INC. AND SUBSIDIARIES
                         --------------------------------
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
           -----------------------------------------------------------


                                                                                                  For the Nine Months Ended
                                                                                                           July 31,
                                                                                          ----------------------------------------
                                                                                                 2008                  2007
                                                                                          ------------------    ------------------

NET REVENUE
                             <S>                                                                   <C>                   <C>
         Revenue from sales of encryption products, net                                    $       329,710       $       161,177
         Revenue from encryption services, net                                                           -               180,000
         Display technology license fee                                                            770,000                     -
                                                                                          ------------------    ------------------
                  Total net revenue                                                              1,099,710               341,177
                                                                                          ------------------    ------------------

COST AND OPERATING EXPENSES
         Cost of encryption products sold                                                           84,881                49,411
         Cost of encryption services                                                                     -                64,354
         Research and development expenses                                                       3,374,270             2,589,936
         Selling, general and administrative expenses                                            3,037,627             1,923,448
                                                                                          ------------------    ------------------
                  Total cost and operating expenses                                              6,496,778             4,627,149
                                                                                          ------------------    ------------------

LOSS FROM OPERATIONS                                                                            (5,397,068)           (4,285,972)

DIVIDEND INCOME                                                                                    130,887                     -

INTEREST INCOME                                                                                     25,297                25,121
                                                                                          ------------------    ------------------

LOSS BEFORE INCOME TAX EXPENSE                                                                  (5,240,884)      $    (4,260,851)

INCOME TAX EXPENSE                                                                                  14,958                     -
                                                                                          ------------------    ------------------
NET LOSS                                                                                   $    (5,255,842)      $    (4,260,851)
                                                                                          ==================    ==================


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

Shares used in computing net loss per share:
         Basic and Diluted                                                                     128,798,027           102,422,570
                                                                                          ==================    ==================
</TABLE>

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


                                       4
<PAGE>

<TABLE>
<CAPTION>
                         COPYTELE, INC. AND SUBSIDIARIES
                         -------------------------------
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
           -----------------------------------------------------------


                                                                                                 For the Three Months Ended
                                                                                                           July 31,
                                                                                          ----------------------------------------
                                                                                                 2008                 2007
                                                                                          ------------------    ------------------

NET REVENUE
                         <S>                                                                     <C>                   <C>
         Revenue from sales of encryption products, net                                    $       112,130       $        54,000
         Revenue from encryption services, net                                                           -                60,000
         Display technology license fee                                                            770,000                     -
                                                                                          ------------------    ------------------
                  Total net revenue                                                                882,130               114,000
                                                                                          ------------------    ------------------

COST AND OPERATING EXPENSES
         Cost of encryption products sold                                                           34,711                16,974
         Cost of encryption services                                                                     -                19,988
         Research and development expenses                                                         930,266               670,722
         Selling, general and administrative expenses                                              658,535               469,089
                                                                                          ------------------    ------------------
                  Total cost and operating expenses                                              1,623,512             1,176,773
                                                                                          ------------------    ------------------

LOSS FROM OPERATIONS                                                                              (741,382)           (1,062,773)

DIVIDEND INCOME                                                                                          -                     -

INTEREST INCOME                                                                                     12,216                 7,252
                                                                                          ------------------    ------------------

LOSS BEFORE INCOME TAX EXPENSE                                                                    (729,166)           (1,055,521)

INCOME TAX EXPENSE                                                                                       -                     -
                                                                                          ------------------    ------------------

NET LOSS                                                                                   $      (729,166)      $    (1,055,521)
                                                                                          ==================    ==================


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                                                                     130,406,487           104,121,311
                                                                                          ========================================
</TABLE>

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


                                       5
<PAGE>

<TABLE>
<CAPTION>
            CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
            --------------------------------------------------------
                  FOR THE NINE MONTHS JULY 31, 2008 (UNAUDITED)
                  ---------------------------------------------



                                                                                               Loan                      Accumulated
                                                             Common Stock       Additional  Receivable                     Other
                                                        ----------------------   Paid-in       From       Accumulated  Comprehensive
                                                          Shares    Par Value    Capital   Related Party    Deficit         Loss
                                                        ----------- ---------- ------------ -----------  ------------- -------------

<S>                                                     <C>         <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                          -          -    2,388,387           -             -             -
  Stock option compensation to consultants                        -          -      213,588           -             -             -
  Common stock issued upon exercise of stock options
   under stock option plans                               2,679,200     26,792    2,080,513           -             -             -
  Common stock issued to employees pursuant to stock
   incentive plans                                        1,453,060     14,530    1,422,754           -             -             -
  Common stock issued to consultants pursuant to stock
   incentive plans                                           85,171        852       91,511           -             -             -
  Unregistered common stock issued to Videocon
   Industries Limited                                    20,000,000    200,000   16,000,000  (5,000,000)            -             -
  Unrealized loss on investment in Videocon Industries
   Limited global depository receipts                             -          -            -           -             -    (5,344,922)
  Net loss                                                        -          -            -           -    (5,255,842)            -
                                                        ----------- ---------- ------------ -----------  ------------- -------------

BALANCE, July 31, 2008                                  131,128,746 $1,311,287 $108,285,727 $(5,000,000) $(91,222,579)  $(5,344,922)
                                                        =========== ========== ============ ===========  ============= =============
</TABLE>

         The accompanying notes are an integral part of this statement.

