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Quentra Networks Inc · S-3/A · On 3/16/00

Filed On 3/16/00 · SEC File 333-68333 · Accession Number 57201-0-13

  As Of               Filer                 Filing     As/For/On Docs:Pgs

 3/16/00  Quentra Networks Inc              S-3/A                  4:35

Pre-Effective Amendment to Registration Statement for Securities Offered Pursuant to a Transaction · Form S-3
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-3/A       Registration Statement                                31    110K 
 2: EX-5        Legal Opinion                                          2      7K 
 3: EX-23       Audit Consent                                          1      4K 
 4: EX-23       Audit Consent                                          1      5K

S-3/A · Registration Statement
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Exhibits Experts Indemnification of Directors and Officers Legal Matters Other Expenses of Issuance and Distribution Risk Factors Selling Stockholders Summary Undertakings Use of Proceeds
1	1st Page
4	Summary
5	Risk Factors
17	Use of Proceeds
18	Selling Stockholders
24	Experts
"	Legal Matters
27	Item 14. Other Expenses of Issuance and Distribution
"	Item 15. Indemnification of Directors and Officers
28	Item 16. Exhibits
29	Item 17. Undertakings

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As filed with the Securities and Exchange
Commission on March 16, 2000 Reg. No. 333-68333

================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

--------------------------

PRE-EFFECTIVE AMENDMENT NO. 3
FORM S-3/A-3

REGISTRATION STATEMENT
Under the Securities Act of 1933

--------------------------

COYOTE NETWORK SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware 36-2448698
------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

4360 Park Terrace Drive, Westlake Village, CA 91361 (818) 735-7600
--------------------------------------------------- ------------------
(Address, including Zip Code of Registrant's (Telephone Number,
Principal Executive Offices) Including Area Code)

James R. McCullough, Chief Executive Officer

COYOTE NETWORK SYSTEMS, INC.
4360 Park Terrace Drive, Westlake Village, CA 91361
Telephone: (818) 735-7600
Facsimile: (818) 735-7633
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

Copies of all communications to:

SQUADRON, ELLENOFF, PLESENT & SHEINFELD, LLP
551 Fifth Avenue, New York, NY 10176
Attn: Kenneth Koch, Esq.
Telephone: (212) 661-6500
Facsimile: (212) 697-6686

Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.

If the only securities being registered on this Form are being offered
pursuant to dividend or reinvestment plans, please check the following box. |_|

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|

If this Form is a post-effective amendment filed pursuant to Rule 462 (c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|

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--------------------------------------------------------------------------------

CALCULATION OF REGISTRATION FEE

--------------------------------------------------------------------------------

Proposed Proposed Amount
Title of shares Amount maximum maximum of
to be to be aggregate price aggregate offering registration
registered registered 1 per share price fee
---------------- -------------- --------------- ------------------ ------------
Common Stock 5,414,789 $16.00 2 $86,636,624 2 $25,558.00 3
$1.00 Par Value
---------------- -------------- --------------- ------------------ ------------
Common Stock

$1.00 Par Value 782,790 $5.125 4 $4,011,799 4 $1,115.28 5

---------------- -------------- --------------- ------------------ -------------

TOTAL 6,197,579 $90,648,423 $26,673.28

--------------------------------------------------------------------------------

1 Represents: (a) 1,898,148 shares of Common Stock acquired by the selling
stockholders in connection with a private placement; (b) 4,156,702 shares
of Common Stock which may be issued upon exercise of warrants, upon
conversion of convertible preferred stock or upon conversion of Class A
Units of Coyote Technologies, LLC; and (c) 20,821 shares of Common Stock
issued in connection with an acquisition.

2 Calculated in accordance with Rule 457(c) based on the average of the high
and low sales prices of the Common Stock as reported on The Nasdaq National
Market on November 30, 1998 solely for the purpose of calculating the
amount of the registration fee.

3 A registration fee with respect to these shares was paid upon the filing of
Registrant's Registration Statement on Form S-3 (Registration Statement No.
333-68333).

4 Calculated in accordance with Rule 457(c) based on the average of the high
and low sales prices of the Common Stock as reported on The Nasdaq National
Market on July 9, 1999 solely for the purpose of calculating the amount of
the registration fee.

5 A registration fee with respect to these shares of $1,938.79, an excess of
$823.51 over the required registration fee, was paid upon the filing of
Amendment No. 2 to the Registrant's Registration Statement on Form S-3
(Registration Statement No. 333-68333).

--------------------------

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

================================================================================

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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

Subject To Completion, Dated March __, 2000

Prospectus

COYOTE NETWORK SYSTEMS, INC.
[GRAPHIC OMITTED]

6,197,579 Shares of Common Stock

The selling stockholders listed in this prospectus are offering for sale up to
6,197,579 shares of common stock of Coyote Network Systems, Inc.

Shares of our common stock are traded on The Nasdaq National Market.

Trading Symbol on The Nasdaq National Market: CYOE
Last Sale Price on July 9, 1999: $5.125 per share.

--------------------------------

Before purchasing shares in this offering, you should carefully consider the
"Risk Factors" beginning on page 3 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal7 offense.

--------------------------------

The date of this prospectus is March __, 2000.

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SUMMARY

The following is a summary of the more detailed information contained
elsewhere in this prospectus and in the documents that we incorporate by
reference. Because this is only a summary, it does not contain all of the
information that may be important to you. To understand this offering, you need
to review the entire prospectus, including the risk factors, and the financial
statements and other information incorporated in this prospectus by reference.

Coyote Network Systems, Inc.

Coyote Network Systems, Inc. is a Delaware corporation, which was
incorporated in 1961. We are engaged in the telecommunications business. We sell
telecommunications equipment, international and domestic long distance services,
local service, applications and network operations and support services,
primarily to entrepreneurial carriers, e.g., domestic and international long
distance providers, competitive local exchange carriers, Internet service
providers, small businesses and consumers.

Our telecommunications switching products are designed to route telephone
calls in an efficient, cost-effective manner and are targeted to emerging
telecom companies that may start off with relatively low levels of telecom
traffic and grow over time. Accordingly, these switches are designed to
substantially lower cost and are designed to easily expand to handle additional
traffic as our customers business grows. We also sell international long
distance services to telecom carriers and market retail domestic and
international long distance services, as well as local service primarily to
affinity groups, which share a common characteristic such as language or
culture.

We also plan to provide simple Internet-based applications using a simple
screen-based telephone directly to the home or office through our own branded
network. We believe we can create a sustainable competitive advantage by
providing our customers with a low cost, high functionality total communications
solution package that includes local and long distance service, Internet access
and simple, easy-to-use custom value-added applications, all from a simple,
easy-to-use screen-based telephone.

Our principal executive offices are located at 4360 Park Terrace Drive,
Westlake Village, California 91361, and our telephone number is (818) 735-7600.

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RISK FACTORS

Before purchasing our stock, you should carefully consider the following
risk factors and the other information contained in this prospectus and in the
documents we incorporate by reference.

We have only recently entered the telecommunications industry and have a limited
operating history in such industry; therefore, we expect to encounter risks
frequently faced by new entrants into this rapidly evolving market, such as
difficulty obtaining acceptance and generating sales of our products.

Although we were originally incorporated in 1961, we did not enter the
telecommunications industry until 1994. Accordingly, we have a limited operating
history in the telecommunications business upon which you can evaluate our
current business and we are subject to the risks typically encountered in a
relatively new business. In order to be successful, we must increase the level
of sales of our products and services, and increase their acceptance in the
marketplace. Some of the risks and uncertainties we face while we continue to
develop our experience in this market relate to our ability to:

- sell our products and services;

- generate significant revenues from our sale of long distance minutes;

- integrate acquired businesses, technologies and services; and

- respond to rapidly changing technologies and competitors' development
of similar products.

