SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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


For the quarterly period ended January 31, 2000
                               ----------------

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

Number of shares of common stock, par value
$.01 per share, outstanding as of March 10, 2000:            62,744,776  shares
                                                             -------------------

<PAGE>



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


Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed  Balance  Sheets as of  January  31,  2000  (Unaudited)  and
         October 31, 1999

         Condensed  Statements of Operations  (Unaudited)  for the three months
         ended  January 31, 2000 and January 31, 1999,  and for the period from
         November 5, 1982 (Inception) through January 31, 2000

         Condensed Statement of Shareholders' Equity (Unaudited) for the period
         from November 5, 1982 (Inception) through January 31, 2000

         Condensed  Statements of Cash Flows  (Unaudited)  for the three months
         ended  January 31, 2000 and January 31, 1999,  and for the period from
         November 5, 1982 (Inception) through January 31, 2000

         Notes to Condensed Financial Statements (Unaudited)

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

Part II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

         Signatures


                                        2

<PAGE>
                         Part I - FINANCIAL INFORMATION
                         ------------------------------
Item 1. Financial Statements.
        ---------------------
<TABLE>
<CAPTION>
                                 COPYTELE, INC.
                                 --------------
                         (Development Stage Enterprise)
                         ------------------------------
                            CONDENSED BALANCE SHEETS
                            -------------------------

                                                                                                   Unaudited
                                                                                                  January 31,       October 31,
                                ASSETS                                                               2000              1999
                                ------                                                            ----------        -----------
<S>                                                                                            <C>                <C>
CURRENT ASSETS:
  Cash (including cash equivalents and interest bearing accounts of
    $2,047,925 and $1,531,254, respectively)                                                      $2,124,390        $1,587,830
  Marketable securities, at cost                                                                       -               488,038
  Inventory                                                                                        4,356,490         4,538,608
  Prepaid expenses and other current assets (including amounts due from
    Joint Venture of approximately $862,000)                                                       1,088,662           929,099
                                                                                                  -----------        ---------
                      Total current assets                                                         7,569,542         7,543,575


PROPERTY AND EQUIPMENT (net of accumulated depreciation
  and amortization of $1,693,279 and $1,627,012, respectively)                                       468,469           531,155


OTHER ASSETS                                                                                          26,668            26,814


DEFERRED TAX BENEFITS (net of valuation allowance of
  $33,652,000 and $33,026,000, respectively)                                                            -                 -
                                                                                                   -----------      -----------
                                                                                                   $8,064,679       $8,101,544
                                                                                                   ===========      ===========
                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------

CURRENT LIABILITIES:
  Accounts payable (including amounts due to Joint Venture of
    approximately $862,000)                                                                        $1,674,359       $1,546,494
  Accrued liabilities                                                                                 300,660          270,273
                                                                                                   ----------        ---------
                       Total current liabilities                                                    1,975,019        1,816,767

SHAREHOLDERS' EQUITY:
  Preferred stock, par value $100 per share; authorized 500,000 shares;
    no shares outstanding                                                                                 -                -
  Common stock, par value $.01 per share; authorized 240,000,000
   shares; outstanding 61,292,076 and 60,057,376  shares, respectively                                612,921          600,574
  Additional paid-in capital                                                                       56,971,318       55,844,128
  Accumulated (deficit) during development stage                                                  (51,494,579)     (50,159,925)
                                                                                                  ------------     ------------
                                                                                                    6,089,660        6,284,777
                                                                                                  ------------     ------------
                                                                                                   $8,064,679       $8,101,544
                                                                                                  ============     ============
</TABLE>

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


                                        3

<PAGE>
<TABLE>
<CAPTION>


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


                                                                          For the three months                   For the period from
                                                                           ended January 31,                       November 5, 1982
                                                            ------------------------------------------------     (inception) through
                                                                    2000                      1999                 January 31, 2000
                                                            ---------------------     ----------------------   ---------------------

<S>                                                        <C>                        <C>                       <C>
SALES                                                              $276,792                 $   -                       $323,669

COST OF SALES                                                       207,065                     -                        244,369
                                                            ---------------------     ----------------------    --------------------
  Gross profit                                                       69,727                     -                         79,300

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, (including
  research and development expenses of approximately
  $641,000, $728,000 and $32,115,000, respectively)               1,422,369                  1,415,282                55,297,220
                                                            ---------------------     ----------------------    --------------------


LOSS FROM AND IMPAIRMENT OF INVESTMENT IN JOINT VENTURE                -                        68,628                 1,225,000
                                                            ---------------------     ----------------------   ---------------------

INTEREST INCOME                                                      17,988                     52,827                 4,948,341
                                                            ---------------------     ----------------------   ---------------------

NET (LOSS)                                                      $(1,334,654)               $(1,431,083)             $(51,494,579)
                                                            =====================     ======================   =====================

NET (LOSS) PER SHARE OF COMMON STOCK: Basic and Diluted              $(0.02)                    $(0.02)                   $(1.08)
                                                            =====================     ======================   =====================


WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic and
  Diluted                                                        60,327,102                  57,920,672               47,552,308
                                                            =====================     ======================   =====================
</TABLE>