                                       6
<PAGE>

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

                                                                            For the Nine Months Ended
                                                                                     July 31,
                                                                        ----------------------------------
                                                                              2008              2007
                                                                        ----------------   ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
                          <S>                                                 <C>                <C>
   Payments to suppliers, employees and consultants                       $  (2,545,210)     $ (2,182,027)
   Cash received from encryption products                                       122,310           291,342
   Cash received from display technology license fees                         2,000,000
   Dividend received                                                            130,887                 -
   Interest received                                                             25,297            25,121
                                                                        ----------------   ---------------
           Net cash used in operating activities                               (266,716)       (1,865,564)
                                                                        ----------------   ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Disbursements to acquire Videocon Industries Limited global
    depository receipts                                                     (16,200,000)                -
   Disbursements to acquire long-term investments (government
    securities)                                                                (999,538)                -
   Disbursements to acquire short-term investments (certificates of
    deposit and government securities)                                       (1,881,321)         (825,000)
   Proceeds from maturities of short-term investments (certificates of
    deposit)                                                                    841,000           463,000
   Payments for purchases of property and equipment                             (12,354)           (8,781)
                                                                        ----------------   ---------------
           Net cash used in investing activities                            (18,252,213)         (370,781)
                                                                        ----------------   ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from sale of common stock to Videocon Industries Limited         16,200,000                 -
   Issuance of loan receivable from related party                            (5,000,000)                -
   Proceeds from issuance of loan payable to related party                    5,000,000
   Proceeds from exercise of stock options                                    2,107,305         1,607,450
                                                                        ----------------   ---------------
           Net cash provided by financing activities                         18,307,305         1,607,450
                                                                        ----------------   ---------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                      (211,624)         (628,895)

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                $     457,517      $    652,765
                                                                        ================   ===============

RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES:
   Net loss                                                               $  (5,255,842)    $  (4,260,851)
   Stock option compensation to employees                                     2,388,387         1,074,504
   Stock option compensation to consultants                                     213,588                 -
   Stock awards granted to employees pursuant to stock incentive plans        1,437,284         1,472,615
   Stock awards granted to consultants pursuant to stock incentive
    plans                                                                        92,363           114,493
   Provision for doubtful accounts                                              120,000                 -
   Recovery of slow-moving inventory reserve                                    (16,440)                -
   Depreciation and amortization                                                  7,809             7,709
   Change in operating assets and liabilities:
      Accounts receivable                                                      (207,400)          (49,835)
      Inventories                                                                23,062            46,334
      Prepaid expenses and other current assets                                   8,936            (9,088)
      Other assets                                                                6,000                 -
      Accounts payable and accrued liabilities                                 (314,463)         (261,445)
      Deferred revenue                                                        1,230,000                 -
                                                                        ---------------    ---------------
           Net cash used in operating activities                          $    (266,716)    $  (1,865,564)
                                                                        ===============    ===============

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

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

                                       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 nine-month and three-month periods
ended July 31, 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 July 31, 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.



Investment in and Related Party Transactions with Videocon Industries Limited
-----------------------------------------------------------------------------

         In November 2007, we entered into a Technology License Agreement (as
amended in May 2008, the "License Agreement") with 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 commencing
in May 2008, 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.


                                       8
<PAGE>

         Under the License Agreement, Videocon, with our assistance, is to
provide the design and process engineering required to produce such display
modules, and also is to provide all tooling and fixtures required for the
production process. As part of our assistance to Videocon to produce such
display modules, we have been exchanging information with Videocon employees so
that they may understand the CopyTele technology. We are currently cooperating
with Videocon to jointly implement the CopyTele technology to create
pre-production prototypes of these modules. CopyTele and Videocon are also
working together to incorporate advancements to our display technology for
various sizes of displays. Improvements to the technology, when and if
available, are to be jointly owned by CopyTele and Videocon. Significant
improvements, as defined in the License Agreement, may result in additional
compensation to CopyTele. CopyTele has determined that any improvements which
are not significant in nature are inconsequential.

         The arrangement with Videocon also provides for each of the parties to
designate an advisor to the other party's Board of Directors. The purpose of the
advisor to the Board of Directors is to provide knowledge to the Board of the
display market and to apprise the Board of developments in this market. CopyTele
believes this to be inconsequential to the operation of the License Agreement.

         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, which was determined by
management to approximate fair market value. 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"), acquired by Global on the open market for an
aggregate purchase price of $16,200,000, which was determined by management to
approximate fair market value. 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.

                                       9
<PAGE>

         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,
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.

         We previously reported the $5,000,000 loan receivable as an asset on
our condensed consolidated balance sheet at January 31, 2008 and April 30, 2008.
In the current quarter, it was determined that the loan receivable should have
been reported within shareholders' equity, because the loan receivable is
secured by the CopyTele Shares and the Subscription Agreement and Loan and
Pledge Agreement were entered into concurrently. Accordingly, we have
classified the loan receivable as a contra-equity in the accompanying condensed
consolidated balance sheet. Had the adjustment been made at January 31, 2008 and
April 30, 2008, our total assets would have been lower than reported by
$5,000,000 and would have been $19,282,605 at January 31, 2008 and $16,203,528,
at April 30, 2008 and total equity would have been lower than reported by
$5,000,000 and would have been $13,695,769 at January 31, 2008 and $10,720,279,
at April 30, 2008. In addition, we previously reported the issuance of the
$5,000,000 loan receivable as cash used in investing activities on our condensed
consolidated statement of cash flows for the three-month and six-month periods
ended January 31, 2008 and April 30, 2008. Because of the change in
classification of the loan receivable, we have also changed the classification
of the loan receivable as cash flows from financing activities in the
accompanying condensed consolidated statement of cash flows. Had the adjustment
been made during the three months ended January 31, 2008 and six months ended
April 30, 2008, the cash used in investing activities would have been lower than
reported by $5,000,000 and would have been $(16,247,188) for the three months
ended January 31, 2008 and $(16,252,322) for six months ended April 30, 2008.
Had the adjustment been made during the three months ended January 31, 2008 and
six months ended April 30, 2008, the cash provided by financing activities would
have been lower than reported by $5,000,000 and would have been $17,206,605 for
the three months ended January 31, 2008 and $17,898,605 for six months ended
April 30, 2008.



