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, 1996
--------------------------------------------------
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 March 11, 1996 26,659,733 shares
-----------------
<PAGE>
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Balance Sheets (Unaudited) as of January 31,
1996 and October 31, 1995
Condensed Statements of Operations (Unaudited) for the
three-months ended January 31, 1996 and January 31, 1995, and for
the period from November 5, 1982 (Inception) through January 31,
1996
Condensed Statement of Shareholders' Equity (Unaudited) for the
period from November 5, 1982 (Inception) through January 31, 1996
Condensed Statements of Cash Flows (Unaudited) for the
three-months ended January 31, 1996 and January 31, 1995, and for
the period from November 5, 1982 (Inception) through January 31,
1996
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.
<PAGE>
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
COPYTELE, INC.
--------------
(Development Stage Enterprises)
-------------------------------
CONDENSED BALANCE SHEETS (UNAUDITED)
------------------------------------
January 31, October 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash (including cash equivalents and interest bearing
accounts of $10,109,615 and $8,786,210, respectively) $10,177,938 $8,864,293
Accrued interest receivable 23,659 36,206
Prepaid expenses and other current assets 54,767 52,451
------------ ------------
10,256,364 8,952,950
PROPERTY AND EQUIPMENT (net of accumulated depreciation
and amortization of $709,144 and $690,420, respectively) 225,083 235,201
INVESTMENT IN JOINT VENTURE COMPANY (Note 2) 826,815 349,687
OTHER ASSETS 157,646 157,560
DEFERRED TAX BENEFITS (net of valuation allowance of
$17,280,000 and $15,983,000, respectively) -- --
------------ ------------
$ 11,465,908 $ 9,695,398
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 376,376 $ 218,954
Accrued liabilities 66,429 39,736
------------ ------------
442,805 258,690
------------ ------------
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 26,418,153 and
25,955,103 shares, respectively 264,182 259,551
Additional paid-in capital 35,045,210 32,492,127
Accumulated (deficit) during development stage (24,286,289) (23,314,970)
------------ ------------
11,023,103 9,436,708
------------ ------------
$ 11,465,908 $ 9,695,398
============ ============
<FN>
The accompanying notes to condensed financial statements are
an integral part of these balance sheets.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
COPYTELE, INC.
--------------
(Development Stage Enterprise)
------------------------------
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
----------------------------------------------
For the period from
For the three months November 5, 1982
ended January 31, (inception) through
--------------------------------
1996 1995 January 31, 1996
-------------------------------- -------------------
<S> <C> <C> <C>
SALES $ -- $ -- $ --
----------- ------------ ------------
SELLING,GENERAL AND ADMINISTRATIVE EXPENSES, including
research and development
expenses of approximately $767,000,
$479,000 and $17,652,000, respectively 1,088,268 740,551 27,068,710
----------- ----------- ------------
INTEREST INCOME 116,949 69,265 2,782,421
----------- ----------- ------------
NET (LOSS) ($ 971,319) ($ 671,286) ($24,286,289)
=========== =========== ============
NET (LOSS) PER SHARE OF COMMON STOCK ($ 0.04) ($ 0.03) ($ 1.09)
=========== =========== ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 26,167,725 24,837,403 22,230,526
=========== =========== ============
<FN>
The accompanying notes to condensed financial statements are an
integral part of these statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
COPYTELE, INC.
--------------
(Development State Enterprise)
------------------------------
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
-------------------------------------------
FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION)
------------------------------------------------
THROUGH JANUARY 31, 1996 (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
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>
3
<PAGE>
<TABLE>
<CAPTION>
COPYTELE, INC.
--------------
(Development State Enterprise)
------------------------------
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
-------------------------------------------
FOR THE PERIOD FROM NOVEMBER 5, 1982 (INCEPTION)
------------------------------------------------
THROUGH JANUARY 31, 1996 (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 on
various dates from September 1993 through
January 1996 494,720 4,948 2,322,629 -
Common stock issued upon exercise of stock options
from December 16, 1992 to January 31, 1996
under stock option plans, net of registration
costs 2,656,390 26,564 14,707,495 -
Accumulated (deficit) during development stage - - - ( 24,286,289)
---------- -------- ----------- ------------
BALANCE, Janaury 31, 1996 26,418,153 $264,182 $35,045,210 ($24,286,289)
========== ======== =========== ===========
<FN>
The accompanying notes to condensed financial statements are
an integral part of this statement.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
COPYTELE, INC.