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


                                        4

<PAGE>
<TABLE>
<CAPTION>
                                 COPYTELE, INC.
                                 --------------
                         (Development Stage Enterprise)
                         ------------------------------
                   CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
                   -------------------------------------------
 FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION) THROUGH JANUARY 31, 2000 (UNAUDITED)
 -------------------------------------------------------------------------------------




                                                                                                   Additional        Accumulated
                                                                         Common Stock               Paid-in       (Deficit) During
                                                                      Shares     Par Value          Capital       Development Stage
                                                               --------------------------------    -----------   -------------------
<S>                                                               <C>          <C>                <C>            <C>
BALANCE, November 5, 1982 (inception)                                   -        $      -             $   -          $    -
Sale of common stock, at par, to incorporators on November
  8,  1982                                                         1,470,000          14,700              -               -
Sale of common stock, at $.10 per share, primarily to
  officers and employees from November 9, 1982 to November
  30, 1982                                                           390,000           3,900            35,100            -
Sale of common stock, at $2 per share, in private offering
  from  January 24, 1983 to March 28, 1983                           250,000           2,500           497,500            -
Sale of common stock, at $10 per share, in public offering on
  October 6, 1983, net of underwriting discounts of $1 per
  share                                                              690,000           6,900         6,203,100            -
Sale of 60,000 warrants to representative of underwriters, at
  $.001 each, in conjunction with public offering                       -                -                  60            -
Costs incurred in conjunction with private and public
  offerings                                                             -                -            (362,030)           -
Common stock issued, at $12 per share, upon exercise of
  57,200 warrants from February 5, 1985 to October 16, 1985,
  net of registration costs                                           57,200             572           630,845            -
Proceeds from sales of common stock by individuals from
  January 29, 1985 to October 4, 1985 under agreements with
  the Company, net of costs incurred by the Company                     -                -             298,745
Restatement as of October 31, 1985 for three-for-one stock
  split                                                            5,714,400          57,144           (57,144)           -
Common stock issued, at $4 per share, upon exercise of 2,800
  warrants in December 1985                                            8,400              84            33,516            -
Sale of common stock, at market, to officers on January 9,
  1987 and April 22, 1987 and to members of their immediate
  families on July 28, 1987                                           67,350             674           861,726            -
Restatement as of July 31, 1987 for five-for-four stock split      2,161,735          21,617           (21,617)
Fractional share payments in conjunction with five-for-four
  stock split                                                           -                 -             (1,345)           -
Sale of common stock, at market, to members of officers'
  immediate families from September 10,1987 to December 4,
  1990 and to officers on October 29, 1987 and February 26,
  1989                                                               628,040             6,280       6,124,031            -
Sale of common stock, at market, to senior level
  personnel on February 26, 1989                                      29,850               299         499,689            -

                                                                                                                       Continued
</TABLE>


                                        5

<PAGE>
<TABLE>
<CAPTION>
                                 COPYTELE, INC.
                                 --------------
                         (Development Stage Enterprise)
                         ------------------------------
                   CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
                   -------------------------------------------
 FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION) THROUGH JANUARY 31, 2000 (UNAUDITED)
 -------------------------------------------------------------------------------------


                                    Continued
                                    ---------





                                                                                                  Additional        Accumulated
                                                                         Common Stock               Paid-in       (Deficit) During
                                                                      Shares     Par Value          Capital       Development Stage
                                                               --------------------------------   -------------  -------------------
<S>                                                             <C>              <C>               <C>           <C>
Sale of common stock, at market, to unrelated party on
  February 26, 1989 amended on March 10, 1989                         35,820           358           599,627              -
Restatement as of January 31, 1991 for
  two-for-one stock split                                         11,502,795       115,028          (115,028)             -
Sale of common stock, at market, to members of officers'
  immediate families from April 26, 1991 to October 27, 1992         261,453         2,615         2,788,311              -
Common stock issued upon exercise of warrants by
  members of officers' immediate families on various
  dates from September 1993 through March 1996                       579,800         5,798         2,651,462              -
Common stock issued upon exercise of stock options
  from December 16, 1992 to June 12, 1996                          4,535,340        45,353        28,197,223              -
Restatement as of June 17, 1996 for two-for-one stock split       28,382,183       283,822          (283,822)
Common stock issued upon exercise of warrants by
  members of officers' immediate families on various
  dates in July and October, 1996, and March 1997                    206,610         2,066         1,062,167              -
Common stock issued upon purchase of equipment                        15,000           150            74,850
Common stock issued upon exercise of stock options
 from July 1996 to January 2000 under stock option plans,
 net of  registration costs                                        2,586,100        25,861         5,093,872              -
Sale of common stock, at market, to a related party and other
 unrelated parties in April and September, 1999 and January
 2000                                                              1,720,000        17,200         1,803,380              -
Stock options granted to consultants                                    -              -             357,100              -
Accumulated (deficit) during development stage                          -              -                -             (51,494,579)
                                                               --------------    ------------   ----------------    ----------------
BALANCE, January 31, 2000                                         61,292,076      $612,921       $56,971,318         $(51,494,579)
                                                               ==============    ============   ================    ================
</TABLE>