We may not be successful in accomplishing these objectives. Our inability
to increase market awareness and demand for our products could adversely affect
our sales and revenues and our ability to compete in the telecommunications
industry.

We have experienced and may continue to experience operating losses and negative
cash flow from operations, which could adversely affect our ability to carry out
our business plan and attain profitability.

Our ability to achieve profitability and positive cash flow from operations
is uncertain. We have incurred substantial costs in growing our business and by
acquiring complementary businesses and technologies. For the last four fiscal
years, we incurred losses from our continuing operations. Our net sales during
the same period, $264,000 in the 1996 fiscal year, $7,154,000 in the 1997 fiscal
year, $5,387,000 in the 1998 fiscal year and $43,318,000 in the 1999 year, did
not offset our operating losses in each of these years. In addition, we
experienced negative cash flow from operations of $17,859,000, $8,475,000 and
$6,125,000, in fiscal years 1997, 1998 and 1999, respectively. Our net sales and
negative cash flow from operations for the first nine months in the 2000 fiscal
year was $24,745,000 and $13,402,000, respectively. To achieve profitability and
positive cash flow, we must increase the sales of our products and services. If
we are unable to increase our sales, we may not generate enough revenues to
carry out our business plan and achieve profitability. Even if we do achieve
profitability and positive cash flow, we may not sustain or increase
profitability and positive cash flow in the future.

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We have negative working capital and if we are unable to obtain the required
substantial additional financing to carry out our business plan, we may be
unable to carry out our planned expansion of operations.

As of December 31, 1999, we had negative working capital of $4,300,000.
Although we anticipate that available funds and cash flow from operations will
enable us to meet our anticipated working capital needs over the next 12 months,
our current business plan contemplates growth through acquisitions, which would
require substantial additional financing and we cannot assure you that the
required additional financing will be available to us on favorable terms or at
all. If we are unable to obtain adequate funds at all or on acceptable terms, we
may have to reduce the scope of our planned expansion of operations; we may also
be unable to take advantage of acquisition opportunities, develop or enhance
services or respond to competitive or business pressures, all of which could
have a material adverse effect on our business, results of operations and
financial condition.

In addition, until we achieve higher sales and more favorable operating
results, our ability to obtain funding from outside sources of capital could be
restricted. Although our short-term liquidity has improved recently, we cannot
be certain that we will maintain sufficient liquidity for the length of time
required to achieve our operating goals or to successfully integrate the
operations of our acquired businesses into our own.

Factors that could further increase our need for additional capital
include:

- our discovery of one or more additional attractive acquisition
opportunities;

- the failure of our operating cash flow to meet our working capital and
capital expenditure needs; and

- the growth of our company beyond our current expectations.

If we raise additional funds by issuing equity securities, stockholders may
experience dilution of their ownership interest and such securities may have
rights senior to those of the holders of our common stock. If we raise
additional funds by issuing debt, we may be subject to certain limitations on
our operations, including limitations on our payment of dividends.

We recently sold close to 20% of our outstanding common stock in a private
placement. Accordingly, under NASD rules, we may not be able to obtain
additional financing through another private placement in the near further
without shareholder approval or a waiver from the NASD.

We may continue to experience the consequences from adverse publicity which we
received in December 1998, including an inquiry from Nasdaq, decreases in the
price of our common stock or disruption in trading.

In December 1998, we received publicity, which adversely affected our stock
price, from several articles published by TheStreet.com, an Internet
publication, which implied, among other things:

- that one of our end-user customers, Crescent Communications, Inc. did
not exist; and

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- that our sale of equipment to Crescent through a third party,
Comdisco, Inc., was invalid.

We believe that as a result of this publicity, The Nasdaq National Market
and the Securities and Exchange Commission commenced inquiries regarding our
sale to Crescent Communications and other transactions. We were requested to
furnish, and have furnished, a number of documents and although we were advised
in November 1999 that the SEC had dropped its investigation, we do not know the
status of The Nasdaq National Market inquiry. The Nasdaq National Market inquiry
may continue to divert the attention of our management from day-to-day
operations which could have a material adverse effect on our business, results
of operations and financial condition.

If the Nasdaq inquiry results in a negative outcome, The Nasdaq National
Market could impose a variety of sanctions against us, including possible
de-listing. These sanctions could adversely affect our financial condition or
the trading of our common stock and/or its price.

We may not receive expected revenues because a customer may not fulfill its
obligation to purchase additional equipment and services from us and our failure
to receive these revenues could contribute to our operating losses or adversely
affect our cash flow.

We typically sell equipment through a third party leasing company which
pays us for the equipment and then leases it to our customers. Crescent
Communications ordered equipment from us, which we sold to Comdisco, Inc.
Comdisco paid us the full $12 million for that equipment and then leased it to
Crescent under a separate contract between Comdisco and Crescent. Our agreement
with Crescent contemplated Crescent ordering an additional $16 million in
equipment and $9 million in services from us. However, Crescent Communications
has not been able to implement its business plan as scheduled and has not
purchased the additional equipment or generated the sales which would enable it
to purchase the $9 million in services from us. Our future sales to Crescent
will depend upon Crescent's ability to:

- implement its business plan;

- get its system operational;

- retain the 30 million minutes of communications traffic it had letters
of intent for at the time of our agreement in September 1998;

- obtain additional commitments for minutes of communications traffic;
and

- translate those minutes and commitments into successful operations and
cash flows.

We will not deliver any additional equipment to Crescent unless it first
obtains third party financing. We cannot control the development of Crescent or
its business and we may not receive any additional revenue from sales of our
equipment to Crescent through Comdisco or another third party, or from sales of
our services directly to Crescent. Crescent's inability to purchase additional
equipment could result in the loss of revenue we had planned on generating,
decreasing our anticipated cash flow and increasing our cash requirements.

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Our operating results vary significantly, which could adversely affect our
ability to manage our expenses in any given period and could also affect our
stock price.

Our quarterly operating results have fluctuated and may continue to
fluctuate significantly in the future due to a variety of factors, many of which
are outside of our control. As a result, we believe that period-to-period
comparisons of our operating results may not be meaningful, especially as
indicators of our future performance. In addition, it is difficult for us to
predict the occurrence of factors which may lead to such fluctuation. Because we
base our expense levels in part on expectations regarding future sales, we may
be unable to adjust spending in a timely manner to compensate for any unexpected
shortfall in sales. A significant shortfall in demand relative to our
expectations, or a material delay in customer orders, could have a material
adverse effect on our ability to meet our financial commitments. In recent
periods, slower than expected closings of lease transactions and financings have
adversely impacted our results and strained our liquidity. Some of the factors
which cause fluctuation include:

- fluctuations in the volume of calls, particularly in regions with
relatively high per-minute rates;

- the addition or loss of a major customer;

- the loss of economically beneficial routing options for our traffic;

- pricing pressure resulting from increased competition;

- market acceptance of new or advanced versions of our products;

- technical difficulties or failures with portions of our network;

- fluctuations in the rates charged by carriers for our traffic and in
other costs associated with obtaining rights to switching and other
transmission facilities; and

- changes in the staffing levels of our sales, marketing and technical
support and administrative personnel.

Changes in or difficulties experienced by our customers in fulfilling their
business plans, economic conditions and related financing have caused some of
our customers to not meet previously announced estimated purchase requirements.
In addition, some of our contracts contemplate the purchase of additional
equipment or the provision by us of maintenance and other services, which are
dependent on our customers installing their equipment, placing it into service
and otherwise fulfilling their business plans, which may not occur on a timely
basis or at all.

We have sold our non-telecommunications businesses and are no longer
diversified. Any decline in our telecommunications business will materially
affect our financial condition.

