<PAGE>
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, 1995
---------------------
Commission file number 0-11254
-------------
COPYTELE, INC.
------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2622630
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
900 Walt Whitman Road
Huntington Station, NY 11746
------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(516) 549-5900
-----------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing reqirements for the past 90
days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of common stock, par value
$.01 per share, outstanding as of September 5, 1995: 25,782,003 shares
-----------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
-----------------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Condensed Balance Sheets (Unaudited) as of July 31, 1995 and
October 31, 1994
Condensed Statements of Operations (Unaudited) for the nine-
months ended July 31, 1995 and July 31, 1994, and for the period
from November 5, 1982 (Inception) through July 31, 1995
Condensed Statements of Operations (Unaudited) for the
three-months ended July 31, 1995 and July 31, 1994
Condensed Statement of Shareholders' Equity (Unaudited) for the
period from November 5, 1982 (Inception) through July 31, 1995
Condensed Statements of Cash Flows (Unaudited) for the nine-
months ended July 31, 1995 and July 31, 1994, and for the period
from November 5, 1982 (Inception) through July 31, 1995
Condensed Statements of Cash Flows (Unaudited) for the three-
months ended July 31, 1995 and July 31, 1994
Notes to Condensed Financial Statements (Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
SIGNATURES.
NYFS11...:\95\38995\0001\2579\FRM9125K.270
<PAGE>
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
COPYTELE, INC.
(Development Stage Enterprise)
CONDENSED BALANCE SHEETS (UNAUDITED)
July 31, October 31,
1995 1994
------- ----------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash (including cash equivalents and interest bearing
accounts of $8,646,407 and $6,163,435, respectively) $ 8,720,050 $ 6,244,801
Accrued interest receivable 11,905 17,041
Prepaid expenses and other current assets 19,145 45,994
----------- -----------
8,751,100 6,307,836
PROPERTY AND EQUIPMENT (net of accumulated depreciation
and amortization of $673,468 and $628,668, respectively) 201,829 207,778
OTHER ASSETS (including investment of $358,240 at July 31, 1995
in joint venture company under the equity method) 461,450 98,718
DEFERRED TAX BENEFITS (net of valuation allowance of
$15,342,379 and $13,458,155, respectively) - -
----------- -----------
$ 9,414,379 $ 6,614,332
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 226,516 $ 163,402
Accrued liabilities 2,335 35,697
----------- -----------
228,851 199,099
----------- -----------
SHAREHOLDERS' EQUITY:
Preferred stock, par value $100 per share; authorized
500,000 shares; no shares outstanding - -
Common stock, par value $.01 per share; authorized
120,000,000 shares; outstanding 25,728,003 and
24,837,403 shares, respectively 257,280 248,374
Additional paid-in capital 31,324,260 26,487,930
Accumulated (deficit) during development stage (22,396,012) (20,321,071)
----------- -----------
9,185,528 6,415,233
----------- -----------
$ 9,414,379 $ 6,614,332
=========== ===========
<FN>
The accompanying notes to condensed financial statements are
an integral part of these balance sheets.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
COPYTELE, INC.
(Development Stage Enterprise)
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
For the nine months For the Period from
ended July 31, November 5, 1982
------------------- (inception) through
1995 1994 July 31, 1995
---- ---- --------------------
<S> <C> <C> <C>
SALES $ - $ - $ -
----------- ----------- ------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES,
including research and development expenses
of approximately $1,513,000 $2,145,000 and
$16,045,000, respectively 2,314,749 2,929,113 24,945,066
---------- ---------- -----------
INTEREST INCOME 239,808 158,571 2,549,054
---------- ---------- -----------
NET (LOSS) ($2,074,941) ($2,770,542) ($22,396,012)
========== ========== ===========
NET (LOSS) PER SHARE OF COMMON STOCK ($0.08) ($0.11) ($1.01)
========== ========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 25,072,604 24,638,582 22,081,838
========== ========== ===========
<FN>
The accompanying notes to condensed financial statements are an
integral part of these statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
COPYTELE, INC.