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


                                        6

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


                                                                               For the three
                                                                               months ended                      For the period from
                                                                                January 31,                        November 5, 1982
                                                               ----------------------------------------------    (inception) through
                                                                      2000                      1999               January 31, 2000
                                                               --------------------      --------------------    -------------------
<S>                                                             <C>                       <C>                        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Payments to suppliers, employees and consultants                 $(1,161,035)              $(1,417,535)                $(56,922,889)
Cash received from customers                                         151,945                     -                          198,822
Interest received                                                     27,506                    49,883                    4,948,341
                                                               --------------------      --------------------    -------------------
Net cash (used in) operating activities                             (981,584)               (1,367,652)                 (51,775,726)
                                                               --------------------      --------------------    -------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and
  equipment                                                           (3,581)                   (8,302)                  (2,027,023)
Disbursements to acquire certificates of deposit and
  marketable securities                                                 -                     (489,444)                 (13,534,037)
Proceeds from maturities of investments                              488,038                      -                      13,534,037
Investment made in Joint Venture                                        -                         -                      (1,225,000)
                                                               --------------------      --------------------    -------------------
Net cash provided by (used in) investing activities                  484,457                  (497,746)                  (3,252,023)
                                                               --------------------      --------------------    -------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock and warrants, net of
  underwriting discounts of $690,000 related to initial
  public offering in October 1983                                       -                         -                      17,647,369
Proceeds from exercise of stock options and warrants, net of
  registration disbursements                                         687,607                   838,650                   37,748,820
Proceeds from sales of common stock in private
  placements, net of listing fees                                    346,080                      -                       1,820,580
Proceeds from sales of common stock by
  individuals under agreements with the
  Company, net of disbursements made by the
  Company                                                               -                         -                         298,745
Disbursements made in conjunction with sales of stock                   -                         -                        (362,030)
Fractional share payments in conjunction with stock split               -                         -                          (1,345)
                                                               --------------------      --------------------    -------------------
Net cash provided by financing activities                           1,033,687                   838,650                  57,152,139
                                                               --------------------      --------------------    -------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                  536,560                (1,026,748)                  2,124,390

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                    1,587,830                 5,406,017                       -
                                                               --------------------      --------------------    -------------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                         $2,124,390                $4,379,269                  $2,124,390
                                                               ====================      ====================    ===================
                                                                                                                          Continued
</TABLE>


                                        7

<PAGE>
<TABLE>
<CAPTION>


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

                                    Continued
                                    ---------

                                                                          For the three
                                                                          months ended                        For the period from
                                                                           January 31,                          November 5, 1982
                                                           --------------------------------------------       (inception) through
                                                                      2000                     1999             January 31, 2000
                                                           -------------------      -------------------     ------------------------
<S>                                                         <C>                      <C>                      <C>
RECONCILIATION OF NET (LOSS) TO NET CASH (USED IN)
  OPERATING ACTIVITIES:
Net (loss)                                                       $(1,334,654)             $(1,431,083)                 $(51,494,579)
Loss from Joint Venture                                               -                        68,628                     1,139,828
Stock option compensation to consultants                             105,850                   61,650                       357,100
Depreciation and amortization                                         66,267                   72,054                     1,708,937
Impairment of investment in Joint Venture                             -                          -                           85,172
Impairment of amounts due from Joint
  Venture                                                             -                          -                        1,407,461
Decrease (increase) in inventory                                     182,118                 (272,295)                   (4,356,490)
(Increase) decrease in prepaid expenses and
  other current assets                                              (159,563)                 125,036                    (1,088,662)
Decrease (increase) in long term amount due from Joint
  Venture                                                             -                       111,983                    (1,407,461)
Decrease (increase) in other assets                                      146                   (5,494)                      (26,668)
Increase (decrease) in accounts payable and accrued
  liabilities                                                        158,252                  (98,131)                    1,899,636
                                                           -------------------      -------------------     ------------------------
Net cash (used in) operating activities                            $(981,584)             $(1,367,652)                 $(51,775,726)
                                                           ===================      ===================     ========================
</TABLE>

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


                                        8

<PAGE>

                                 COPYTELE, INC.
                                 --------------
                        (Development Stage Enterprise)
                        ------------------------------
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     ---------------------------------------
                          JANUARY 31, 2000 (UNAUDITED)
                          ----------------------------

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

CopyTele, Inc. (the "Company"), which was incorporated on November 5, 1982, is a
development stage enterprise whose principal activities include the development,
production and marketing of multi-functional  encryption and  telecommunications
products under the Cryptele(TM)  brand name. The first  encryption  products the
Company has  produced  under the  Cryptele(TM)  brand name  product line are the
USS-900 (Universal Secure System) and the SCS-700 (Secure Communication System).
The USS-900 is a  hardware-based  peripheral  digital  encryption  system  which
incorporates a private label digital  cryptographic  chip to provide  high-grade
information encryption. The SCS-700 combines the USS-900 with a modified version
of the  Magicom(R)2000,  the Company's  first  developed  product,  to provide a
secure telephone-based multi-functional  telecommunications system incorporating
the Company's  E-Paper(TM)  Flat Panel Display  technology.  The Company is also
continuing its research and  development  activities  for additional  encryption
products  and flat panel  display  technologies  in addition  to its  ultra-high
resolution charged particle E-Paper(TM) flat panel display.