We have sold our non-telecommunications businesses in order to concentrate
on developing our telecommunications business. We are now focused solely on the
development and sales of our telecommunications products and services. Our
company has become smaller and less diverse than in the past, with fewer fixed

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assets and a smaller revenue base. A decrease in the sales of our
telecommunications products and services will no longer be offset by revenues
from our businesses in other industries, and will therefore directly and
adversely affect our revenues and results of operations.

We plan to expand our business by acquiring complementary businesses and any
difficulties we encounter in acquiring such businesses or integrating those
businesses into our company may adversely affect our operations and our ability
to compete in the telecommunications industry.

Our growth strategy is to expand through the acquisition of other
businesses which are complementary to our own. Since April 1998, we acquired two
such businesses, American Gateway Telecommunications ("American Gateway") and
INET Interactive Network System, Inc. (although we divested ourselves of
American Gateway in October 1999). Our management must devote a significant
amount of time and attention to integrating newly acquired businesses into our
company, which may divert their attention from our day-to-day operations. We
must also allocate some of our financial resources to the integration process
which, along with the diversion of management's attention, may adversely affect
our business, results of operations and financial condition. When we acquire a
company, we sometimes face difficulties in assimilating that company's personnel
and operations. In addition, key personnel of the acquired company might decide
not to work for us. If we are unable to successfully integrate our new
businesses into our existing operations, the new businesses may not operate at a
profitable level and we may not be able to recoup the cost of acquiring the new
businesses.

Our common stock price has not fully recovered from its December decline
and we may encounter difficulties in acquiring other businesses using our common
stock as a form of payment. We also invest financial and management resources
into potential acquisitions of businesses that we do not ultimately acquire. We
terminated our pending acquisition of Apollo Telecom, Inc. due to its inability
to satisfy all of the closing conditions. In addition, our pending acquisition
of additional interests in Systeam, S.p.A. was postponed indefinitely due to our
inability to timely raise the needed capital. We ultimately sold our interest in
Systeam in February 2000. If we are unable to acquire other businesses that are
complementary to our own and expand our range of products and services, this may
adversely affect our growth strategy and our ability to compete in the
telecommunications industry.

We have recently entered the application services market and any difficulties we
have in establishing our business in that area may adversely affect our
operations.

As part of our strategy, we have recently entered the application services
market, in which we have only limited experience and which involves all of the
risks commonly associated with the establishment of new lines of business. The
likelihood of our success must be considered in light of the problems, expenses,
difficulties, complications and delays frequently encountered in connection with
the establishment of new lines of business. Any difficulties we encounter may
divert our financial resources and the attention of our management and adversely
affect our business and operations.

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If we are unable to successfully introduce our products, services and
technologies into the telecommunications marketplace, our business and financial
condition may be materially adversely affected.

While our products are targeted primarily to smaller carriers of telephone
and Internet communications who cannot afford larger switches and gateways, this
is an emerging market and there has been no historical demand for our products.
We are working to create a larger market for our products but if there is no
demand for them, our sales and revenues may decrease, which could have a
material adverse effect on our results of operations and financial condition. A
variety of factors, many of which are beyond our control, could affect the
demand for our products and technology. These factors include:

- the cost of the various components that we must purchase in order to
market our DSS Switch and other products, which is reflected in our
prices;

- the compatibility of our customers' systems and infrastructure with
our products and services;

- consumer demand for advanced telecommunications services; and

- the emergence of alternative approaches to the delivery of
telecommunications services.

If our products become obsolete or incompatible with emerging technologies, we
may be unable to sell our products which could have a material adverse effect on
our revenue and results of operations.

Our potential customers, including other telecommunications companies, may
choose to buy other emerging products that use different technologies but serve
the same purposes as our products. Our products may also be technologically
incompatible with the systems of our potential customers. The telecommunications
industry and its technology are evolving rapidly, and new products and services
are constantly being introduced into the marketplace which may render our
products' technology obsolete. Products which involve the use of the Internet
for international voice and data communications are among the new products which
compete with ours, including our Carrier IP Gateway. If we are unable to conform
our operations, products and services to new technological developments and
compete with other sellers of telecommunications products, our product sales
could decrease or we may be unable to sell our products. Our inability to sell
our products or a decrease in our sales could result in a decrease in revenues
and results of operations.

The telecommunications industry is highly competitive and our inability to
compete successfully could decrease the demand for our products and adversely
affect our sales and revenues.

We sell our products, including our DSS Switch and our Carrier IP Gateway,
in competition with several other sellers of similar telecommunications
equipment. Some of our competitors include Nortel, Cisco Systems, Lucent
Technologies, Newbridge Networks and Digital Switch Corporation. Many of our
competitors have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. In addition, it is possible that large telecommunications
companies with significantly greater financial resources than ours, including

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AT&T Corporation, MCI Worldcom Communications and Sprint, could begin selling
products similar to our DSS Switch and Carrier IP Gateway. Such potential
competitors have the financial and other resources necessary to engage in
prolonged price competition to gain market share, which could force us to lower
our prices and reduce the profitability of sales. If we are unable to
successfully compete in the marketplace, our sales and revenues could decrease
and this could have a material adverse effect on our business, results of
operations and financial condition.

The international telecommunications industry is also intensely competitive
and subject to rapid change. INET's competitors in the retail and wholesale
international long distance market include:

- multinational corporations;

- service providers in the U.S. and overseas that have emerged as a
result of deregulation;

- switchless and switch-based resellers of international long distance
services;

- joint ventures and alliances among such companies;

- dominant telecommunications operators that previously held various
monopolies established by law over the telecommunications traffic in
their countries; and

- U.S. based and foreign long-distance providers that have the authority
from the Federal Communications Commission to resell and terminate
international telecommunications services.

In addition, consolidation in the telecommunications industry could not
only create even larger competitors with greater financial and other resources,
but could also affect us by reducing the number of potential customers for our
products and services. If we are unable to sell our products and services to the
remaining potential customers, this could further hamper our ability to attain a
profitable level of sales.

International competition also may increase as a result of the competitive
opportunities created by a new Basic Telecommunications Agreement concluded by
members of the World Trade Organization in April 1997. Under the terms of such
agreement, starting February 1998, the United States and more than 65 countries
have committed to open their telecommun-ications markets to competition and
foreign ownership and to adopt measures to protect against anti-competitive
behavior.

The telecommunications industry is highly regulated and future regulations may
have an adverse effect on our business.

The federal government, through the Federal Communications Commission and
other federal agencies, regulates and administers the telecommunications
industry by passing laws and regulations that control prices, competition and
the sale of long distance minutes. Foreign governments perform similar functions
overseas. The U.S. Congress, the FCC or foreign governments may adopt new laws,
regulations and policies that may directly or indirectly affect us in the
future. The adoption of new legislation or regulations which impact

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telecommunications businesses could have a material adverse effect on our
business. We are unable to predict the impact of regulations which may be
adopted in the future.

We depend primarily on sales of one product for most of our revenue and our
inability to achieve and maintain market acceptance could adversely impact our
ability to compete in the telecommunications industry.

In fiscal years 1998 and 1999, most of our revenue came from the sale of
our principal product, our DSS Switch. Any reduction in such sales could have a
material adverse effect on our business, results of operations and financial
condition. To maintain the sales of our DSS Switch, we must continue to enhance
its technology to keep pace with industry standards and developments. We must
also maintain its compatibility with our customers' technology, equipment and
software.

Our ability to achieve market acceptance of our DSS Switch depends on our
ability to maintain a low rate of undetected and unresolved errors in new
versions of its complex software. In the past, we have discovered software
errors in DSS switch installations, and although we test our equipment and
software rigorously, we may find similar errors in the future in new versions of
the DSS Switch and our Internet Protocol products. These errors could delay our
installation of DSS Switches and decrease market acceptance of our products,
which could have a material adverse effect on our ability to compete in the
telecommunications industry and our overall business, results of operations and
financial condition.