--------------
(Development Stage Enterprise)
------------------------------
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
---------------------------------------------
For the three For the
months ended period from
January 31, November 5, 1982
----------- (inception) through
1996 1995 January 31, 1996
--------------------------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Payments to suppliers, employees and
consultants ($ 879,112) ($ 627,593) ($ 26,098,002)
Interest received 129,496 64,122 2,758,763
------------- ------------ ------------
Net cash (used in) operating activities ( 749,616) ( 563,471) ( 23,339,239)
------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and equip-
ment ( 4,453) ( 12,079) ( 934,715)
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 Company ( 490,000) - ( 857,500)
------------- ------------ ------------
Net cash (used in) investing activities ( 494,453) ( 12,079) ( 1,792,215)
------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock and
warrants, net of underwriting discounts
of $690,000 relating to initial public
offering in October 1983 - - 17,647,369
Proceeds from exercise of stock options and
warrants, net of registration disbursements 2,557,714 - 17,726,653
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 2,557,714 - 35,309,392
------------ ------------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,313,645 ( 575,550) 10,177,938
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 8,864,293 6,244,801 -
------------ ------------- ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 10,177,938 $ 5,669,251 $ 10,177,938
============ ============= ============
</TABLE>
Continued
5
<PAGE>
<TABLE>
<CAPTION>
COPYTELE, INC.
--------------
(Development Stage Enterprise)
------------------------------
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
---------------------------------------------
Continued
---------
For the three For the
months ended period from
January 31, November 5, 1982
----------- (inception) through
1996 1995 January 31, 1996
--------------------------------- ----------------
<S> <C> <C> <C>
RECONCILIATION OF NET (LOSS) TO NET CASH
(USED IN) OPERATING ACTIVITIES:
Net (loss) ($ 971,319) ($ 671,286) ($ 24,286,289)
Pro-rata share of Joint Venture Company
losses 12,872 - 30,685
Depreciation and amortization 18,724 14,721 713,785
(Increase) Decrease in accrued interest
receivable 12,547 ( 5,143) ( 23,659)
(Increase) Decrease in prepaid expenses
and other current assets ( 2,316) 12,377 ( 54,767)
Decrease (Increase) in other assets ( 86) ( 5,455) ( 157,646)
Increase (Decrease) in accounts payable and
accrued liabilities related to operating
activities 179,962 91,315 438,652
------------- ------------- -------------
Net cash (used in) operating activites ($ 749,616) ($ 563,471) ($ 23,339,239)
============= ============= ============
<FN>
The accompanying notes to condensed financial statements are an
integral part of these statements.
</TABLE>
6
<PAGE>
COPYTELE, INC.
--------------
(Development Stage Enterprise)
------------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
JANUARY 31, 1996 (UNAUDITED)
----------------------------
(1) Summary of significant accounting policies and other
disclosures:
------------
During 1995, the Company signed a joint venture contract (the "Joint
Venture Contract") with Shanghai Electronic Components Corp. ("SECC") to
form a joint venture in Shanghai, China with a 20 year duration. With
this contract, a joint venture company, Shanghai CopyTele Electronics
Co., Ltd., (the "Joint Venture Company" or "Joint Venture") was formed
with the Company owning a 55% interest in capital and profits. The
remaining 45% is owned by SECC, 35%, and Shanghai International Trade
and Investment Developing Corp. ("SIT"), 10% (See Note 2, Investment in
Joint Venture). The Company, pursuant to a Technology License Agreement
entered into on the same date as the Joint Venture Contract, has
licensed its flat panel application technology to the Joint Venture
Company for exclusive use in China. It is contemplated that the Joint
Venture, in conjunction with the Company and SECC, will develop,
manufacture and market products worldwide in the telecommunications
field. Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for further discussion
involving the Joint Venture Contract.
The Company has produced a pre-production multi-functional
telecommunications prototype, called "Magicom"TM, that is directed
toward the higher end of its potential market. This prototype is a
unique telephone based multi-functional telecommunications product
incorporating the Company's flat panel and associated proprietary
hardware and software technology. The Company believes that the features
of the prototype will position the product for the needs of the
developing digital information field and various on-line services.
Reference is made to the October 31, 1995 audited financial statements
and notes thereto included in the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 1995, for more extensive
disclosures than contained in these condensed financial statements.