Shanghai  CopyTele  Electronics  Co.,  Ltd.  (the "Joint  Venture" or  "Shanghai
CopyTele"),  the  Company's  55% owned joint  venture in  Shanghai,  China,  was
established in 1995 to produce and market Magicom(R) 2000 for the Company.

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

Management has recorded the Company's  inventory at its current best estimate of
net realizable value, which is based upon the historic and future selling prices
of the  Company's  Magicom(R)  2000 units as  packaged  in the  SCS-700  and the
USS-900. To date, sales of the Company's product have been limited. Accordingly,
there can be no  assurance  that the  Company  will not be  required  to further
reduce the selling price of its inventory  below its current  carrying  value in
order to accomplish the Company's business strategies.

In  addition,  the  Company's  advances  to  Shanghai  CopyTele  have funded the
purchase of inventory  components to manufacture the Magicom(R) 2000. Due to the
uncertainty of realizing the amounts due from Shanghai CopyTele, the Company has
reserved  for  approximately  $1,407,000  of this amount at January 31, 2000 and
October 31, 1999, which is shown net in the accompanying financial statements.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Impairment of Long-Lived  Assets and for Long-Lived  Assets to be Disposed of",
the


                                        9

<PAGE>
Company has recognized a permanent  impairment charge at October 31, 1999 in the
amount of $85,172 on its previously recorded investment in Joint Venture, due to
the uncertainty of Shanghai CopyTele  generating enough future undiscounted cash
flows to cover the carrying amount of the investment.

The success and  profitability  of the Company's  products will depend upon many
factors,  many of which are beyond the Company's control.  These factors include
the capability of the Company to market its products,  the Company's  continuing
ability to purchase the encryption  chip for use in the USS-900,  the production
capability  of the Company and its  suppliers  as  required,  long-term  product
performance  and the  capability of the Company's  dealers and  distributors  to
adequately  service  the  Company's  products,  the  ability  of the  Company to
maintain an acceptable  pricing  level to its  customers  for its products,  the
ability of  suppliers  to meet the  Company's  requirements  and  schedule,  the
Company's ability to obtain adequate supplies of substrates for the SCS-700, the
Company's  ability to successfully  develop its new products under  development,
rapidly  changing  consumer   preference,   and  the  possible   development  of
competitive  products  that could  render the  Company's  products  obsolete  or
unmarketable.

         Basis of Presentation
         ---------------------

The  condensed  financial  statements  have been  prepared  in  accordance  with
generally  accepted  accounting  principles  for  interim  financial  reporting.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
The  information  contained  herein is for the three month periods ended January
31, 2000 and 1999 and for the period from November 5, 1982  (inception)  through
January 31, 2000.  In the opinion of the Company,  all  adjustments  (consisting
only  of  normal  recurring   adjustments   considered   necessary  for  a  fair
presentation  of the results of operations  for such periods) have been included
herein.

The results of operations for interim  periods may not  necessarily  reflect the
annual  operations  of the Company.  Reference is made to the audited  financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K for the fiscal year ended October 31, 1999, for more extensive  disclosures
than contained in these condensed financial statements.

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

The amounts due from the Joint Venture of  approximately  $862,000 as of January
31, 2000 and October 31, 1999, represents advances for parts inventory,  such as
the flat  panel  assembly  components,  purchased  by the  Company  on behalf of
Shanghai CopyTele which are incorporated into the Magicom(R) 2000 product.

(2)          Joint Venture:
             --------------

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

Due  to  the  uncertainty  of  realizability  of  its  investment,  the  Company
recognized  a permanent  impairment  charge in fiscal 1999  against the carrying
value of this investment.


                                       10

<PAGE>
The  Company is not  legally  liable for the  obligations  of the Joint  Venture
beyond its initial cash  capital  contribution  of  $1,225,000.  Therefore,  the
Company  has  discontinued  recording  its share of any of the  Joint  Venture's
losses since  October 31, 1999.  Should the Joint  Venture  subsequently  report
income,  the Company will begin accruing income only after the cumulative income
exceeds  the  unrecorded   losses  and  original   investment.   Any  additional
investments in Shanghai CopyTele by the Company will be directly expensed to the
statement of operations.

The  Company  controls  four of seven  votes  of the  Joint  Venture's  board of
directors.  However,  decisions  involving  the Joint Venture  require  either a
unanimous or two-thirds vote of the Joint  Venture's  board of directors.  Since
the Company has significant  influence over the Joint  Venture's  operations but
does not have control, the Company has historically  reflected its investment in
the Joint Venture under the equity method of accounting.

The Company has  contributed  an  aggregate  of  $1,225,000  in cash to Shanghai
CopyTele,  and technology that has been valued for purposes of the Joint Venture
at $700,000. Shanghai CopyTele does not reflect the $700,000 in technology as an
asset or equity investment in their financial  statements.  The other parties to
the Joint Venture have contributed cash aggregating $1,575,000.