Our inability to develop and market new products could adversely affect our
sales and revenue.

In order to reduce the effect a decline in sales of our DSS Switch could
have on our revenues, we must also cost-effectively develop and introduce new
products on a timely basis, such as the Carrier IP Gateway. We cannot guarantee
that we will be able to successfully develop, introduce and market new products,
or that our new products and product enhancements will achieve market
acceptance. We have experienced delays in completing and developing new products
and features, and we cannot assure you that similar delays will not occur in the
future. In addition, future technological advances in the telecommunications
industry could decrease acceptance of our products. If we are unable to develop
new products and successfully market them, we may not be able to attain
profitability if sales of our DSS switch decline and this could have a material
adverse effect on our business, results of operations and financial condition.

We depend on relationships with a limited number of suppliers and any difficulty
in obtaining products or components from them could materially and adversely
affect our relationships with our customers.

Our business could be adversely affected if we do not maintain our existing
relationships with key suppliers of the necessary components of our products.
Certain components used in our products are available from only a limited number
of suppliers, and failure by a supplier to deliver quality products on a timely
basis could have a material adverse effect on our ability to sell our own
products. In addition, due to market demand certain suppliers, from time to
time, allocate supplies among customers. We compete with many larger
telecommunications companies that may have a higher priority in receiving
components from this limited supply. If we are unable to obtain components for

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our products and are unable to provide them to our customers on time or at all,
our relationships with them may be adversely affected and demand for our
products could decline, causing a material adverse effect on our sales and
revenues. To protect ourselves against such occurrences we have established
relationships with alternative suppliers.

If the protection of our intellectual property rights is inadequate or if third
parties subject us to claims of infringement, our ability to manufacture, market
and sell our products may be adversely affected.

We rely on a combination of trade secrets, confidentiality and non-compete
agreements to protect our products and their specific features. Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy aspects of our products or to obtain and use information that we regard as
proprietary. Competitors may also independently develop technologies that are
substantially equivalent or superior to ours. Effective trademark, service mark,
copyright and trade secret protection may not be available in every country in
which we market our products and services. Our failure to protect our
intellectual property rights and proprietary information could enable others to
build products comparable or superior to ours which they could sell to our
potential and existing customers. If this occurs, our customer base could be
reduced and our sales and revenues could be adversely affected.

We cannot assure you that the steps taken by us will prevent
misappropriation of our technology or that the agreements entered into for that
purpose will be enforceable. Litigation may be necessary to enforce or protect
our intellectual property rights or to defend against claims of infringement.
Litigation for these purposes could be costly and could divert the attention of
our management from day-to-day operations, which could have a material adverse
effect on our business, results of operations and financial condition. A
negative outcome in intellectual property litigation could cost us our
proprietary rights, subject us to significant liabilities, require us to seek
licenses from third parties (which they may not be willing to grant) or prevent
us from manufacturing or selling our products, all of which could have a
material adverse affect on our ability to compete in the telecommunications
industry and our overall business, results of operations and financial
condition. We are currently involved in litigation to defend a claim that our
use of the name "Coyote" infringes on the rights of the plaintiff. We cannot
assure you that we will prevail in this litigation.

We have historically made equipment sales to a limited number of customers and
the loss of one or more major customers could materially and adversely affect
our sales revenues.

We made shipments of our products to 16 customers in fiscal year 1999,
seven of which accounted for approximately 93% of our total equipment revenues.
Customers accounting for 10% or more of total equipment revenues were Crescent
Communications, Inc. (30%), Dakota Carrier Services (19%), Wireless USA, Inc.
(17%) and DTA/I:COMM Networks (11%). In fiscal year 1998, we made shipments to
12 customers. One customer, INET Interactive Network System, Inc., accounted for
approximately 40% of our total revenues and Apollo Telecom, Inc. accounted for
20% of total revenues. In fiscal year 1997, 94% of our revenues came from sales
to Concentric Network. We expect that our dependence on sales to a limited
number of customers will continue, and the loss of one or more of our major
customers could substantially decrease our sales revenues and adversely affect
our results of operations and financial condition.

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The loss of the services of our key personnel could have a material adverse
effect on our growth, business and financial condition.

Our future success depends, in part, on the continued services of our
senior management, particularly James R. McCullough, our Chief Executive
Officer. We have entered into an employment agreement with Mr. McCullough, which
terminates on January 14, 2003. The loss of the services of Mr. McCullough could
adversely affect the expansion of our operations into the applications services
market, which could have a material adverse effect on our growth, business and
financial condition.

Our inability to effectively manage our growth and retain skilled personnel
could delay our development of new products and the enhancement of existing
products.

We have experienced growth in the number of our employees and the scope of
our operations. To manage potential future growth of our operations, we must
improve our operational, financial and management information systems. We will
also be required to expand, train, motivate and manage our employee base on a
timely basis. We face intense competition in the market for qualified technical,
sales, marketing, network operations and management personnel and our success
will depend on our ability to attract and retain them. We have in the past
experienced delays in filling sales and engineering positions. We may not be
able to achieve or manage growth, and our inability to do so could delay our
development of new products and our enhancement of existing products, which
could negatively impact our ability to compete in the telecommunications
industry or otherwise have a material adverse effect on our business, results of
operations and financial condition.

We may encounter difficulties in expanding into international markets, which
could affect our overall growth.

We plan to increase our expansion into international markets, where we will
face risks inherent in international operations. Factors that may affect our
international operations include:

- our ability to obtain necessary permits and operating licenses in
foreign countries;

- unexpected regulatory changes;

- fluctuations in international currency exchange rates;

- changes in political and economic conditions; and

- our ability to staff and manage international operations.

If we encounter such difficulties in our international operations,
management's attention from other day-to-day operations could be diverted and
this could affect our results of operations. Managing operations in multiple
countries could also strain our ability to manage our overall growth and our
inability to do so could delay our development of new products and our
enhancement of existing products which could negatively impact our ability to
compete in the telecommunications industry or otherwise affect our business,
results of operations and financial condition.

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We depend on third parties to finance our equipment customers and our inability
to arrange such financing in the future may materially and adversely affect our
business.

Many of our customers are entrepreneurial telecommunications companies with
limited financial resources. They are often unable to pay for our equipment and
services without obtaining additional financing. Although we have arranged
financing for some of our customers in the past, through third parties, we
cannot assure you that we will be able to arrange similar financing in the
future. To arrange lease financing for our customers through third parties, we
have on occasion issued warrants to purchase our common stock and made other
financial considerations to the third party leasing companies, and we may need
to provide such inducements in the future. If our customers are unable to obtain
financing, they may decrease their purchases of our equipment and services,
which could decrease our sales revenues or otherwise adversely affect our
business, results of operations and financial condition.

Our common stock price has been and may continue to be volatile, which could
result in difficulty using our stock to make acquisitions and raising financing.

The market price of our common stock has been volatile, in part due to the
negative publicity referred to above, and could be subject to further
fluctuations in response to factors such as:

- actual or anticipated fluctuations in our operating results;

- our announcement of potential acquisitions;

- industry consolidation;

- conditions and trends in the international telecommunications market;

- adoption of new accounting standards affecting the telecommunications
industry;

- changes in recommendations and estimates by securities analysts; and

- general market conditions and other factors.

These fluctuations may adversely affect the market price of our common
stock which could affect our ability to use such stock as consideration for
acquisitions and to raise financing.

Options, warrants, convertible securities and other commitments to issue common
stock may dilute the value of the common stock.

As of February 25, 2000, we had outstanding warrants and options to issue
up to 8,459,804 shares of common stock, of which up to 911,500 are subject to
shareholder approval and convertible securities convertible into up to 3,564,562
shares of common stock. If the common stock underlying such options, warrants,
convertible securities and commitments were issued, it could dilute the book
value per share, earnings per share and voting power of our outstanding capital
stock.