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

         Revenues 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.

         We have assessed the guidance of Emerging Issues Task Force No. 00-21
"Revenue Arrangements with Multiple Deliverables" ("EITF 00-21") to determine
whether multiple deliverables in our arrangement with Videocon represent
separate units of accounting. Under the License Agreement, CopyTele is required
to: (a) disclose to Videocon the Licensed Technology and provide reasonable
training of Videocon personnel; (b) jointly cooperate with Videocon to produce
prototypes prior to production; and (c) assist Videocon in preparing for
production. CopyTele has determined that these performance obligations do not
have value to Videocon on a standalone basis, as defined in EITF 00-21, and
accordingly they do not represent separate units of accounting.

         We have established objective and reasonable evidence of fair value for
the royalty to be earned during the production period based on analysis of the
pricing for similar agreements. Accordingly, we have determined that the license
fee of $11 million to be paid during the pre-production period and royalties on
product sales reflects the established fair value for these deliverables. We
will recognize the $11 million license fee over the estimated period that we
expect to provide cooperation and assistance during the pre-production period,
limiting the revenue recognized on a cumulative basis to the aggregate license
fee payments received from Videocon. We will assess at each reporting period the
progress and assistance provided and will continue to evaluate the period during
which this fee will be recognized. On this basis, we have recognized license fee
revenue during the three-month period ended July 31, 2008 of $770,000. License
fee payments received from Videocon which are in excess of the amounts
recognized as revenue (approximately $1,230,000 as of July 31, 2008) are
recorded as non-refundable deferred revenue on the accompanying condensed
consolidated balance sheet.


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

         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 July 31, 2008
are as follows:

                                         July 31, 2008
                                      -------------------
           Cost                       $        16,200,000
           Unrealized loss                     (6,147,922)
                                      -------------------
           Fair Value                 $        10,052,078
                                      ===================


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.

                                       10
<PAGE>

         During the nine months ended July 31, 2008, our cash used in operating
activities was approximately $267,000. This resulted from payments to suppliers,
employees and consultants of approximately $2,545,000, which was offset by cash
of approximately $122,000 received from collections of accounts receivable
related to sales of encryption products, cash received from display technology
licensing fee of $2,000,000 and approximately $25,000 of interest income and
approximately $131,000 of dividend income received. Our cash used in investing
activities during the nine months ended July 31, 2008 was approximately
$18,252,000, which resulted from a disbursement of $16,200,000 for the purchase
of Videocon GDRs, a purchase of a long-term investment consisting of long-term
U.S. government securities of approximately $1,000,000, purchases of short-term
investments consisting of certificates of deposit and short-term U.S. government
securities of approximately $1,881,000 and purchases of approximately $12,000 of
equipment, offset by $841,000 received upon maturities of short-term investments
consisting of certificates of deposit. Our cash provided by financing activities
during the nine months ended July 31, 2008 was approximately $18,307,000, 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 $2,107,000,
offset by a disbursement of $5,000,000 to issue a loan to Mars Overseas.
Accordingly, during the nine months ended July 31, 2008, our cash and cash
equivalents decreased by approximately $212,000 and investments in certificates
of deposits and government securities increased by approximately $2,040,000. As
a result, our cash, cash equivalents and investments in certificates of deposits
and government securities at July 31, 2008 increased to approximately $2,897,000
from approximately $ 1,069,000 at the end of fiscal 2007.

         We believe that our existing cash, cash equivalents, investments in
certificate of deposit, investments in government securities 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.

                                       11
<PAGE>

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
No.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 $2,388,000 and $1,075,000 during
the nine-month periods ended July 31, 2008 and 2007, respectively, and of
approximately $479,000 and $88,000 during the three-month periods ended July 31,
2008 and 2007, respectively, in accordance with SFAS No. 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 nine-month periods ended July 31,
2008 and 2007 by $0.02 and $0.01, respectively, and for the three-month periods
ended July 31, 2008 and 2007 by $0.00 and $0.00, respectively.

         Included in the stock-based compensation cost related to stock options
granted to employees and directors recorded during the nine-month periods ended
July 31, 2008 and 2007 was approximately $-0- and $19,000, respectively, and
during the three-month periods ended July 31, 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 July 31, 2008, there was approximately
$203,000 of unrecognized compensation cost related to non-vested share-based
compensation arrangements for stock options granted to employees and directors.
Approximately $30,000 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 No.
123R. We recognized consulting expense for options granted to non-employee
consultants, during the nine-month periods ended July 31, 2008 and 2007, of
approximately $214,000 and $-0-, respectively, and during the three-month
periods ended July 31, 2008 and 2007, of approximately $3,000 and $-0-,
respectively. As of July 31, 2008, there was approximately $17,000 of
unrecognized consulting expense related to non-vested share-based compensation
arrangements for stock options granted to consultants. Approximately $4,000 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.