7
<PAGE>
The Company 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, the Company
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 information for the three month periods ended January 31, 1996 and
1995 and for the period from November 5, 1982 (inception) through
January 31, 1996 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 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 not yet determined how Statement of Financial Accounting
Standard ("SFAS") No. 123, Accounting for Stock Based Compensation will
be implemented and, accordingly, has not yet determined what impact it
will have on the Company's financial statements. This statement will be
adopted by the Company no later than fiscal 1997. The Company has
adopted all other recently issued accounting standards which have a
material impact on its condensed financial statements.
(2) Investment in Joint Venture:
----------------------------
The Company is required to contribute $1,225,000 in cash and technology
which has been valued for purposes of the Joint Venture Contract at
$700,000. The Joint Venture Company does not reflect the $700,000 in
technology as an asset or equity investment in the condensed financial
statements presented below. The Company will recognize losses on the
Joint Venture to the extent of its cash investment. SECC and SIT will
contribute cash aggregating $1,575,000. As of March 11, 1996, the
Company and the other parties have contributed cash of $857,500 and
$1,102,500, respectively. The balance of the required contributions will
be made at such time as the Company, SECC and SIT mutually agree. The
Company has reflected its investment in the Joint Venture Company under
the equity method of accounting (See Note 1, Summary of significant
accounting policies and other disclosures).
8
<PAGE>
Condensed financial information for Shanghai CopyTele
Electronics Co., Ltd. at January 31, 1996 and for the three
month period ended January 31, 1996:
Condensed Balance Sheet
-----------------------
(Unaudited)
Cash $1,565,116
Land occupancy rights 309,547
Fixed assets and
construction in
progress 80,389
----------
Total Assets $1,955,052
==========
Accrued expenses $ 50,842
Capital 1,904,210
----------
Total Liabilities
and Capital $1,955,052
==========
Condensed Statement of Operations
---------------------------------
(Unaudited)
Net sales $ -
Operating (loss) ( 26,793)
Interest income 3,390
--------
Net (Loss) ($ 23,403)
========
(3) 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,
1995 to January 31, 1996, after adjustments for applicable stock splits,
is as follows:
Range of Option
Shares Price Per Share
------ ---------------
Shares under option at
October 31, 1995 884,060 $ 4.19 - $13.88
Exercised ( 219,700) $ 4.19 - $ 8.50
---------
Shares under option at
January 31, 1996 664,360 $ 4.19 - $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
9
<PAGE>
the fair market value of the underlying common stock of the Company (the
"Common Stock") on the date of grant. As of January 31, 1996, all of the
options to purchase shares of Common Stock granted and outstanding under
the 1987 Plan were exercisable. Upon the approval of the CopyTele, Inc.
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 February 1996, the Company received proceeds aggregating
approximately $225,000 relating to the exercise of options to purchase
40,500 shares of Common Stock pursuant to the 1987 Plan.
Information regarding the 1993 Plan from October 31, 1995 to January 31,
1996 is as follows:
Range of Option
Shares Price Per Share
------ ---------------
Shares under option
at October 31, 1995 4,446,600 $ 4.88 - $17.00
Granted 160,000 $9.50
Exercised ( 190,150) $ 4.88 - $ 7.88
--------
Shares under option
at January 31, 1996 4,416,450 $ 4.88 - $17.00
========= ===============
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 January 31,
1996, 2,756,450 of the options to purchase shares of Common Stock
granted and outstanding under the 1993 Plan were exercisable. At that
date, 2,044,000 options were available for future grants under the 1993
Plan.
As of March 11, 1996, 2,790,450 of the options to purchase shares of
Common Stock granted and outstanding under the 1993 Plan were
exercisable.
During February 1996 and through March 11, 1996, the Company received
proceeds aggregating approximately $730,000
10
<PAGE>
relating to the exercise of options to purchase 116,000 shares of Common
Stock pursuant to the 1993 Plan.
(4) Warrants to purchase common stock:
----------------------------------
Information from October 31, 1995 to January 31, 1996 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, 1995 426,333 $7.79
Warrants exercised ( 53,200) $3.75
Warrants expired ( 26,600) $3.75
-------
Shares covered by
warrants at
January 31, 1996 346,533 $8.71
======== =====
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 January 31, 1996, all of the warrants to purchase
shares of Common Stock issued and outstanding were exercisable.
On March 4, 1996, warrants to purchase 85,080 shares of Common Stock
were exercised at an exercise price of $3.875 per share.