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Existing stockholders may be able to exercise significant control over us.

As of February 25, 2000, our officers and directors, as a group,
beneficially owned 11.5% of our outstanding common stock. In addition, according
to filed Schedules 13D and 13G, as of the dates of such filings, Alan J.
Andreini beneficially owned 8.7% and the Kiskiminetas Springs School owned 5.8%
of our common stock. Additionally, Richard L. Haydon beneficially owned 9.0% of
our common stock, JNC Opportunity Fund beneficially owned 4.999% of our common
stock and Ardent Research Partners beneficially owned 3.9% of our common stock.
Such stockholders may have significant influence on us, including influence over
the outcome of any matter submitted to a vote of the stockholders, including the
election of directors and the approval of significant corporate transactions.

If our products, software, computer technology and other systems are not year
2000 compliant, our business will be materially and adversely affected.

The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. In other words,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among others, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities.

We have completed a comprehensive assessment of our principal products
operating systems and our internal systems to identify those that may be
affected by the Year 2000 issue. Based on our testing, we believe that our
customer products and our internal computer systems are Year 2000 compliant.
However, if we are not Year 2000 compliant, it could impair our ability to
process and deliver customer orders, manufacture compliant equipment and perform
other critical business functions, which could have a material adverse effect on
our business, results of operations and financial condition. We could also be
subjected to claims against us for the non-compliance of our products. The costs
of defending and settling such claims could have a material adverse affect on
our financial condition. Since January 1, 2000, we have not experienced any
adverse effects related to the Year 2000 issue.

Because we believe that we are currently Year 2000 compliant, we do not
have a formal contingency plan in the event that an area of our operation does
not become Year 2000 compliant. We will adopt a formal plan if we believe that a
part of our internal systems or those of a critical third party will be
non-compliant. If we are wrong, our failure to prepare a contingency plan will
likely exacerbate the problem. Our Year 2000 due diligence and compliance
testing is ongoing and we will test any new, adjunct or upgraded products that
we integrate into our products or our internal computer systems. To date, our
costs associated with Year 2000 testing have not been material. Factors beyond
our control that could materially increase the cost or delay the date of our
Year 2000 compliance include the compliance of the systems of third parties.

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We have included forward-looking statements in this document based on
expectations involving risks that could cause actual results to differ
materially from the forward-looking statements.

This prospectus contains certain forward-looking statements based on
current expectations that involve risks and uncertainties. These forward-looking
statements include, without limitation, statements regarding new products that
we may introduce in the future, statements about our business strategy and
plans, statements regarding the adequacy of our working capital and other
financial resources, and in general, statements that are not historical in
nature. When we use words such as "believes," "expects," "anticipates" or
similar expressions, we are making forward-looking statements. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of many factors, including the risk factors set forth
above and factors that are beyond our control. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our business operations. If any of these risks actually occur, our
business, operating results and our financial condition could be materially
adversely affected. In such case, the price of our common stock could decline.
The cautionary statements made in this prospectus should be read as being
applicable to all forward-looking statements wherever they appear in this
prospectus.

USE OF PROCEEDS

We will not receive any proceeds from the sale of the shares by the selling
stockholders. We will, however, receive the exercise price from the exercise of
any warrants held by the selling stockholders. We cannot predict the amount of
such proceeds or the time when it would receive any such proceeds. Accordingly,
we will use all funds received upon exercise of warrants for general working
capital purposes.

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SELLING STOCKHOLDERS

The 6,197,579 shares of common stock offered for sale by the stockholder
listed below pursuant to this prospectus include: (a) outstanding shares owned
by the selling stockholders; (b) shares which may be issued upon exercise of
outstanding warrants; and (c) shares issued in connection with an acquisition,
all as set forth in the table below:

[Enlarge/Download Table]

Shares of Common Shares to be Owned
Stock Owned Shares After the Offering*
Prior to Offered for ------------------
Offering Sale Hereby Number Percent
---------------- ----------- ------ -------

Ardent Research 668,586(26) 236,250(1) 432,336 1.9%
Chesed Congregation 172,500 78,750(1) 93,750 +
Emerald International 73,500 36,750(1) 36,750 +
Europa International Inc. 52,500 52,500(1) 0 +
Michael Fantetti 207,600 118,125(1) 89,475 +
James J. Fiedler (2) 1,020,288 183,750(1)(27) 836,538 3.5%
John Fife 159,850 157,500(1) 2,350 +
Maxwell H. Gluck Foundation 157,500 78,750(1) 78,750 +
Stuart Isen 105,000 105,000(1) 0 +
Ruth Ellen Keiser 50,050 13,125(1) 36,925 +
Aurel E. Mircea 63,000 31,500(24) 31,500 +
Montpellier International Ltd. 179,750 88,250(1) 91,500 +
Steve Nassau 25,200 14,500(1) 10,700 +
Theodore Netzky 52,500 52,500(1) 0 +
Michelle Portner 1,313 1,313(1) 0 +
Stephen Portner (3) 47,250 10,500(1) 36,750 +
Praxis II Partners Inv. II 91,500(28) 52,500(1) 39,000 +
George Salameh 10,700 3,350(1) 7,350 +
William J. Smith 68,250 34,125(1) 34,125 +
South Ferry #2 94,500 52,500(1) 42,000 +
Anthony D. Squeglia (4) 52,150 15,750(1) 36,400 +
Fred Stein 198,900 78,750(1) 120,150 +
Strategic Restructuring Fund 52,500 26,250(1) 26,250 +
Strategic Restructuring Partnership 683,150(29) 332,500(5) 350,650 1.5%
U.S. Equity Portfolio 105,000 52,500(1) 52,500 +
Valor Capital Management 52,500 52,500(1) 0 +
Ronald N. Weiser Trust 105,000 105,000(1) 0 +
Comdisco, Inc. 192,990 192,990(6) 0 +
First Bermuda Securities Ltd. 89,931 89,931(7) 0 +
Donald L. Hawley 105,000 105,000(8) 0 +
Systeam, S.p.A. 52,500 52,500(9) 0 +
JNC Opportunity Fund Ltd. 873,850 983,250(10) 0 +
Gary Shemano 34,125 34,125(11) 0 +
Mitchell & Kristen Levine TTEE 17,063 17,063(12) 0 +
William & Mary Corbett 17,063 17,063(12) 0 +
Jesup & Lamont Securities Corporation 70,000 70,000(13) 0 +
Charles Chandler 191,800 175,000(14) 16,800 +