                                       12
<PAGE>

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 nine-month period ended July 31, 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 nine-month period ended July 31, 2007 consisted of awards of options
with 10-year terms which vested immediately.

         We estimated the fair value of stock option awards using the following
assumptions:

<TABLE>
<CAPTION>
                                               For the Nine Months          For the Three Months
                                                 Ended July 31,                Ended July 31,
                                          ----------------------------- -----------------------------
                                               2008           2007           2008           2007
                                          -------------- -------------- -------------- --------------
                  <S>                         <C>            <C>            <C>            <C>
Expected term (in years)                       3.5            3.0            2.4            1.5
Volatility                                     91%            92%            86%            78%
Risk-free interest rate                       3.25%          4.64%          2.58%          4.87%
Dividend yield                                  0              0              0              0
Weighted average fair value at grant date     $0.56          $0.37          $0.34          $0.22
</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.

                                       13
<PAGE>

         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.

         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 nine-month periods ended July 31, 2008 and 2007, we granted
options to purchase 5,005,000 shares and 2,880,000 shares, respectively, to
employees, non-employee directors and consultants of common stock at weighted
average exercise prices of $0.92 and $0.66 per share, respectively, pursuant to
the CopyTele, Inc. 2003 Share Incentive Plan (the "2003 Share Plan"). During the
nine-month periods ended July 31, 2008 and 2007, stock options to purchase
2,679,200 shares and 2,997,230 shares, respectively, of common stock were
exercised with aggregate proceeds of approximately $2,107,000 and $1,607,000,
respectively.

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

         As of July 31, 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.

                                       14
<PAGE>

         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.

         Information regarding the 1993 Plan for the nine months ended July 31,
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                                        (1,830,000)         $2.86
  Exercised                                          (5,000)         $1.31
                                                --------------
Shares Under Option and Exercisable at
 July 31, 2008                                      779,000          $1.10             $-0-
                                                --------------
</TABLE>

         The following table summarizes information about stock options
outstanding under the 1993 Plan as of July 31, 2008:

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

   $0.84 to $1.00       575,000        1.30        $0.99
   $1.13 to $1.56       204,000        1.29        $1.41

         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.

                                       15
<PAGE>

         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.

         Information regarding the 2000 Share Plan for the nine months ended
July 31, 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
 July 31, 2008                                   1,772,466           $0.79           $187,089
                                               --------------
</TABLE>

         The following table summarizes information about stock options
outstanding under the 2000 Share Plan as of July 31, 2008:

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

       $0.40           445,000        3.14        $0.40
       $0.69           505,466        2.42        $0.69
   $0.94 - $1.09       822,000        2.17        $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 July 31, 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 nine months ended July
31, 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                                         5,005,000          $0.92
  Exercised                                      (2,264,200)         $0.76
                                               --------------
Shares Under Option at July 31, 2008             17,157,045          $0.79          $1,186,497
                                               --------------
Options Exercisable at July 31, 2008             16,807,045          $0.79          $1,186,497
                                               --------------
</TABLE>

         The following table summarizes information about stock options
outstanding under the 2003 Share Plan as of July 31, 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       5.20        $0.33       1,170,000       5.20         $0.33
   $0.52 - $0.77      5,920,970       7.19        $0.63       5,920,970       7.19         $0.63
   $0.81 - $1.46     10,066,075       7.68        $0.94       9,716,075       7.62         $0.93
</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 July 31, 2008, 3,861,856 shares
were available for future grants under the 2003 Share Plan.

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

         We account for stock grants to employees and consultants based on their
grant date fair value. During the nine-month periods ended July 31, 2008 and
2007, we issued 1,453,060 shares and 2,191,730 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 nine-month periods ended July 31, 2008 and 2007 of approximately
$1,437,000 and $1,473,000, respectively, and for the three-month periods ended
July 31, 2008 and 2007 of approximately $396,000 and $404,000, respectively, for
the shares of common stock issued to employees. In addition, during the
nine-month periods ended July 31, 2008 and 2007, we issued 85,171 shares and
164,020 shares, respectively, of common stock to consultants for services
rendered pursuant to the 2003 Share Plan. We recorded consulting expense for the
nine-month periods ended July 31, 2008 and 2007 of approximately $92,000 and
$114,000, respectively, and for the three-month periods ended July 31, 2008 and
2007 of approximately $17,000 and $9,000, 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 nine months ended July 31,
2008, one customer in the Display Technology Segment represented 70% of total
net revenue and one customer in the Encryption Products and Services Segment
represented 19% of total net revenue. During the nine months ended July 31,
2007, two customers in the Encryption Products and Services Segment represented
53% and 25%, respectively, of total net revenue. At July 31, 2008 one customer
in  the Encryption Products and Services Segment represented 99% 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 AND INVESTMENT IN U.S. GOVERNMENT SECURITIES
         -------------------------------------------------------------------

         At July 31, 2008, and October 31, 2007, we had marketable securities
that were classified as "held-to-maturity securities" and were carried at
amortized costs. Held-to-maturity securities consist of the following:

<TABLE>
<CAPTION>
                                                 July 31,        October 31,
                                                   2008             2007
                                              --------------   ---------------
Current:
              <S>                                  <C>                 <C>
  U.S. Government Securities                      $  997,321      $          -
  Certificate of Deposit                             443,000           400,000
                                              --------------   ---------------
Total current held-to-maturity securities         $1,440,321      $    400,000
                                              ==============   ===============

Noncurrent:
  U.S. Government Securities                      $  999,538      $          -
                                              --------------   ---------------
Total noncurrent held-to-maturity securities      $  999,538      $          -
                                              ==============   ===============

Total held-to-maturity securities                 $2,439,859      $    400,000
                                              ==============   ===============
</TABLE>

                                       18
<PAGE>

          At July 31, 2008, the length of time until maturity of current
held-to-maturity securities were less than twelve months and noncurrent
held-to-maturity securities were eighteen months. At July 31, 2008, and October
31, 2007, the estimated fair value of each investment approximated its amortized
cost, and, therefore, there were no significant unrecognized holding gains or
losses.

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 July 31,
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 June 30, 2008 we held
approximately 11% of the outstanding common stock of DISC.

         The DISC stock held by CopyTele is restricted stock and cannot be sold
or otherwise disposed of in the absence of either a registration statement under
the Securities Act of 1933 ("Securities Act") or an exemption from the
registration provisions of the Securities Act. Because CopyTele may be an
affiliate of DISC due to its ownership of approximately 11% of the outstanding
common stock of DISC, in order for CopyTele to see or dispose of the DISC stock
under the exemption provided by Rule 144 under the Securites Act, all of the
requirements of Rule 144 must be satisfied.

         As of October 31, 2007, all of the requirements of Rule 144 were not
satisfied for CopyTele to sell or dispose of the DISC stock held by us.
Accordingly, as of October 31, 2007, our investment in DISC was 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. Because CopyTele now believes it may sell or dispose of the DISC stock
pursuant to Rule 144, as of July 31, 2008, our investment in DISC is classified
as an "available-for-sale-security" in the accompanying condensed consolidated
financial statements 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.
The cost, unrealized gain and fair value of our investment in DISC as of July
31, 2008 are as follows:

                                       19
<PAGE>

                                            July 31,
                                             2008
                                        ---------------
                    Cost                $      417,000
                    Unrealized gain            803,000
                                        ---------------
                    Fair Value          $    1,220,000
                                        ===============

         Net revenue for the nine months ended July 31, 2007 included billings
to DISC for engineering services of $180,000. We had no net revenue relating to
DISC for the nine months ended July 31, 2008. Net accounts receivable at July
31, 2008 and October 31, 2007 include $-0- and $120,000, respectively, from
DISC.

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

         Inventories consist of the following as of:

                                     July 31,       October 31,
                                       2008            2007
                                  --------------- ---------------
         Component parts          $      67,239   $     113,458
         Work-in-process                  5,079          26,597
         Finished products              112,983          51,868
                                  --------------- ---------------
                                  $     185,301   $     191,923
                                  =============== ===============

7.       NET  INCOME (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 nine month and three-month
periods ended July 31, 2008 and 2007, were options to purchase 19,708,511 shares
and 20,857,711 shares, respectively.

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

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

                                       20
<PAGE>


         In February  2007, the FASB issued SFAS No. 159, "The Fair Value Option
for Financial Assets and Financial  Liabilities"  ("SFAS No. 159"). SFAS No. 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 No. 159 is effective for fiscal years beginning
after November 15, 2007. We are currently  evaluating  the effect,  if any, that
the adoption of SFAS No. 159 will have on our financial statements.

         In December  2007, the FASB issued SFAS No. 141 (revised  2007),
"Business  Combinations" ("SFAS No. 141R"), which changes how an entity accounts
for the acquisition of a business.  When  effective,  SFAS No. 141R will replace
existing  SFAS  No.  141,  "Business  Combinations"  ("SFAS  No.  141"),  in its
entirety. SFAS No. 141R carries forward the existing requirements to account for
all business  combinations  using the acquisition  method  (formerly  called the
purchase method). In general,  SFAS No. 141R will require  acquisition-date fair
value  measurement of identifiable  assets acquired,  liabilities  assumed,  and
noncontrolling interest in the acquired entity. SFAS No. 141R will eliminate the
current  cost-based  purchase  method  under  SFAS No.  141.  SFAS  No.  141R is
effective  for fiscal  years and  interim  periods  within  those  fiscal  years
beginning on or after  December  15, 2008.  The adoption of SFAS No. 141R is not
expected to have a material effect on our financial statements.

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

         Income tax expense for the nine-month period ended July 31, 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) Display Technology and (ii)
Encryption Products and Services. The following represents selected financial
information for our segments for the nine-month and three-month periods ended
July 31, 2008 and 2007:

                                       21
<PAGE>

<TABLE>
<CAPTION>
                                        Display          Encryption Products
          Segment Data                 Technology           and Services             Total
---------------------------------  -------------------  --------------------  -------------------

Nine Months Ended July 31, 2008:
              <S>                          <C>                   <C>                  <C>
   Net revenue                          $     770,000         $     329,710        $   1,099,710
   Net loss                                (2,620,384)           (2,635,458)         ( 5,255,842)

Nine Months Ended July 31, 2007:
   Net revenue                          $           -         $     341,177        $     341,177
   Net loss                                (2,174,229)           (2,086,622)          (4,260,851)
</TABLE>