11
<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 are the development of products,
further enhancements of its flat panel and its interest in Shanghai CopyTele
Electronics Co., Ltd., the Company's 55% owned joint venture in Shanghai, China,
which is accounted for under the equity method of accounting. See Notes 1 and 2
to the Company's financial statements. 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 produced or sold in
commercial quantities. 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 three month periods ended
January 31, 1996 and 1995 and for the period from November 5, 1982 (inception)
through January 31, 1996 were $1,088,268, $740,551 and $27,068,710,
respectively. These amounts include research, development and tooling costs of
approximately $767,000, $479,000 and $17,652,000, respectively, as well as
normal operating expenses. The increase in selling, general and administrative
expenses during the three months ended January 31, 1996 as compared to the same
period ended in 1995 resulted primarily from increases in expenditures for
engineering supplies and services necessitated by the present phase of the
Company's development program and related activities. Professional fees
increased during the fiscal 1996 period, especially patent application
preparation and filing fees, offset somewhat by a decrease in legal fees,
primarily associated with the Joint Venture. Other expense catagories, to a
lesser extent, also increased for the fiscal 1996 period also as a result of the
Company's present phase of development and related activities. The three month
period ended January 31, 1996 also includes the Company's portion of the Joint
Venture Company's loss for the same period.
12
<PAGE>
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 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 the three months ended January 31, 1996
as compared to the same period ended in 1995 primarily resulted from an increase
in funds available for investment and to a lesser extent, slightly higher
interest rates. Funds available for investment during the three month periods
ended January 31, 1996 and 1995, on a monthly weighted average basis, were
approximately $9,377,000 and $5,870,000 respectively. The investment instruments
selected by the Company are principally money market accounts, treasury bills
and commercial paper.
The Company has not yet determined how Statement of Financial Accounting
Standard ("SFAS") No. 123, Accounting for Stock Based Compensation will be
implemented and, accordingly has not yet determined what impact it will have on
the Company's financial statements. This statement will be adopted by the
Company no later than fiscal 1997. The Company has adopted all other 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 February 1996 and through March 11, 1996, the Company received additional
proceeds aggregating approximately $225,000 relating to the exercise of options
to purchase 40,500 shares of Common Stock under the 1987 Plan. During the same
periods, the Company received additional proceeds aggregating approximately
$730,000 relating to the exercise of options to purchase 116,000 shares of
Common Stock under the 1993 Plan. On March 4, 1996, the
13
<PAGE>
Company received additional proceeds aggregating approximately $330,000 relating
to the exercise of warrants.
The Company believes that even without sales it will have sufficient funds into
the second quarter of fiscal 1998 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 $367,500 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 following
its initial capital contributions and to continue its research and development
activities. The Company's estimated funding capacity indicated above assumes,
although there is no assurance, that the waiver of salary and pension benefits
by the Chairman of the Board, the President and senior level personnel will
continue.
The 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.
The Joint Venture Contract contemplates an initial investment of $7 million, of
which half may be borrowed from banks, and a registered capital of $3.5 million.
The Company is required to contribute $1,225,000 in cash and SECC and SIT are
required to contribute $1,575,000 in cash to the Joint Venture. The Company
currently has no plans with respect to additional financing. There can be no
assurance that adequate funds will be available to the Company or the Joint
Venture, including the Company's required capital contributions (beyond its
initial capital contributions of $1,225,000) and its NASD funding requirements,
or that, if available, the Company or the Joint Venture will be able to obtain
such funds on favorable terms and conditions.
See "Business" and Note 1 to the Company's Financial Statements contained in the
Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995
for discussions regarding uncertainties that may significantly affect future
liquidity and capital resources.
14
<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 reports on Form 8-K were filed for the Company during the
quarter ended January 31, 1996.
15
<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
March 14, 1996 Executive Officer)
FRANK J. DISANTO
----------------
Frank J. DiSanto
March 14, 1996 President and Director
GERALD J. BENTIVEGNA
--------------------
Gerald J. Bentivegna
Vice President - Finance and
Chief Financial Officer and
Director (Principal Financial
March 14, 1996 and Accounting Officer)
16
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 - Financial Data Schedule
NYFS11...:\95\38995\0001\6678\FRM3126U.08A
17
<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> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JAN-31-1996
<CASH> 10,177,938
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,256,364
<PP&E> 934,227
<DEPRECIATION> 709,144
<TOTAL-ASSETS> 11,465,908
<CURRENT-LIABILITIES> 442,805
<BONDS> 0
0
0
<COMMON> 264,182
<OTHER-SE> 10,758,921
<TOTAL-LIABILITY-AND-EQUITY> 11,465,908
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,088,268
<OTHER-EXPENSES> (116,949)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (971,319)
<INCOME-TAX> 0
<INCOME-CONTINUING> (971,319)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (971,319)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