Condensed Statements of Operations for the three month periods ended January 31,
2000 and 1999 are as follows:

<TABLE>
<CAPTION>

          Condensed Statements of Operations
          ----------------------------------
                   (Unaudited)
                   -----------                                                        For the three months ended
                                                                            ------------------------------------------
                                                                                January 31,             January 31,
                                                                                   2000                    1999
                                                                            -----------------       ------------------
          <S>                                                               <C>                     <C>
          Net Sales                                                          $       -                $      -
          Operating (Loss)                                                        (48,380)               (104,471)
          Other Income (Expense)                                                  (19,148)                (20,308)
                                                                            -----------------       ------------------
                   Net (Loss)                                                $    (67,528)            $  (124,779)
                                                                            =================       ==================
</TABLE>
The cumulative net (loss)  incurred by Shanghai  CopyTele since its inception on
April 10, 1995 is $(2,139,942).

(3)      Shareholders' Equity:
         ---------------------

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

The Company has two stock option plans,  the 1987 Stock Option Plan,  adopted by
the Board of Directors  on April 1, 1987 (the "1987  Plan"),  and the  CopyTele,
Inc. 1993 Stock Option Plan, adopted by the Board of Directors on April 28, 1993
(the "1993 Plan").  The 1987 Plan has been terminated other than with respect to
outstanding stock options thereunder.


                                       11

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

Options  granted  to  non-employee  consultants  are  accounted  for  using  the
fair-value method required by SFAS No. 123.  Compensation  expense recognized in
the three  months  ended  January 31, 2000 and January 31, 1999 was $105,850 and
$61,650,  respectively,  and is included in general and administrative  expenses
for the periods.

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

On April 30, 1999,  the Company  sold 400,000  shares of its common stock in two
private  placements at a price of $1.50 per share,  or an aggregate of $600,000,
of which 300,000  shares were sold to an individual who became a director of the
Company in July 1999. In conjunction with the sales of common stock, the Company
issued warrants to purchase  400,000 shares of common stock at an exercise price
of $1.50 per share, which expire on April 30, 2001.

On  September 8, 1999,  the Company  sold 900,000  shares of common stock in six
private  placements at a price of $1.00 per share,  or an aggregate of $900,000,
of which 200,000  shares were sold to a director of the Company.  In conjunction
with the sales of common stock,  the Company issued warrants to purchase 900,000
shares of common stock at an exercise price of $1.00 per share,  which expire on
September 8, 2001.

On January 5, 2000, the Company sold 420,000 shares of common stock in a private
placement  at a price of $0.844 per  share,  or an  aggregate  of  $354,480.  In
conjunction  with the sales of common  stock,  the  Company  issued  warrants to
purchase  420,000  shares of common  stock at an  exercise  price of $0.844  per
share, which expire on January 5, 2002.

As of January 31, 2000, all of the aforementioned warrants to purchase shares of
common stock issued and outstanding were exercisable. At January 31, 1999, there
were no outstanding warrants.


                                       12

<PAGE>
Item 2.  Management's Discussion and Analysis of Financial
         -------------------------------------------------

                      Condition and Results of Operations.
                      ------------------------------------

         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.  These  forward-looking  statements  are subject to
risks and uncertainties and other factors, some of which are beyond our control,
that could cause  actual  results to differ  materially  from those  forecast or
anticipated in the forward-looking  statements.  These risks,  uncertainties and
factors  include,  but are not limited to,  those  factors set forth in "General
Risks and Uncertainties"  below and Note 1 to the Company's Financial Statements
contained in the Company's  Annual Report on Form 10-K for the fiscal year ended
October 31, 1999.

         General
         -------

We have been a  development  stage  company  since our  inception on November 5,
1982. Our principal activities include the development, production and marketing
of USS-900,  a hardware based  peripheral  digital  encryption  device,  and the
SCS-700, which combines the USS-900 with a modified  Magicom(R)2000 to provide a
secure telephone based multi-functional telecommunications product incorporating
our  E-Paper(TM)flat  panel  display  technology.  We are  also  continuing  our
research and  development  activities for additional  encryption  products,  and
other  ultra-high  resolution  flat panel  displays,  including  video and color
displays,  and coated particles which could potentially be used by manufacturers
of toners and pigments. We cannot assure you, however, that our efforts in these
areas  will be  successful.  We also  cannot  assure  you that we will  generate
significant  revenues in the future,  that we will have  sufficient  revenues to
generate  profit or that other products will not be produced by other  companies
that will render our products obsolete or unmarketable.

We are producing and have commenced a marketing  program for the USS-900 and the
SCS-700.  The USS-900 uses the Harris Corporation  digital  cryptographic chip -
the  Citadel(TM)CCX  - which is  capable  of  providing  high-grade  information
encryption.  Harris is  supplying  the chip  under a three year  agreement  at a
negotiated  price  based in part on sales of the  USS-900.  We have  produced  a
limited   number  of  the  USS-900s  with  the   assistance  of  a  U.S.   based
sub-contractor.  Shanghai CopyTele produces the modified Magicom(R) 2000 for the
SCS-700  system.  Shanghai  CopyTele  also  supplied  us with a  portion  of the
electronic components, sub-assemblies and accessories for the USS-900.

In reviewing  Management's  Discussion  and Analysis of Financial  Condition and
Results of  Operations,  please refer to our Financial  Statements and the notes
thereto.