<TABLE>
<CAPTION>
                                         Display       Encryption Products
          Segment Data                 Technology         and Services             Total
---------------------------------  ------------------  --------------------  -------------------

Three Months Ended July 31, 2008:
               <S>                          <C>                  <C>                 <C>
   Net revenue                            $  770,000           $   112,130         $    882,130
   Net loss                                  (69,161)             (660,005)            (729,166)

Three Months Ended July 31, 2007:
   Net revenue                            $        -           $   114,000         $    114,000
   Net loss                                 (578,123)             (477,398)          (1,055,521)
</TABLE>

                                       22
<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 (as
amended, 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 display modules. The display modules consist of our low voltage
phosphor displays, the attached associated driver circuits, and controller
circuits under the license agreement. Under the License Agreement, Videocon,
with assistance from CopyTele, is to provide the design and process engineering
required to produce such display modules, and also is to provide all tooling and
fixtures required for the production process. Videocon has a group of qualified
and experienced personnel assigned to this program. As part of our assistance to
Videocon to produce such display modules, we have been exchanging information
with this group of personnel so that they may understand the CopyTele
technology. We are currently cooperating with Videocon to jointly implement the
CopyTele technology to create pre-production prototypes of these modules.
CopyTele and Videocon are also working together to incorporate advancements to
our display technology for various sizes of displays. Improvements to the
technology are to be jointly owned by CopyTele and Videocon.

                                       23
<PAGE>

         We 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, 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:

                                       24
<PAGE>

     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. 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.

                                       25
<PAGE>

         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
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.

         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.

                                       26
<PAGE>

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 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.

         We have assessed the guidance of Emerging Issues Task Force No. 00-21
"Revenue Arrangements with Multiple Deliverables" ("EITF 00-21") to determine
whether multiple deliverables in our arrangement with Videocon represent
separate units of accounting. Under the License Agreement, CopyTele is required
to: (a) disclose to Videocon the Licensed Technology and provide reasonable
training of Videocon personnel; (b) jointly cooperate with Videocon to produce
prototypes prior to production; and (c) assist Videocon in preparing for
production. CopyTele has determined that these performance obligations do not
have value to Videocon on a standalone basis, as defined in EITF 00-21, and
accordingly they do not represent separate units of accounting.

         We have established objective and reasonable evidence of fair value for
the royalty to be earned during the production period based on analysis of the
pricing for similar agreements. Accordingly, we have determined that the license
fee of $11 million to be paid during the pre-production period and royalties on
product sales reflects the established fair value for these deliverables. We
will recognize the $11 million license fee over the estimated period that we
expect to provide cooperation and assistance during the pre-production period,
limiting the revenue recognized on a cumulative basis to the aggregate license
fee payments received from Videocon. We will assess at each reporting period the
progress and assistance provided and will continue to evaluate the period during
which this fee will be recognized. On this basis, we have recognized license fee
revenue during the three-month period ended July 31, 2008 of $770,000. License
fee payments received from Videocon which are in excess of the amounts
recognized as revenue (approximately $1,230,000 as of July 31, 2008) are
recorded as non-refundable deferred revenue on the accompanying condensed
consolidated balance sheet.

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

                                       27
<PAGE>

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 No.
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
---------------------

Nine months ended July 31, 2008 compared with nine months ended July 31, 2007
-----------------------------------------------------------------------------

         Net Revenue

         Net revenue increased by approximately $759,000 in the nine-month
period ended July 31, 2008, to approximately $1,100,000, as compared to
approximately $341,000 in the comparable prior-year period. Revenue recognized
during the current period included display technology license fees related to
the License Agreement with Videocon of $770,000 compared to none in the
comparable prior-year period. Revenue from sales of encryption products
increased by approximately $169,000 in the nine-month period ended July 31,
2008, to approximately $330,000, as compared to approximately $161,000 in the
comparable prior-year period. Revenue from encryption services decreased from
$180,000 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 revenue has been limited and
is sensitive to individual large transactions. We believe that changes in
revenue between periods generally represent the nature of the early stage of our
product and sales channel development.

         Cost of Encryption Products Sold

         The cost of encryption products sold increased by approximately $36,000
in the nine-month period ended July 31, 2008, to approximately $85,000, as
compared to approximately $49,000 in the comparable prior-year period. The
increase in cost of encryption products sold is primarily due to an increase in
unit shipments of encryption products as well as a reduction of cost of products
sold the current period of approximately $19,000 resulting from the sale during
the current period of inventory for which a provision for excess inventory of
that amount was recorded in prior periods.

         Cost of Encryption Services

         The cost of encryption services decreased from $64,000 in the
comparable prior-year period to none in the current period as there was no
revenue in the current period from encryption services.

                                       28
<PAGE>

         Research and Development Expenses

         Research and development expenses increased by approximately $784,000
in the nine-month period ended July 31, 2008, to approximately $3,374,000, from
approximately $2,590,000 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 $756,000 and an increase in
consultant stock option compensation expense of approximately $45,000, offset by
a decrease in patent related expenses of approximately $25,000.

         Selling, General and Administrative Expenses

         Selling, general and administrative expenses increased by approximately
$1,115,000 to approximately $3,038,000 in the nine-month period ended July 31,
2008, from approximately $1,923,000 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
$558,000, an increase in professional fees of approximately $86,000, an increase
in consultant stock option compensation expense of approximately $214,000, an
increase in the provision for doubtful accounts of $120,000 related to an
accounts receivable in that amount from Digital Info Security Co. Inc ("DISC"),
an increase in employee compensation and related costs, other than stock option
expense, of approximately $87,000 and an increase in travel expense of
approximately $41,000.