(Development Stage Enterprise)
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
For the three months
ended July 31,
--------------------
1995 1994
---- ----
<S> <C> <C>
SALES $ - $ -
---------- ----------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES,
including research and development expenses
of approximately $553,000 and $605,000, respectively 835,420 890,957
---------- ----------
INTEREST INCOME 91,066 58,691
---------- ----------
NET (LOSS) ($ 744,354) ($ 832,266)
========== ==========
NET (LOSS) PER SHARE OF COMMON STOCK ($0.03) ($0.03)
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 25,379,315 24,749,620
========== ==========
<FN>
The accompanying notes to condensed financial statements
are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
COPYTELE, INC.
(Development Stage Enterprise)
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION) THROUGH JULY 31, 1995 (UNAUDITED)
Accumulated
(Deficit)
Common Stock Additional During
------------------- Paid-in Development
Shares Par Value Capital 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 under-
writers, 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
<PAGE>
<PAGE>
<CAPTION>
COPYTELE, INC.
(Development Stage Enterprise)
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION) THROUGH JULY 31, 1995 (UNAUDITED)
Continued
Accumulated
(Deficit)
Common Stock Additional During
------------------- Paid-in Development
Shares Par Value Capital Stage
------ --------- ---------- -----------
<S> <C> <C> <C> <C>
Sale of common stock, at market, to unrelated party on
February 26, 1989 amended on March 10, 1989 35,820 358 599,627 -
Restatement as of January 31, 1991 for two-for-one
stock split 11,502,795 115,028 (115,028) -
Sale of common stock, at market, to members of
officers' immediate families from April 26, 1991
to October 27, 1992 261,453 2,614 2,788,311 -
Common stock issued upon exercise of warrants by
members of officers' immediate families in
September 1993, July 1994 and February
and July 1995 404,420 4,044 1,964,387 -
Common stock issued upon exercise of stock options
from December 16, 1992 to July 26, 1995
under stock option plans, net of registration costs 2,056,540 20,566 11,344,787 -
Accumulated (deficit) during development stage - - - ( 22,396,012)
---------- -------- ----------- -----------
BALANCE, July 31, 1995 25,728,003 $257,280 $31,324,260 ($22,396,012)
========== ======== =========== ===========
<FN>
The accompanying notes to condensed financial statements are
an integral part of this statement.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
COPYTELE, INC.
(Development Stage Enterprise)
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine For the
months ended Period from
July 31, November 5, 1982
-------------------- (inception) through
1995 1994 July 31, 1995
---- ---- --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Payments to suppliers, employees and
consultants ($2,213,524) ($2,996,603) ($24,157,520)
Interest received 244,944 155,285 2,537,150
---------- ---------- -----------
Net cash (used in) operating activities ( 1,968,580) ( 2,841,318) ( 21,620,370)
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and equip-
ment ( 33,907) ( 41,897) ( 873,620)
Disbursements to acquire certificates of
deposit and corporate notes and bonds - - ( 12,075,191)
Proceeds from maturities of investments - - 12,075,191
Investment made in joint venture subsidiary ( 367,500) - ( 367,500)
---------- ---------- -----------
Net cash (used in) investing activities ( 401,407) ( 41,897) ( 1,241,120)
---------- ---------- -----------
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 4,845,236 1,597,825 13,998,801
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 4,845,236 1,597,825 31,581,540
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,475,249 ( 1,285,390) 8,720,050
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 6,244,801 8,317,010 -
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $8,720,050 $7,031,620 $8,720,050
========== ========== ==========
Continued
<PAGE>
<PAGE>
<CAPTION>
COPYTELE, INC.
(Development Stage Enterprise)
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Continued
For the nine For the
months ended Period from
July 31, November 5, 1982
-------------------- (inception) through
1995 1994 July 31, 1995
---- ---- -------------------
<S> <C> <C> <C>
RECONCILIATION OF NET (LOSS) TO NET CASH
(USED IN) OPERATING ACTIVITIES:
Net (loss) ($2,074,941) ($2,770,542) ($22,396,012)
Depreciation and amortization 45,567 41,377 678,110
(Increase) Decrease in accrued interest
receivable 5,136 ( 3,286) ( 11,905)
(Increase) Decrease in prepaid expenses
and other current assets 26,849 23,508 ( 19,145)
Decrease (Increase) in other assets 4,768 780 ( 93,950)
Increase (Decrease) in accounts payable and
accrued liabilities related to operating
activities 24,041 ( 133,155) 222,532
---------- ---------- -----------
Net cash (used in) operating activities ($1,968,580) ($2,841,318) ($21,620,370)
========== ========== ===========
<FN>
The accompanying notes to condensed financial statements are an
integral part of these statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
COPYTELE, INC.