                                       13

<PAGE>
         Results of Operations
         ---------------------

We sell our USS-900,  SCS-700 and Magic Printer  products to end-users  directly
and  through a  distributor/dealer  network.  We have had  limited  sales to our
dealers,  distributors  and other customers to support our operations  since our
inception.  We are currently recognizing revenue on our non-refundable sales. We
are hopeful,  although there is no assurance,  that with an increased  marketing
effort for our existing products and our new products under development, we will
procure  sufficient  sales  during  fiscal 2000 to emerge  from the  development
stage.

Sales for the three month  period  ended  January  31,  2000 were  approximately
$277,000.  No sales were  recognized for the  comparable  period in fiscal 1999.
Cost of  sales  and  gross  profit  were  approximately  $207,000  and  $70,000,
respectively,  for the  three  month  period  ended  January  31,  2000  with no
comparable   amounts  in  the  fiscal   1999   period.   Selling,   general  and
administrative  expenses,  excluding  the loss from Shanghai  CopyTele,  for the
three months ended  January 31, 2000,  and 1999 and for the period from November
5, 1982  (inception)  through  January 31, 2000 were  approximately  $1,422,000,
$1,415,000  and  $55,297,000,  respectively.  These  amounts  include  research,
development  and  tooling  costs  of   approximately   $641,000,   $728,000  and
$32,115,000, respectively, as well as normal operating expenses.

Selling, general and administrative  expenses,  excluding the loss from Shanghai
CopyTele,  increased by approximately  $7,000, from approximately  $1,415,000 in
the fiscal 1999 period to  approximately  $1,422,000  in the fiscal 2000 period.
Expenditures  for  research  and  development  for video and  color  flat  panel
displays,  compensation costs,  engineering supplies and travel related expenses
decreased in the fiscal 2000 period as compared to the fiscal 1999 period. These
decreases were offset by increases in professional  fees,  marketing  costs, and
stock based compensation to consultants.

Employee  compensation  and related costs decreased in the fiscal 2000 period as
compared  to the fiscal  1999  period  principally  as a result of certain  cost
reductions. These reductions were offset by the hiring of three additional sales
and marketing  employees  whose cost were incurred in the fiscal 2000 period but
not the fiscal 1999 period.  Payroll taxes and pension costs also decreased as a
result of the decreased  compensation  costs.  Other employee  benefit  programs
increased as a result of rate  increases in the fiscal 2000 period.  Engineering
supplies  decreased  in the fiscal 2000  period as  compared  to the  comparable
fiscal 1999 period primarily as a result of reduced purchases of components used
to develop the  USS-900 in the fiscal 1999  period.  Engineering  service  costs
decreased  in the fiscal 2000 period as compared to the  comparable  fiscal 1999
period as a result of completing the  development  of the USS-900.  Research and
development costs for flat panel displays  decreased in the aggregate during the
comparable periods principally as a result of lower costs incurred in connection
with the development of our video and color displays.

Marketing  costs  increased  in  the  fiscal  2000  period  as  compared  to the
comparable  fiscal  1999 period as a result of the launch of the USS-900 and the
SCS-700.   However,   travel  and   entertainment   costs  decreased   slightly.
Professional  fees were  higher in the fiscal  2000  period as  compared  to the
comparable  fiscal 1999 period as a result of higher  fees  incurred  for patent
related  services and legal and accounting  services.  Rents also increased as a
result


                                       14

<PAGE>
of the leasing of additional  storage space.  Insurance expense increased in the
fiscal 2000 period as a result of higher  levels of coverage and the addition of
one policy.  Our  non-cash  charge to earnings for stock based  compensation  to
consultants  was higher in the fiscal 2000 period as compared to the  comparable
fiscal 1999 period.

Shanghai  CopyTele's  loss for the three months ended  January 31, 2000 and 1999
and for the period from April 10, 1995 (Shanghai  CopyTele's  inception) through
January  31,  2000  were   approximately   $68,000,   $125,000  and  $2,140,000,
respectively.  The  decrease  in the loss for the fiscal  2000  period  from the
fiscal 1999 period of  approximately  $57,000 was  primarily  the result of cost
reductions  and limited  production  activity  with respect to  producing  panel
assemblies and Magicom(R) 2000 for the SCS-700 program.  A permanent  impairment
charge was recognized on our investment in Shanghai  CopyTele in the fiscal year
ended October 31, 1999 due to the  uncertainty of Shanghai  CopyTele  generating
sufficient  future  undiscounted  cash flows to cover the carrying amount of our
investment.  The Company is not legally liable for the  obligations of the Joint
Venture beyond its initial cash capital  contribution of $1,225,000.  Therefore,
the Company has  discontinued  recording its share of any of the Joint Venture's
losses since  October 31, 1999.  Should the Joint  Venture  subsequently  report
income,  the Company will begin accruing income only after the cumulative income
exceeds the unrecorded losses and original investment. Additional investments in
Shanghai CopyTele are directly expensed to the statements of operations.

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

The decrease in interest income of $35,000 from approximately $53,000 during the
fiscal 1999 period as compared to  approximately  $18,000 during the fiscal 2000
period  resulted  primarily  from a decrease  in  average  funds  available  for
investment  and a  slight  decrease  in  interest  rates.  Funds  available  for
investment  during  the  fiscal  2000 and 1999  periods,  on a monthly  weighted
average basis, were approximately $1,640,000 and $4,641,000,  respectively.  The
investment  instruments selected by us are principally money market accounts and
treasury investments.