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Sydney B. Lilly 221,257 50,000(15) 162,196 +
Superior Street Capital Advisors, L.L.C. 340,200 340,200(16) 0 +
RFC Capital Corporation 20,821 20,821(17) 0 +
Balmore Funds S.A. 338,167 338,167(18) 0 +
Austost Anstalt Schaan 166,666 166,666(18) 0 +
William J. Harlow Trust DTD 2/27/90 296,800 149,800(18) 147,000 +
Foxhound Fund Limited Partnership 100,000 100,000(18) 0 +
Robert L. Swisher, Jr. 200,000(30) 100,000(18) 100,000 +
Bedford Oak Partners, L.P. 106,000(31) 100,000(18) 6,000 +
Summer Hill Partners, L.P. 152,000 100,000(18) 52,000 +
Howard Milstein 66,666 66,666(18) 0 +
Craddock Asset Management 50,000 50,000(18) 0 +
Triple Equity Investments, Ltd. 48,335 48,335(18) 0 +
Jeffrey Thorp 43,017 43,017(18) 0 +
Michael G. Jesselson 90,000(23) 45,000(18) 0 +
Benjamin J. Jesselson Trust 45,000 45,000(18) 0 +
DTD 8/21/74
Jonathan Brooks 106,174(32) 43,016(18) 63,158 +
Penn Footwear 50,000 50,000(18) 0 +
George Karfunkel 30,000 30,000(18) 0 +
Joseph E. Sheehan 28,333(25) 25,000(18) 0 +
Warren H. Haber 25,000 25,000(18) 0 +
Marcuard Cook & CIE, S.A. 25,000 25,000(18) 0 +
Delta Enhanced Equity Fund, L.P. 25,000 25,000(18) 0 +
Erinch Ozada IRA 16,667 16,667(18) 0 +
AGR Halifax Fund, Ltd. 16,666 16,666(18) 0 +
Amy Newmark 15,000 15,000(18) 0 +
Mirala Investments Ltd. 13,000(33) 10,000(18) 3,000 +
Steven M. Oliveira 10,000 10,000(18) 0 +
David Schwartz 10,000 10,000(18) 0 +
Stephanie Hofman 8,000 8,000(18) 0 +
Lori Sherman 19,175 5,000(18) 14,175 +
Lucille Deter 4,500 4,000(18) 500 +
Ray Rivers 4,000 4,000(18) 0 +
Joel H. Baer 3,050 2,000(18) 1,050 +
Alan Swerdloff I.R.A. 2,800 2,800(19) 0 +
Preston Tsao 7,200 7,200(19) 0 +
Derek Caldwell 177,704 67,704(20) 110,000 +
D. Dwight Miller 25,000 5,000(19) 20,000 +
Marc Seelenfreund 25,000 25,000(19) 0 +
Sunrise Foundation Trust 326,289 76,289(21) 250,000 1.1%
Nathan Low Roth I.R.A. 86,700 86,700(19) 0 +
Paul Scharfer 5,000 5,000(19) 0 +
Richard Stone 23,322 23,322(22) 0 +
John Gallagher 25,000 5,000(19) 20,000 +
Dawn Faktor 500 500(21) 0 +
J. Sheehan & Co. 3,333 3,333(21) 0 +

* Assumes resale of all shares offered hereby. For purposes of determining
the percentage of ownership after the offering, it has been assumed that
all shares offered are issued.

+ Percentage of ownership is less than 1%.

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(1) Represents shares of common stock which will be received by the selling
stockholder upon exercise of outstanding warrants issued to the selling
stockholder on or about June 30, 1997. The warrants are exercisable at
$2.86 per share.

(2) Mr. Fiedler was our Chairman of the Board until March 2000 and Chief
Executive Officer from November 1996 until January 2000 and Chairman and
Chief Executive Officer of Coyote Technologies, LLC from September 1995
until January 2000.

(3) Mr. Portner was one of our directors from September 1997 until February
2000.

(4) Mr. Squeglia has been our Director of Corporate Communications since June
1996.

(5) Represents 262,500 shares of common stock which will be received by the
selling stockholder upon exercise of outstanding warrants issued to the
selling stockholder on or about June 30, 1997. The warrants are exercisable
at $2.86 per share. In addition, represents 70,000 shares of common stock
received in connection with our private placement completed in May 1999.

(6) Represents shares of common stock which will be received by the selling
stockholder upon exercise of outstanding warrants issued to the selling
stockholder on March 26, 1998; June 26, 1998 and September 30, 1998. The
warrants issued on March 26, 1998 entitle the selling stockholder to
purchase 40,740 shares at an exercise price of $3.81 per share; the
warrants issued on June 26, 1998 entitle the selling stockholder to
purchase 78,750 shares at an exercise price of $8.33 per share and the
warrants issued on September 30, 1998 entitle the selling stockholder to
purchase 73,500 shares at an exercise price of $8.10 per share. We have
entered into a general sale agreement with Comdisco, Inc., a third-party
leasing company, who in turn leases equipment to our end-user customers. On
January 12, 1999, Comdisco filed with the Commission a Schedule 13G
disclosing beneficial ownership of 708,400 shares of common stock including
shares purchased on the open market as well as the shares underlying the
above warrants. On August 23, 1999, Comdisco filed a Schedule 13G
disclosing beneficial ownership of 192,990 shares consisting entirely of
unexercised warrants to purchase shares of our common stock.

(7) Represents shares of common stock which will be received by the selling
stockholder upon exercise of outstanding warrants issued to the selling
stockholder on July 17, 1997 and December 22, 1997. The warrants issued on
July 17, 1997 entitle the selling stockholder to purchase 38,889 shares at
an exercise price of $6.43 per share. The warrants issued on December 22,
1997 entitle the selling stockholder to purchase 51,042 shares at an
exercise price of $6.86 per share. First Bermuda Securities Ltd. provided
services as an agent in connection with our issuance of convertible notes
in July and December 1997.

(8) Represents shares of common stock which will be received by the selling
stockholder upon exercise of an outstanding warrant issued to the selling
stockholder on May 29, 1998. The warrant entitles the selling stockholder
to purchase 105,000 shares at an exercise price of $2.86 per share. Mr.
Donald L. Hawley provided consulting services to us in connection with our
sale of certain of our subsidiaries.

(9) Represents shares of common stock which will be received by the selling
stockholder upon exercise of an outstanding warrant issued to the selling
stockholder on September 4, 1998. The warrant entitles the selling

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stockholder to purchase 52,500 shares at an exercise price of $3.99 per
share. In May 1998, Systeam, S.p.A. invested $300,000 in Coyote Network
Systems, Inc. and we issued 71,650 shares of common stock to Systeam,
S.p.A. Mr. James J. Fiedler, our former Chairman and Chief Executive
Officer, was an advisor to the board of directors of Systeam, S.p.A.
Subsequently, we invested $300,000 in equity and $450,000 in a convertible
note that Systeam, S.p.A. issued to us. We ultimately sold our interest in
Systeam, S.p.A. in February 2000.

(10) Represents 406,667 shares of common stock issuable to JNC Opportunity Fund
Ltd. ("JNC") upon conversion of Series A Convertible Preferred Stock (the
"Series A Preferred Stock") and 15,333 shares of common stock issued to JNC
upon conversion of Series A Preferred Stock between December 1999 and
January 2000 (including dividends payable thereon). Also represents 561,250
shares of common stock issuable to JNC upon the exercise of certain
warrants. If the Preferred Stock was converted in full, JNC would receive
406,667 shares of common stock, however, the Certificate of Designation
governing the Preferred Stock prohibits JNC from converting shares of the
Preferred Stock (or receiving shares of common stock as payment of
dividends thereunder) to the extent that such conversion would result in
JNC beneficially owning in excess of 4.999% of the outstanding shares of
common stock following such conversion. Such restriction may be waived by
JNC upon not less than 75 days' notice to us. Without giving effect to the
above-mentioned conversion limitation, if the Preferred Stock was converted
in full and the warrants were exercised in full, JNC would, on the date
hereof, own 5.6% of the outstanding common stock.

The 4.999% conversion limitation would not prevent the selling stockholder
from converting and selling some of its holdings and then converting and
selling additional holdings. By doing so, such stockholder could, over
time, sell more than 4.999% of the outstanding common stock while never
holding more than 4.999% at any one time.

Encore Capital Management LLC ("Encore") is the investment advisor to JNC
and, as such, has the authority to vote and dispose of the shares being
offered by JNC hereunder. James Q. Chau and Neil T. Chau are the
controlling persons of Encore.

(11) Represents shares of common stock which will be received by the selling
stockholder upon exercise of an outstanding warrant issued to the selling
stockholder on August 31, 1998. The warrant entitles the selling
stockholder to purchase 34,125 shares of our common stock at an exercise
price of $8.03 per share. The selling stockholder received the warrant
described above in consideration of financial consulting services rendered
to us in connection with our offering of the Preferred Stock to JNC.