(Development Stage Enterprise)
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three
months ended
July 31,
--------------------
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Payments to suppliers, employees and consultants ($ 872,917) ($ 979,786)
Interest received 96,434 54,953
---------- ----------
Net cash (used in) operating activities ( 776,483) ( 924,833)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and equipment ( 18,711) ( 5,103)
Investment made in joint venture subsidiary ( 367,500) -
---------- ----------
Net cash (used in) investing activities ( 386,211) ( 5,103)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and warrants,
net of registration disbursements 3,007,126 1,131,406
---------- ----------
Net cash provided by financing activities 3,007,126 1,131,406
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,844,432 201,470
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,875,618 6,830,150
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $8,720,050 $7,031,620
========== ==========
RECONCILIATION OF NET (LOSS) TO NET CASH (USED IN)
OPERATING ACTIVITIES:
Net (loss) ($ 744,354) ($ 832,266)
Depreciation and amortization 15,439 14,448
(Increase) Decrease in accrued interest receivable 5,368 ( 3,738)
Decrease in prepaid expenses and other current assets 16,893 3,523
Decrease in other assets 9,741 -
(Decrease) in accounts payable and accrued
liabilities related to operating activities ( 79,570) ( 106,800)
---------- ----------
Net cash (used in) operating activities ($ 776,483) ($ 924,833)
========== ==========
<FN>
The accompanying notes to condensed financial statements are
an integral part of these statements.
</TABLE>
<PAGE>
<PAGE>
COPYTELE, INC.
---------------
(Development Stage Enterprise)
-------------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS
----------------------------------------
JULY 31, 1995 (UNAUDITED)
--------------------------
(1) Summary of significant accounting policies and
other disclosures:
-----------------
On March 28, 1995, the Company entered into a Joint Venture Contract
with Shanghai Electronic Components Corp. providing for the formation
of a joint venture (the "Joint Venture") in China having a 20 year
duration for the development, manufacture and marketing of multi-
functional telecommunication products utilizing the Company's flat
panel and associated technology. The Company owns a 55% interest in
Shanghai CopyTele Electronics Co., Ltd. (the "Joint Venture Company").
The remaining 45% is owned by Shanghai Electronic Components Corp.
(35%) and Shanghai International Trade and Investment Developing Corp
(10%). The Company's initial capital contribution consists of both
cash and certain technology that has been licensed by the Company to
the Joint Venture pursuant to a Technology Licensing Agreement entered
into on the same date as the Joint Venture Contract. Reference is made
to the Management's Discussion and Analysis of Financial Condition and
Results of Operations section for further discussion involving this
joint venture arrangement.
CopyTele, Inc. has reflected its investment in the Joint Venture
Company under the equity method of accounting in the accompanying
condensed financial statements. Under the Joint Venture Contract,
CopyTele, Inc. controls four of the seven votes of the Joint Venture
Company's board of directors. Under certain circumstances, decisions
involving the Joint Venture Company require either a unanimous or two-
thirds vote of the Joint Venture Company's board of directors.
The condensed financial statements (unaudited) of Shanghai CopyTele
Electronics Co., Ltd. as of July 31, 1995 and for the period from May
18, 1995 (inception) through July 31, 1995 are as follows:
Condensed Balance Sheet (Unaudited) As of July 31, 1995
-------------------------------------------------------
Assets
------
Cash $ 825,529
Other Assets 10,469
------------
$ 835,998
============
<PAGE>
<PAGE>
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities $ 12,834
Shareholders' Equity 823,164
------------
$ 835,998
============
Condensed Statement of Operations (Unaudited) from the period
-------------------------------------------------------------
May 18, 1995 (inception) through July 31, 1995
----------------------------------------------
Sales $ -
Selling, General and
Administrative Expenses 16,836
-----------
Net Loss ($ 16,836)
===========
Reference is made to the October 31, 1994 audited financial statements
and notes thereto included in the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 1994, for more extensive
disclosures than contained in these condensed financial statements.