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

We are not  aware of any Year 2000  problems  affecting  us.  The cost for us to
address this issue was immaterial.  Our contingency plan remains available to us
should we need to implement  any part.  We will  continue to monitor our systems
and  relationships  for any  potential  Year 2000  problems that we have not yet
uncovered.


                                       15

<PAGE>
         Liquidity and Capital Resources
         -------------------------------

Since our  inception,  we have met our liquidity and capital  expenditure  needs
primarily  from the proceeds of sales of our 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 pursuant to our Stock Option Plan,  adopted by the Board of Directors on
April 1, 1987, and our 1993 Stock Option Plan, adopted by the Board of Directors
on April 28, 1993, and amended on May 3, 1995 and May 10, 1996.

For the three  month  periods  ended  January  31,  2000 and 1999,  we  received
proceeds aggregating approximately $688,000 and $839,000, respectively, from the
exercise of stock  options to purchase  shares of our common  stock.  During the
three  month  period  ended  January  31,  2000,  we also  received  proceeds of
approximately  $354,000  from sales of our common stock in a private  placement.
During the period from  February 1, 2000  through  March 13,  2000,  we received
proceeds aggregating approximately $2,338,000 from the exercise of stock options
pursuant to the 1993 Stock Option Plan and approximately $304,000 from the sales
of our  common  stock  in  private  placements.  Working  capital  decreased  by
approximately  $132,000  from  approximately  $5,727,000  at October 31, 1999 to
approximately  $5,595,000  at January 31, 2000 as a result of the loss  incurred
for the period offset by the proceeds received during the same period.

Our operations used approximately $982,000 in cash during the three month period
ended January 31, 2000.  As of January 31, 2000,  our working  capital  included
approximately   $2,124,000  of  cash  and   approximately   $1,113,000  (net  of
approximately $862,000 due to Shanghai CopyTele) of accounts payable and accrued
liabilities.  Based on reductions in operating  expenses that have been made and
additional reductions that may be implemented, if necessary, we believe that our
cash resources, including cash received from February 1, 2000 to March 13, 2000,
will be  sufficient to continue  operations  through the first quarter of fiscal
2001. We anticipate  that,  thereafter,  we will continue to require  additional
funds to continue our marketing, and research and development activities if cash
generated from operations is insufficient to satisfy our liquidity requirements.
However,  our  projections  of future  cash needs and cash flows may differ from
actual  results.  If current cash 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 additional dilution to our
stockholders.  We can give  you no  assurance  that we will be able to  generate
adequate funds from operations,  that funds will be available to us from debt or
equity financings, or that if available, we will be able to obtain such funds on
favorable  terms and  conditions.  We currently have no definitive  arrangements
with respect to additional  financing.

Our estimated  funding  capacity  indicated above assumes,  although there is no
assurance, that the waiver of salary and pension benefits by the Chairman of the
Board, the President and senior level personnel will continue.


                                       16

<PAGE>
We are seeking to improve our  liquidity  through  the sale of  products.  In an
effort to generate sales, we have commenced  marketing the USS-900  directly and
to U.S.  office  equipment  distributors  and  dealers.  We also have  commenced
marketing  the SCS-700  system  utilizing  the  Magicom(R)  2000, as modified to
function as a secure  communication  system, to government agencies and units of
the armed forces. We are hopeful, although we can give you no assurance, that by
marketing the USS-900 encryption device and the modified Magicom(R) 2000 SCS-700
system, sufficient sales will be generated to improve our liquidity.

The NASD  requires  that we  maintain a minimum  of $4  million of net  tangible
assets to  maintain  our  Nasdaq  National  Market  listing.  If our stock  were
delisted, the delisting could potentially have an adverse affect on the price of
our common stock and could adversely  affect the liquidity of the shares held by
our  stockholders.  Our  net  tangible  assets  as  of  January  31,  2000  were
approximately  $6,090,000. We anticipate that we may require additional funds to
maintain the NASD net tangible assets requirement.  We can give you no assurance
that we will be able to generate adequate funds from operations, that funds will
be available to us from equity financings, or that if available, we will be able
to obtain such funds on favorable  terms and  conditions.  We currently  have no
definitive arrangements with respect to additional equity financings.

Shanghai CopyTele required an initial aggregate capital investment of $3,500,000
from the parties to the joint venture. The Joint Venture Agreement  contemplates
an additional  $3,500,000 of funding which may be borrowed from banks,  of which
$1,085,000  has  been  borrowed  to  date.   Short-term  loans  aggregating  the
$1,085,000  are from a Chinese  bank,  secured  by the  building  and a land-use
contract with the Land Administration Bureau of Shanghai County, and from one of
the Chinese  parties.  We have  contributed  $1,225,000 in cash,  and technology
valued for the  purposes  of  Shanghai  CopyTele  at  $700,000,  and the Chinese
parties contributed  $1,575,000 in cash to Shanghai CopyTele.  Shanghai CopyTele
may require  additional  capitalization  depending upon the nature and extent of
its business  activities.  We can give you no assurance that adequate funds will
be available to Shanghai CopyTele,  including any future capital  contributions,
if any, beyond its initial capital contributions or that, if available, Shanghai
CopyTele will be able to obtain such funds on favorable terms and conditions.