(12) Represents shares of common stock which will be received by the selling
stockholder upon exercise of an outstanding warrant issued to the selling
stockholder on August 31, 1998. The warrant entitles the selling
stockholder to purchase 17,063 shares of common stock at an exercise price
of $8.03 per share. The selling stockholder received the warrant in
consideration of financial consulting services rendered to us in connection
with our offering of the Preferred Stock to JNC.

(13) Represents shares of common stock which will be received by the selling
stockholder upon exercise of an outstanding warrant issued to the selling
stockholder on August 31, 1998. The warrant entitles the selling

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stockholder to purchase 70,000 shares of our common stock at an exercise
price of $8.03 per share. The selling stockholder received the warrant in
consideration of financial consulting services rendered to us in connection
with our offering of the Preferred Stock to JNC.

(14) Represents shares of common stock issuable to Mr. Chandler upon conversion
of 350 Class A Units of Coyote Technologies, LLC, one of our subsidiaries,
which were issued to Mr. Chandler on October 2, 1996. Each Class A Unit is
convertible into 500 shares of common stock.

(15) Represents shares of common stock issuable to Mr. Lilly upon conversion of
100 Class A Units of Coyote Technologies, LLC, one of our subsidiaries,
which were issued to Mr. Lilly on October 2, 1996. Each Class A Unit is
convertible into 500 shares of common stock. Mr. Lilly was a director of
ours from 1988 to September 1998 and was our Executive Vice President from
April 1995 to November 1996.

(16) Represents shares of common stock which will be received by the selling
stockholder upon exercise of outstanding warrants issued to the selling
stockholder on May 13, 1997 and November 13, 1997. The warrants entitle the
selling stockholder to purchase 340,200 shares at an exercise price of
$2.14 per share. The selling stockholder provided consulting services to us
in connection with investment advisory services.

(17) Represents shares of common stock received in connection with our
acquisition of INET Interactive Network System, Inc.

(18) Represents shares of common stock received in connection with our private
placement completed in May 1999.

(19) Represents shares of common stock underlying warrants received as a
designee of the placement agent in our 1999 private placement.

(20) Represents 40,204 shares of common stock received as a commission and
27,500 shares of common stock underlying warrants received as a designee of
the placement agent in our 1999 private placement. Such warrants are
exercisable at $6.00 per share.

(21) Represents shares of common stock received as a commission as a designee of
the placement agent in our 1999 private placement.

(22) Represents 10,822 shares of common stock received as a commission and
12,500 shares underlying warrants received as a designee of the placement
agent in our 1999 private placement. Such warrants are exercisable at $6.00
per share.

(23) Includes 45,000 shares of common stock owned by Benjamin J. Jesselson
Trust DTD 8/21/74, of which the selling stockholder is a trustee and which
are also offered for sale pursuant to this prospectus.

(24) Represents shares of common stock received by the selling stockholder upon
exercise of warrants issued to the selling stockholder on or about June 30,
1997. Such warrants were exercisable at $2.86 per share.

(25) Includes 3,333 shares of common stock owned by J. Sheehan & Co., of which
the selling stockholder is an owner and which are also offered for sale
pursuant to this prospectus.

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(26) Includes 6,000 shares of common stock issuable upon exercise of certain
warrants issued to the selling stockholder on November 1, 1999 in
connection with a loan made to us in the amount of $100,000. Such warrants
expire on November 1, 2002 and entitle the selling stockholder to purchase
6,000 shares of common stock at an exercise price of $4.50 per share. In
addition, includes 84,211 shares of common stock issuable at $4.75 per
share upon the conversion of 84,211 shares of our Series B Preferred Stock
which the selling stockholder purchased in January 2000.

(27) Includes 75,075 shares of common stock issued to the selling stockholder on
September 8, 1999 upon the exercise of certain warrants at an exercise
price of $2.86 per share.

(28) Includes 9,000 shares of common stock issuable upon exercise of certain
warrants issued to the selling stockholder on November 1, 1999 in
connection with a loan made to us in the amount of $150,000. Such warrants
expire on November 1, 2002 and entitle the selling stockholder to purchase
9,000 shares of common stock at an exercise price of $4.50 per share.

(29) Includes 27,000 shares of common stock issuable upon exercise of certain
warrants issued to the selling stockholder on November 1, 1999 in
connection with a loan made to us in the amount of $450,000. Such warrants
expire on November 1, 2002 and entitle the selling stockholder to purchase
27,000 shares of common stock at an exercise price of $4.50 per share.

(30) Includes 100,000 shares of common stock issuable at $4.75 per share upon
the conversion of 100,000 shares of our Series B Preferred Stock which the
selling stockholder purchased in February 2000.

(31) Includes 6,000 shares of common stock issuable upon exercise of certain
warrants issued to the selling stockholder on November 1, 1999 in
connection with a loan made to us in the amount of $100,000. Such warrants
expire on November 1, 2002 and entitle the selling stockholder to purchase
6,000 shares of common stock at an exercise price of $4.50 per share.

(32) Includes 63,158 shares of common stock issuable at $4.75 per share upon the
conversion of 63,158 shares of our Series B Preferred Stock which the
selling stockholder purchased in February 2000.

(33) Includes 3,000 shares of common stock issuable upon exercise of certain
warrants issued to the selling stockholder on November 1, 1999 in
connection with a loan made to us in the amount of $50,000. Such warrants
expire on November 1, 2002 and entitle the selling stockholder to purchase
3,000 shares of common stock at an exercise price of $4.50 per share.

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We are required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of
counsel to the selling stockholders. We have agreed to indemnify
the selling stockholders against certain liabilities in connection
with this prospectus.

EXPERTS

The consolidated financial statements and schedules incorporated by
reference in this prospectus and elsewhere in the registration statement for the
years ended March 31, 1999 and 1998 have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.

The consolidated financial statements for the year ended March 31, 1997
incorporated in this prospectus by reference to our Annual Report on Form 10-K
for the year ended March 31, 1999, have been so incorporated in reliance on the
report (which contains an explanatory paragraph relating to certain
uncertainties as described in Notes 7 and 15 to the financial statements) of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

LEGAL MATTERS

The legality of the shares of common stock offered hereby will be passed
upon for us by Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue,
New York, New York 10176.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

We file reports, proxy statements and other information with the
Commission. You may read and copy any reports, proxy statements or other
information we file at the Commission's public reference room at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 or at its public reference rooms
in New York, New York, or Chicago, Illinois. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. You can
also obtain copies of our Commission filings by writing to the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, many of our Commission filings are available at the Commission's site
on the World Wide Web at "http://www.sec.gov".

We have filed a registration statement on Form S-3 to register with the
Commission the common stock offered for sale by the selling stockholders. This
prospectus is part of that registration statement. As allowed by Commission
rules, this prospectus does not contain all the information you can find in the
registration statement or the exhibits to the registration statement, which are
incorporated herein by reference. Statements contained herein concerning the
provisions of documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.

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The Commission allows us to "incorporate by reference" information in this
prospectus, which means we can disclose important information to you by
referring you to another document filed separately with the Commission. The
information that we incorporate by reference is deemed to be part of this
prospectus, except for any information superseded by information in this
prospectus. These documents contain important information about us and our
finances. This prospectus incorporates by reference our:

1. Annual Report on Form 10-K for the fiscal year ended March 31, 1999;
2. Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;
3. Quarterly Report on Form 10-Q for the quarter ended September 30,
1999;
4. Quarterly Report on Form 10-Q for the quarter ended December 31, 1999;
5. Current Report on Form 8-K dated April 20, 1999;
6. Current Report on Form 8-K dated May 24, 1999;
7. Current Report on Form 8-K dated May 27, 1999, as amended;
8. Current Report on Form 8-K dated October 27, 1999, as amended;
9. Current Report on Form 8-K dated November 18, 1999;
10. Current Report on Form 8-K dated January 25, 2000; and
11. Current Report on Form 8-K dated January 31, 2000.