The information for the three and nine month periods ended July 31,
1995 and 1994 and for the period from November 5, 1982 (inception)
through July 31, 1995 is unaudited, but 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. The results of
operations for interim periods may not necessarily reflect the annual
operations of the Company.
The Company invests principally in short term highly liquid financial
instruments with original maturities of less than three months, which
have been classified as cash equivalents in the accompanying condensed
balance sheets. The cost of these investments approximates market value.
The Company has adopted all recently issued accounting standards which
have a material impact on its condensed financial statements.
(2) Stock option plans:
------------------
Information regarding the Company's stock option plan, adopted by the
Board of Directors on April 1, 1987 (the "1987 Plan"), from October
31, 1994 to July 31, 1995, after adjustments for applicable stock
splits, is as follows:
<PAGE>
<PAGE>
Range of Option
Shares Price Per Share
------ ---------------
Shares under option at
October 31, 1994 1,687,860 $ 3.88 - $13.88
Exercised ( 446,000) $ 3.88 - $ 5.50
Cancelled ( 172,800) $ 5.50 - $11.25
---------
Shares under option at
July 31, 1995 1,069,060 $ 3.88 - $13.88
========= ===============
The exercise price with respect to all of the options granted under
the 1987 Plan from its inception was at least equal to the fair market
value of the underlying common stock of the Company (the "Common
Stock") on the date of grant. As of July 31, 1995, all of the options
to purchase shares of Common Stock granted and outstanding under the
1987 Plan were exercisable. Upon the approval of the 1993 Stock Option
Plan (the "1993 Plan") by the Company's shareholders in July 1993,
which had been adopted by the Company's Board of Directors on April
28, 1993, the 1987 Plan was terminated with respect to the grant of
future options. The 1993 Plan was amended as of May 3, 1995 to, among
other things, increase the number of shares of the Company's Common
Stock available for issuance pursuant to grants thereunder from 3
million to 7 million.
During August 1995 and September 1995 to date, the Company received
proceeds aggregating approximately $267,000 relating to the exercise
of options to purchase 50,000 shares of Common Stock pursuant to the
1987 Plan.
Information regarding the 1993 Plan from October 31, 1994 to July 31,
1995 is as follows:
Range of Option
Shares Price Per Share
------ ---------------
Shares under option
at October 31, 1994 2,231,000 $ 4.88 - $17.00
Granted 2,450,000 $ 4.88 - $ 8.94
Exercised ( 344,400) $ 4.88 - $ 5.63
Cancelled ( 60,000) $ 5.63 - $11.50
---------
Shares under option
at July 31, 1995 4,276,600 $ 4.88 - $17.00
========= ===============
<PAGE>
<PAGE>
The exercise price with respect to all of the options granted under
the 1993 Plan from its inception was at least equal to the fair market
value of the underlying Common Stock on the grant date. As of July
31, 1995, 1,901,600 of the options to purchase shares of Common Stock
granted and outstanding under the 1993 Plan were exercisable. At that
date, 2,379,000 options were available for future grants under the
1993 Plan.
On August 8, 1995, options to purchase an aggregate of 50,000 shares
of Common Stock were granted under the 1993 Plan at a price of $9.00
per share, which was the fair market value of the underlying Common
Stock on that date.
As of September 5, 1995, 1,896,600 of the options to purchase shares
of Common Stock granted and outstanding under the 1993 Plan were
exercisable. At that date, 2,329,000 options were available for future
grants under the 1993 Plan.
During August 1995 and September 1995 to date, the Company received
proceeds aggregating approximately $31,000 relating to the exercise of
options to purchase 5,000 shares of Common Stock pursuant to the 1993
Plan.