We have recorded our inventory at management's  current best estimate of its net
realizable  value,  which is based upon the historic and future selling price of
our products. To date, sales of our products have been limited.  Accordingly, we
can give you no  assurance  that we will not have to further  reduce the selling
prices of our  inventory  below its current  carrying  value to  accomplish  our
business strategies.

As of January 31, 2000, we owed Shanghai CopyTele  approximately  $862,000 which
when paid  could be used by  Shanghai  CopyTele  to repay us.  Sales of units by
Shanghai  CopyTele to us may result in an increase in our  inventory  before the
units are then sold by us in the ordinary course of our business.


                                       17

<PAGE>
         General Risks and Uncertainties
         -------------------------------

We have had  limited  sales to  dealers,  distributors  and other  customers  to
support our operations since our inception.  We have expended  approximately $32
million for research and development since our inception. We have had net losses
and  negative  cash flow from  operations  in each  year of our  business  since
inception  and we may  continue  to  incur  substantial  losses  and  experience
substantial negative cash flows from operations.

Based on  reductions in operating  expenses  that have been made and  additional
reductions  that may be  implemented,  if  necessary,  we believe  that our cash
resources, including cash received from February 1, 2000 to March 13, 2000, will
be sufficient to continue  operations  through the first quarter of fiscal 2001.
We anticipate that,  thereafter,  we may continue to require additional funds to
continue our marketing,  research and development activities,  if cash generated
from operations is insufficient  to satisfy our liquidity  requirements.  We may
seek to sell debt or equity securities or to obtain a line of credit, if needed.
In addition, we may need to raise additional equity financing to satisfy an NASD
requirement  that we have a minimum  of $4  million  of net  tangible  assets to
maintain our Nasdaq  National  Market  listing.  The NASD also  requires that we
maintain a minimum  bid price of at least  $1.00 per share in order to  continue
our listing. If our stock were delisted, the delisting could potentially have an
adverse  affect on the market price of our common stock and the liquidity of our
shares. We cannot give you any assurance that additional  financing,  if needed,
will be  available  to us or  that,  if  available,  we  will be able to  obtain
additional  financing  on  favorable  terms and  conditions.  See  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Liquidity and Capital Resources".

Our  encryption  products are only in their  initial  stages of  production  and
marketing. The success and profitability of these products will depend upon many
factors,  many of which are  beyond  our  control,  including:  our  ability  to
successfully market the USS-900 and SCS-700;  our continuing ability to purchase
the  Citadel(TM)  CCX  encryption  chip from Harris for use in the USS-900;  our
production  capabilities  and  those  of  our  suppliers  as  required  for  the
production  of the USS-900,  and the modified  Magicom(R)  2000 for the SCS-700;
long-term product performance and the capability of our dealers and distributors
to  adequately  service our  products;  our  ability to  maintain an  acceptable
pricing level to end-users  for our  products;  the ability of suppliers to meet
our  requirements  and  schedule;  our  ability to obtain  adequate  supplies of
substrates for the SCS-700; our ability to successfully develop our new products
under development,  particularly our new encryption  products;  rapidly changing
consumer preferences;  and the possible development of competitive products that
could render our products obsolete or unmarketable. Consequently, we cannot give
you any  assurance  that we will  generate  sufficient  revenues  to support our
operations  in the future or that we will have  sufficient  revenues to generate
profits.

Our Chief  Executive  Officer,  Denis A.  Krusos,  and our  President,  Frank J.
DiSanto,  founded  CopyTele  in  1982  and are  engaged  in the  management  and
operations of our business and that of Shanghai CopyTele,  including all aspects
of the development,  production and marketing of our products and our flat panel
display technology. Messrs. Krusos and DiSanto, and our other senior executives,
are important to our future business and financial  arrangements and the loss of
the  services  of any such  persons  may have a material  adverse  effect on our
business prospects.


                                       18

<PAGE>
               PART II  OTHER INFORMATION
                        -----------------



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

          (a)     Exhibits
                  --------

                  27 - Financial Data Schedule

          (b)     Reports on Form 8-K.
                  --------------------

                  No current report on Form 8-K was filed for the Company during
                  the first quarter of its fiscal year ended January 31, 2000.


                                       19

<PAGE>



                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                    CopyTele, Inc.



                                    By: DENIS A. KRUSOS
                                       -----------------------------------------
                                    Denis A. Krusos
                                    Chairman of the Board,
                                    Chief Executive Officer
                                    and Director (Principal Executive
March 15, 2000                      Officer)

                                    By: FRANK J. DISANTO
                                       -----------------------------------------
                                    Frank J. DiSanto
March 15, 2000                      President and Director

                                    By: GERALD J. BENTIVEGNA
                                       -----------------------------------------
                                    Gerald J. Bentivegna
                                    Vice President - Finance,
                                    Chief Financial Officer and
                                    Director (Principal Financial
March 15, 2000                      and Accounting Officer)


                                       20