We are also incorporating by reference (a) the description of our common
stock which is registered under Section 12 of the Exchange Act, contained in our
registration statement on Form 8-A, dated February 27, 1997, and (b) all
additional documents that we file with the Commission between the date of this
prospectus and the termination of the offering.

We will, without charge, provide you with copies of any of the documents
which are incorporated in this prospectus by reference (other than exhibits to
such documents unless we have specifically incorporated those exhibits by
reference into this prospectus). To obtain copies, please write Brian A. Robson,
Coyote Network Systems, Inc., 4360 Park Terrace Drive, Westlake Village,
California 91361, or call him at (818) 735-7600.

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----------------------------------- -----------------------------------------

We have not authorized any dealer,
salesperson or other person to give
any information or represent
anything not contained in this
prospectus. You must not rely on
any unauthorized information. This 6,197,579 Shares Common Stock
prospectus does not offer to sell
or buy any shares in any juris-
diction where it is unlawful. This
information in this prospectus is
current as of March __, 2000.

TABLE OF CONTENTS Page COYOTE NETWORK SYSTEMS, INC.

SUMMARY.......................2

RISK FACTORS..................3
PROSPECTUS

USE OF PROCEEDS..............15

SELLING STOCKHOLDERS.........16

EXPERTS......................22

LEGAL MATTERS................22

INCORPORATION OF CERTAIN

INFORMATION BY REFERENCE...22

March __, 2000

----------------------------------- ------------------------------------------

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II. INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The expenses relating to the registration of the shares of common stock
being offered hereby, other than underwriting discounts and commissions, will be
borne by the Company. Such expenses are estimated to be as follows:

Item Amount
---- ------

Securities and Exchange Commission Registration Fee $ 28,500
Nasdaq Listing Fees 17,500
Legal Fees and Expenses 125,000
Accounting Fees and Expenses 45,000
Miscellaneous Expenses 10,000
--------
Total $226,000

Item 15. Indemnification of Directors and Officers

Consistent with section 145 of the Delaware General Corporation Law
("Delaware Law"), Article IX of the Company's By-Laws provides that the Company
shall indemnify any person in connection with legal proceedings threatened or
brought against him by reason of his present or past status as an officer or
director of the Company or present or past status as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise if he is serving in such capacity at the request of the
Company, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person,
provided that the person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company, and with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The Company shall also indemnify any such person in
connection with any action by or in the night of the Company provided the person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company; except in such cases as involve
gross negligence or willful misconduct in the performance of his duties. In
addition, to the extent that any officer or director is successful in the
defense of any such legal proceeding, the Company is required to indemnify him
against expenses, including attorneys' fees, that are actually and reasonably
incurred by him in connection therewith. The By-Laws also contain a
nonexclusivity clause which provides in substance that the indemnification
rights under the By-Laws shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any agreement with the
Company, any By-Law, any vote of stockholders or disinterested directors of the
Company or otherwise.

Consistent with section 102(b) of the Delaware Law, Article IX of the
Company's Restated Certificate of Incorporation provides that a director of the
Company shall not be liable to the Company or its stockholders for damages for
breach of fiduciary duties as a director, subject to certain limitations.
Article IX does not eliminate or limit the liability of a director for (a) any
breach of the director's duty of loyalty to the Company or its stockholders; (b)
any acts or omissions not in good faith or which involved intentional misconduct
or a knowing violation of law; (c) any conduct that is the subject of section
25

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174 of the Delaware Law; or (d) any transaction from which the director derived
an improper personal benefit.

The Company maintains directors' and officers' liability insurance for its
directors and officers.

The general effect of the foregoing provisions is to reduce the
circumstances in which an officer or director may be required to bear the
economic burdens of the foregoing liabilities and expenses.

Item 16. Exhibits

Exhibit
Number Description
------- -----------

4.1 Restated Certificate of Incorporation (incorporated herein by
reference to Exhibit 4.1 of the Company's Registration Statement on
Form S-8, filed September 8, 1998).

4.2 By-Laws of the Company (incorporated herein by reference to Exhibit
3.2 of the Company's Form 10-K for the year ended March 31, 1997).

5.1 Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP.

23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.

23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.

23.3 Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP (included in
Exhibit 5.1).

24 Power of Attorney.*

* Previously filed.

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Item 17. Undertakings

The undersigned Registrant undertakes as follows:

1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(A) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(B) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and

(C) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement; provided, however, that paragraphs l (a)
and (b) will not apply if the information required to be included
in a post effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to section 13
or 15(d) of the Exchange Act and which are incorporated by
reference in this Registration Statement.

2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

4. That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan annual report pursuant to section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof

5. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

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SIGNATURES
----------

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Westlake Village, State of California, on the 16th
day of March 2000.

COYOTE NETWORK SYSTEMS, INC.

By: /s/ James R. McCullough
------------------------
James R. McCullough
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Titles Date
--------- ------ ----

/s/ James R. McCullough Chief Executive Officer and Director March 16, 2000
-----------------------
James R. McCullough

/s/ Daniel W. Latham President, Chief Operating Officer March 16, 2000
-----------------------
Daniel W. Latham and Director

/s/ Brian A. Robson Executive Vice President, March 16, 2000
----------------------- Chief Financial Officer and Secretary
Brian A. Robson

/s/ John M. Eger Director March 16, 2000
-----------------------
John M. Eger

/s/ J. Thomas Markley Director March 16, 2000
-----------------------
J. Thomas Markley

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EXHIBIT INDEX
-------------

Exhibit Page
Number Description Number
------- ----------- ------

5.1 Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP 30

23.1 Consent of Arthur Andersen LLP, Independent Public Accountants 32

23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants 33

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This S-3/A Filing	Date	First	Last	Other Filings

	10/2/96	22
	2/27/97	25		8-A12B, 8-A12G
	3/31/97	24	28	10-K, 4, NT 10-K
	5/13/97	22
	6/30/97	20	22	10-Q, NT 10-K, NT 10-Q
	7/17/97	20		8-K
	11/13/97	22
	12/22/97	20		8-K
	3/26/98	20
	3/31/98	24		10-K, NT 10-K
	5/29/98	20
	6/26/98	20
	8/31/98	21
	9/4/98	20
	9/8/98	28		S-8
	9/30/98	20		10-Q, 8-K, 8-K/A
	11/30/98	2
	1/12/99	20		SC 13G
	3/31/99	24	25	10-K, 10-K/A, 5, NT 10-K, PRE 14A
	4/20/99	25		8-K
	5/24/99	25		8-K
	5/27/99	25		8-K, 8-K/A
	6/30/99	25		10-Q, 10-Q/A
	7/9/99	2	3
	8/23/99	20
	9/8/99	23
	9/30/99	25		10-Q, 10-Q/A, 8-K, 8-K/A
	10/27/99	25
	11/1/99	23
	11/18/99	25		8-K
	12/31/99	6	25	10-Q, 10-Q/A, NT 10-Q
	1/1/00	16
	1/25/00	25		8-K
	1/31/00	25		3/A, 8-K
	2/25/00	15	16
Filed On / Filed As Of	3/16/00	1	30	10-K/A
	3/17/00
	11/1/02	23
	1/14/03	14

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Quentra Networks Inc · S-3/A · On 3/16/00

Filed On 3/16/00 · SEC File 333-68333 · Accession Number 57201-0-13

Pre-Effective Amendment to Registration Statement for Securities Offered Pursuant to a Transaction · Form S-3Filing Table of Contents

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Dates Referenced Herein and Documents Incorporated By Reference

Pre-Effective Amendment to Registration Statement for Securities Offered Pursuant to a Transaction · Form S-3
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