(3) Warrants to purchase common stock:
---------------------------------
Information from October 31, 1994 to July 31, 1995 regarding warrants
previously issued by the Company, primarily to members of the
immediate families of its Chairman of the Board and its President in
conjunction with the sale of its common stock, after adjustments for
anti-dilutive provisions, is as follows:
Current Weighted
Average Exercise
Shares Price Per Share
------ -----------------
Shares covered by
warrants at
October 31, 1994 669,333 $7.15
Warrants exercised (100,200) $5.96
Warrants expired ( 87,150) $6.35
-------
Shares covered by
warrants at
July 31, 1995 481,983 $7.39
======= =====
The exercise price of all of the warrants was at least equal to the
fair market value of the underlying Common Stock on the date of
issuance of such warrants. As of July 31, 1995, all of the warrants to
purchase shares of Common Stock issued and outstanding were
exercisable.
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
------------------------------------
The Company, which is a development stage enterprise, was incorporated
on November 5, 1982 and has had no revenues to support its operations
since its inception. The Company's principal activities presently
relate to a joint venture (the "Joint Venture") with Shanghai
Electronic Components Corp. ("S.E.C.C.") of Shanghai, China. It is
presently contemplated that the Joint Venture, in conjunction with the
Company and S.E.C.C., will develop, manufacture and market products
worldwide in the telecommunications field. There is no assurance, and
the Company is not able to predict, if and when marketable
telecommunications products incorporating the Company's flat panel
technology will be developed or produced. Even if the Company were to
produce marketable products, directly or through the Joint Venture,
there is no assurance that the Company will generate revenues in the
future, will have sufficient revenues to generate profit or that other
products will not be produced by other companies that will render the
products of the Company or the Joint Venture obsolete.
In reviewing Management's Discussion and Analysis of Financial
Condition and Results of Operations, reference is made to the
Company's Condensed Financial Statements and the notes thereto.
Results of Operations
---------------------
Selling, general and administrative expenses for the nine and three
month periods ended July 31, 1995 and 1994 and for the period from
November 5, 1982 (inception) through July 31, 1995 were $2,314,749,
$2,929,113, $835,420, $890,957 and $24,945,066, respectively. These
amounts include research, development and tooling costs of
approximately $1,513,000, $2,145,000, $553,000, $605,000 and
$16,045,000, respectively, as well as normal operating expenses. The
decrease in selling, general and administrative expenses during the
nine and three months ended July 31, 1995 as compared to the same
periods ended in 1994 resulted primarily from decreases in engineering
supplies expenditures necessitated by the present phase of the
Company's development program and related activities. Professional
fees decreased during the fiscal 1995 periods, especially patent
application preparation and filing fees, offset somewhat by an
increase in legal fees, primarily associated with the Joint Venture.
Travel related expenses, also associated with the Joint Venture,
increased for the nine month period ended July 31, 1995 as compared to
the same period in the prior year. The three and nine month periods
ended July 31, 1995 also include the Company's portion of the Joint
Venture Company's loss.
Since November 1985, the Company's Chairman of the Board and its
President have waived salary and related pension benefits for an
undetermined period of time. Four other individuals, including a
<PAGE>
<PAGE>
former officer and senior level personnel, waived salary and related
pension benefits from January 1987 through December 1990. Commencing
in January 1991, these four individuals waived such rights for an
undetermined period of time and they did not receive salary or related
pension benefits through December 1992. The Company's Chairman of the
Board, its President and the three senior level personnel (exclusive
of the former officer) continued to waive such rights commencing in
January 1993 for an undetermined period of time. One additional
employee is also currently waiving such salary and benefit rights for
an undetermined period of time.
The increase in interest income during both the nine and three months
ended July 31, 1995 as compared to the same periods ended in 1994
primarily resulted from an increase in interest rates available for
investment. Funds available for investment during the nine and three
month periods ended July 31, 1995 and 1994, on a monthly weighted
average basis, were approximately $6,658,000, $7,257,000, $7,766,000
and $6,975,000 respectively. The investment instruments selected by
the Company are principally money market accounts, treasury bills and
commercial paper.
The Company has adopted all recently issued accounting standards which
have a material impact on its condensed financial statements.