         Dividend Income

         Dividend income, which was received in connection with the Videocon
GDRs we acquired in December 2007, was approximately $131,000 in the nine months
ended July 31, 2008. We received no dividend income in the prior-year period.

         Interest Income

         Interest income was approximately $25,000 in the nine-month period
ended July 31, 2008, compared to approximately $25,000 in the comparable
prior-year period. The interest income earned on the additional funds available
for investment on the current period was offset by a reduction in prevailing
interest rates.

         Income Tax Expense

         Income tax expense for the nine-month period ended July 31, 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.

                                       29
<PAGE>

Three months ended July 31, 2008 compared with three months ended July 31, 2007
-------------------------------------------------------------------------------

         Net Revenue

         Net revenue increased by approximately $768,000 in the three-month
period ended July 31, 2008, to approximately $882,000, as compared to
approximately $114,000 in the comparable prior-year period. Revenue recognized
during the current period included display technology license fees related to
the License Agreement with Videocon of $770,000 compared to none in the
comparable prior-year period. Revenue from encryption products increased by
approximately $58,000 in the three-month period ended July 31, 2008, to
approximately $112,000, as compared to approximately $54,000 in the comparable
prior-year period. Revenue from encryption services decreased 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 revenue has been limited and is sensitive to
individual large transactions. We believe that changes in revenue between
periods generally represent the nature of the early stage of our product and
sales channel development.

         Cost of Encryption Products Sold

         The cost of encryption products sold increased by approximately $18,000
in the nine-month period ended July 31, 2008, to approximately $35,000, as
compared to approximately $17,000 in the comparable prior-year period. The
increase in cost of encryption products sold is primarily due to an increase in
unit shipments of encryption products.

         Cost of Encryption Services

         The cost of encryption services decreased from $20,000 in the
comparable prior-year period to none in the current period as there was no
revenue in the current period from encryption services.

         Research and Development Expenses

         Research and development expenses increased by approximately $259,000
in the three-month period ended July 31, 2008, to approximately $930,000, from
approximately $671,000 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 $306,000, offset by a
decrease in outside research and development expense, of approximately $72,000.

         Selling, General and Administrative Expenses

         Selling, general and administrative expenses increased by approximately
$190,000 to approximately $659,000 in the three-month period ended July 31,
2008, from approximately $469,000 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
$85,000, an increase in employee compensation and related costs, other than
stock option expense, of approximately $48,000, an increase in the provision for
doubtful accounts of $60,000 related to an accounts receivable in that amount
from DISC, offset by a decrease in professional fees of approximately $31,000.

                                       30
<PAGE>

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

         Interest income was approximately $12,000 in the three-month period
ended July 31, 2008, compared to approximately $7,000 in the comparable
prior-year period. The increase in interest income was primarily due to an
increase in funds available for investment, which was partially offset by a
reduction in prevailing interest rates.

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 nine months ended July 31, 2008, our cash used in operating
activities was approximately $267,000. This resulted from payments to suppliers,
employees and consultants of approximately $2,545,000, which was offset by cash
of approximately $122,000 received from collections of accounts receivable
related to sales of encryption products, cash received from display technology
licensing fee of $2,000,000 and approximately $25,000 of interest income and
approximately $131,000 of dividend income received. Our cash used in investing
activities during the nine months ended July 31, 2008 was approximately
$18,252,000, which resulted from a disbursement of $16,200,000 for the purchase
of Videocon GDRs, a purchase of a long-term investment consisting of long-term
U.S. government securities of approximately $1,000,000, purchases of short-term
investments consisting of certificates of deposit and short-term U.S. government
securities of approximately $1,881,000 and purchases of approximately $12,000 of
equipment, offset by $841,000 received upon maturities of short-term investments
consisting of certificates of deposit. Our cash provided by financing activities
during the nine months ended July 31, 2008 was approximately $18,307,000, 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 $2,107,000,
offset by a disbursement of $5,000,000 to issue a loan to Mars Overseas.
Accordingly, during the nine months ended July 31, 2008, our cash and cash
equivalents decreased by approximately $212,000 and investments in certificates
of deposits and government securities increased by approximately $2,040,000. As
a result, our cash, cash equivalents and investments in certificates of deposits
and government securities at July 31, 2008 increased to approximately $2,897,000
from approximately $ 1,069,000 at the end of fiscal 2007.

         Net accounts receivable increased by approximately $87,000, from
$120,000 at the end of fiscal 2007 to approximately $207,000 at July 31, 2008.
The increase is primarily the result of an account receivable from one customer
of approximately $206,000, offset by a provision for doubtful accounts of
$120,000 related to accounts receivable from DISC.