Liquidity and Capital Resources
-------------------------------
Since its inception, the Company has met its liquidity and capital
expenditure needs primarily from the proceeds of the sales of Common
Stock in its initial public offering, in private placements, upon
exercise of warrants issued in connection with the private placements
and public offering, and upon exercise of stock options pursuant to
the 1987 Plan and the 1993 Plan.
During August 1995 and September 1995 to date, the Company received
additional proceeds aggregating approximately $267,000 relating to the
exercise of options to purchase 50,000 shares of Common Stock under
the 1987 Plan. During the same periods, the Company received
additional proceeds aggregating approximately $31,000 relating to the
exercise of options to purchase 5,000 shares of Common Stock under the
1993 Plan.
The Company believes that even without sales it will have sufficient
funds into the fourth quarter of fiscal 1997 to maintain its present
level of development efforts, and to make the balance of its initial
capital contributions to the Joint Venture Company of approximately
$850,000 of its total initial capital contribution of approximately
$1.2 million. The Company anticipates that it may require additional
funds in order to participate in the Joint Venture Company following
its initial capital contributions and to continue its research and
development activities. The Company's estimated funding capacity
<PAGE>
<PAGE>
indicated above assumes, although there is no assurance, that the
waiver of salary and pension benefits by the Chairman of the Board,
the President and senior level personnel will continue.
The National Association of Securities Dealers, Inc. ("NASD") requires
that the Company maintain a minimum of $4 million of net tangible
assets to maintain its NASDAQ - NMS listing. The Company anticipates
that it will seek additional sources of funding, when necessary, in
order to satisfy the NASD requirements.
There can be no assurance that adequate funds will be available to
satisfy the Company's Joint Venture and NASD funding requirements or
that, if available, such funds will be available on terms and
conditions favorable to the Company.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
At the Company's Annual Meeting of Shareholders held on July 19, 1995,
five directors were elected, amendments to the CopyTele, Inc. 1993
Stock Option Plan were approved and the selection of Arthur Andersen
LLP, independent public accountants, to audit the financial statements
of the Company for the fiscal year ending October 31, 1995 was
ratified. The following is a tabulation of the voting with respect to
the foregoing matters:
(a) Election of directors -
Nominee For Withheld
------- --- --------
Denis A. Krusos 22,594,386 389,485
Frank J. DiSanto 22,594,536 389,335
John R. Shonnard 22,594,476 389,395
John E. Gillies 22,592,906 390,965
Gerald J. Bentivegna 22,595,386 388,485
(b) Approval of amendments to the CopyTele, Inc. 1993 Stock Option
Plan -
For Against Abstain Broker Nonvotes
--- ------- ------- ---------------
12,893,652 1,481,108 108,432 8,500,679
(c) Ratification of selection of Arthur Andersen LLP -
For Against Abstain
--- ------- -------
22,910,739 35,462 37,670
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
--------
27 - Financial Data Schedule
(b) Reports on Form 8-K.
--------------------
No reports on Form 8-K were filed for the Company during the
quarter ended July 31, 1995.
<PAGE>
<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.
DENIS A. KRUSOS
-------------------------------
Denis A. Krusos
Chairman of the Board,
Chief Executive Officer
and Director (Principal
September 12, 1995 Executive Officer)
FRANK J. DISANTO
--------------------------------
Frank J. DiSanto
September 12, 1995 President and Director
GERALD J. BENTIVEGNA
-------------------------------
Gerald J. Bentivegna
Vice President - Finance and
Chief Financial Officer
(Principal Financial and
September 12, 1995 Accounting Officer)
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the financial
statements contained in the body of the
accompanying Form 10-Q and is qualified in
its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> JUL-31-1995
<CASH> 8,720,050
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,751,100
<PP&E> 875,297
<DEPRECIATION> 673,468
<TOTAL-ASSETS> 9,414,379
<CURRENT-LIABILITIES> 228,851
<BONDS> 0
0
0
<COMMON> 257,280
<OTHER-SE> 8,928,248
<TOTAL-LIABILITY-AND-EQUITY> 9,414,379
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,314,749
<OTHER-EXPENSES> (239,808)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,074,941)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,074,941)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,074,941)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
</TABLE>