                                       31
<PAGE>

Inventories increased by approximately $7,000 from approximately $192,000 at
October 31, 2007 to approximately $185,000 at July 31, 2008, primarily as a
result of the timing of shipments and production schedules. Investment in
Videocon is recorded at fair value and increased to approximately $10,052,000 at
July 31, 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 $6,148,000 as of July 31, 2008.
Investment in DISC increased by $803,000 as a result of recording the investment
at fair value of $1,220,000 as of July 31, 2008 compared to recording the
investment at cost of $417,000 the end of fiscal 2007. Loan receivable increased
to $5,000,000 at July 31, 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 $315,000 from
approximately $679,000 at the end of fiscal 2007 to approximately $364,000 at
July 31, 2008, as a result the timing of payments. Deferred revenue increased by
approximately $1,230,000 at July 31, 2008 from zero at the end of fiscal 2007,
as a result of the receipt of the display technology license fee of $2,000,000
in May 2008 reduced by the license fee revenue recognized during the three-month
period ended July 31, 2008. Loan payable increased to $5,000,000 at July 31,
2008 from zero at the end of fiscal 2007, as a result obtaining a loan from Mars
Overseas in December 2007.

         Working capital at July 31, 2008 increased to approximately $722,000
from approximately $737,000 at the end of fiscal 2007. Our working capital
includes inventory of approximately $185,000 at July 31, 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 nine-month periods ended July 31, 2008 and 2007, we issued
1,453,060 shares and 2,191,730 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 nine-month periods ended July
31, 2008 and 2007 of approximately $1,437,000 and $1,473,000, respectively, and
for the three-month periods ended July 31, 2008 and 2007 of approximately
$396,000 and $404,000, respectively for the shares of common stock issued to
employees. In addition, during the nine-month periods ended July 31, 2008 and
2007, we issued 85,171 shares and 164,020 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 July 31, 2008 and
2007 of approximately $92,000 and $114,000, respectively, and for the
three-month period ended July 31, 2008 and 2007 of $17,000 and approximately
$9,000, respectively, for the shares of common stock issued to consultants.

         During the nine-month periods ended July 31, 2008 and 2007, we granted
options to purchase 5,005,000 shares and 2,880,000 shares, respectively, to
employees, non-employee directors and consultants of common stock at weighted
average exercise prices of $0.92 and $0.66 per share, respectively, pursuant to
the 2003 Share Plan. During the nine-month periods ended July 31, 2008 and 2007,
stock options to purchase 2,679,200 shares and 2,997,230 shares, respectively,
of common stock were exercised with aggregate proceeds of approximately
$2,107,000 and $1,607,000, respectively.

                                       32
<PAGE>

         During the nine-month period ended July 31, 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, investments in
certificates of deposit, investments in government securities 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 nine-month period ended July 31, 2008, we have recognized
revenue from sales of encryption products of approximately $330,000 and we
received the first installment of the license fee from Videocon of $2,000,000.

                                       33
<PAGE>

         The following table presents our expected cash requirements for
contractual obligations outstanding as of July 31, 2008:

<TABLE>
<CAPTION>
                                       Payments Due by Period
                    ---------------------------------------------------------------
                        Less
   Contractual          than         1-3          4-5         After
   Obligations         1 year       years        years       5 years       Total
------------------  -----------  -----------  -----------  -----------  -----------

      <S>               <C>          <C>          <C>        <C>          <C>
Consulting
Agreement            $   42,500            -            -            -   $   42,500

Noncancelable
Operating Leases     $  284,130   $  593,424   $  101,290            -   $  978,844

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

Total Contractual
Cash Obligations     $  326,630   $  593,424   $  101,290   $5,000,000   $6,021,344
                    ===========  ===========  ===========  ===========  ===========
</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 short-term instruments
are not considered at risk with respect to changes in interest rates or markets
for these instruments, our rate of return on these securities could be affected
at the time of reinvestment, if any.

                                       34
<PAGE>

         We also have investments in U.S. government securities recorded at
amortized cost of approximately $1,000,000, having a length of time until
maturity of eighteen months. We do not consider this investment to have a market
risk since our existing cash on hand and expected cash flows indicate that this
can be held until maturity.

         At July 31, 2008, our investment in Videocon GDRs is recorded at fair
value of approximately $10,052,000 including an unrealized loss of approximately
$6,148,000 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 July 31, 2008 amounts to approximately
$1,005,000.

         Our investment in DISC common stock at July 31, 2008 is recorded at
fair value of approximately $1,220,000 including an unrealized gain of $803,000
and has exposure to price risk. DISC's common stock is not registered under the
Securities Exchange Act of 1934, but is quoted on the Pink Sheets. Accordingly,
the fair value of DISC's common stock is subject to price risk. The potential
loss in fair value resulting from a hypothetical 10% adverse change in price of
this investment, as of July 31, 2008 amounts to approximately $122,000.

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 July 31, 2008 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

                                       35
<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.
         ---------

              10.1  Amended and Restated Technology License Agreement, dated May
                    16, 2008,  between  CopyTele,  Inc. and Videocon  Industries
                    Limited.

              31.1  Certification  of  Chief  Executive  Officer,   pursuant  to
                    Section  302  of  the  Sarbanes-Oxley  Act  of  2002,  dated
                    September 18, 2008.

              31.2  Certification  of  Chief  Financial  Officer,   pursuant  to
                    Section  302  of  the  Sarbanes-Oxley  Act  of  2002,  dated
                    September 18, 2008.

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

              32.2  Statement of Chief  Financial  Officer,  pursuant to Section
                    1350 of Title 18 of the United States Code,  dated September
                    18, 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
September 18, 2008                         (Principal Executive Officer)





                                          By: /s/ Henry P. Herms
                                              ----------------------------------
                                          Henry P. Herms
                                          Vice President - Finance and
                                          Chief Financial Officer (Principal
September 18, 2008                         Financial and Accounting Officer)


                                       36