SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                               __________________


                                    FORM 8-K


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

      Date of Report (Date of earliest event reported): September 30, 1998




                          Coyote Network Systems, Inc.
             (Exact name of registrant as specified in its charter)



                                    Delaware
           -----------------------------------------------------------
                 (State or other jurisdiction or incorporation)

          1-5486                                         36-2448698
  ------------------------                      -----------------------------
  (Commission File Number)                      (I.R.S. Employer I.D. Number)


        4360 Park Terrace Drive
      Westlake Village, California                          91361
  ---------------------------------------                 ----------
  (Address of Principal Executive Offices)                (Zip Code)

                                  818-735-7600
              ---------------------------------------------------
              (Registrant's telephone number; including area code)



<PAGE>
Item 2.  Acquisition or Disposition of Assets.

     On  September  30, 1998,  Coyote  Network  Systems,  Inc.  (the  "Company")
completed the acquisition of INET  Interactive  Network System,  Inc.  ("INET"),
through the merger (the "Merger") of INET into a wholly owned  subsidiary of the
Company.  INET is a provider of quality  international long distance services to
high volume, commercial and residential "affinity" groups.  Headquartered in Los
Angeles,  California,  INET markets international long distance services to more
than 17,000 customers, primarily to French and Japanese affinity groups.

     Pursuant to the Merger,  the outstanding  shares of INET capital stock were
converted   into  the  right  to  receive   the   following   aggregate   merger
consideration: (i) a cash payment in the amount of $668,324, (ii) 178,470 shares
of the Company's common stock, and (iii) the right to receive  additional shares
of the  Company's  common  stock (the "Earnout  Shares")  to be  determined  as
provided in the next  paragraph  below.  The Company also made a cash payment of
$74,258 and issued 19,830 shares of the  Company's  common stock to  Receivables
Funding  Corporation in connection with the  cancellation of certain warrants to
purchase shares of INET common stock and the transfer of certain lines of credit
and other  contracts to the surviving  corporation in the Merger,  and made cash
payments  in the  aggregate  amount  of  $257,418  in  connection  with  certain
contractual releases.

     The Company  will issue the  Earnout  Shares in five  installments,  to the
extent  earned,  as follows:  (i) if INET's  earnings  before  interest,  taxes,
depreciation and amortization ("EBITDA") for the 12-month period from October 1,
1998 to September 30, 1999 exceed $100,000, the Company will issue the number of
Earnout Shares  determined by dividing  $500,000 by the average closing price of
the Company's  common stock over the 20 trading days preceding  August 31, 1999,
(ii) if INET's EBITDA for the 12-month  period from October 1, 1999 to September
30, 2000 exceeds  $100,000,  the Company will issue the number of Earnout Shares
determined  by dividing  $500,000 by the average  closing price of the Company's
common stock over the 20 trading days preceding August 31, 2000, (iii) if INET's
profits  before  taxes for the period  from  October  1, 1998 to March 31,  1999
exceed $215,000,  the Company will issue the number of Earnout Shares determined
by dividing  $250,000 by the average closing price of the Company's common stock
over the 20 trading days preceding March 31, 1999, (iv) if INET's profits before
taxes for the period from April 1, 1999 to March 31, 2000 exceed  $778,000,  the
Company will issue the number of Earnout Shares  determined by dividing $500,000
by the average  closing price of the Company's  common stock over the 20 trading
days  preceding  March 31, 2000,  and (v) if INET's profits before taxes for the
period from April 1, 2000 to March 31, 2001 exceed $1,200,000,  the Company will
issue the  number of Earnout  Shares  determined  by  dividing  $250,000  by the
average  closing  price of the  Company's  common stock over the 20 trading days
preceding  March 31, 2001.  The  issuance of the Earnout  Shares based on INET's
profits  before taxes for a given period may be  accelerated  to the extent that
the target for INET's profits before taxes is met for the preceding period.
<PAGE>
     The shares of the Company's common stock were issued in the Merger pursuant
the exemption from  registration  provided by Section 4(2) of the Securities Act
of 1933, as amended.

     The terms of the  Merger are set forth in the Stock  Acquisition  by Merger
Agreement, dated as of September 30,  1998, among the Company, INET Acquisition,
Inc., INET Interactive Network System, Inc., Claude Buchert, Helene Legendre and
First Rock Trustees,  Limited, a Gibraltar corporation,  trustee of the Guimauve
Trust,  a  Gibraltar  trust  dated  September 1,  1994,  which is attached as an
exhibit to this Current Report and is incorporated herein by reference,  and the
description of such terms herein is qualified by reference to such exhibit.

     The  Company  financed  the  acquisition  of  INET  by  using a part of the
proceeds of its recently  completed $7 million equity  private  placement with a
single institutional  investor.  Pursuant to the private placement,  the Company
sold 700  shares of 5%  Series A  Convertible  Preferred  Stock and a warrant to
purchase up to 225,000  shares of the Company's  common stock,  and received net
proceeds of approximately $6.3 million.

Item 7.  Financial Statements and Exhibits.

         (a)      Financial statements of business acquired.

          The  Company  will  file an  amendment  to this  Form  8-K  containing
     financial  statements of INET  Interactive  Network System,  Inc. not later
     than December 14, 1998.

         (b)      Pro forma financial information.

          The Company  will file an amendment  to this Form 8-K  containing  pro
     forma financial information not later than December 14, 1998.

         (c)      Exhibits

               2.1--Stock   Acquisition  by  Merger   Agreement,   dated  as  of
                    September 30, 1998, among Coyote Network Systems, Inc., INET
                    Acquisition,  Inc., INET Interactive  Network System,  Inc.,
                    Claude  Buchert,  Helene  Legendre and First Rock  Trustees,
                    Limited,  a Gibraltar  corporation,  trustee of the Guimauve
                    Trust, a Gibraltar trust dated September 1, 1994.

<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 hereunto duly authorized.

                                        COYOTE NETWORK SYSTEMS, INC.

Date:  October 15, 1998
                                        BY     /s/ JAMES J. FIEDLER
                                               --------------------------------
                                               James J. Fiedler
                                               Chairman of the Board and
                                               Chief Executive Officer
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SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                               __________________

                                    FORM 8-K

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

      Date of Report (Date of earliest event reported): September 30, 1998

                          Coyote Network Systems, Inc.
             (Exact name of registrant as specified in its charter)

                                    Delaware
           -----------------------------------------------------------
                 (State or other jurisdiction or incorporation)

          1-5486                                         36-2448698
  ------------------------                      -----------------------------
  (Commission File Number)                      (I.R.S. Employer I.D. Number)

        4360 Park Terrace Drive
      Westlake Village, California                          91361
  ---------------------------------------                 ----------
  (Address of Principal Executive Offices)                (Zip Code)

                                  818-735-7600
              ---------------------------------------------------
              (Registrant's telephone number; including area code)
Item 2.  Acquisition or Disposition of Assets.

     On  September  30, 1998,  Coyote  Network  Systems,  Inc.  (the  "Company")
completed the acquisition of INET  Interactive  Network System,  Inc.  ("INET"),
through the merger (the "Merger") of INET into a wholly owned  subsidiary of the
Company.  INET is a provider of quality  international long distance services to
high volume, commercial and residential "affinity" groups.  Headquartered in Los
Angeles,  California,  INET markets international long distance services to more
than 17,000 customers, primarily to French and Japanese affinity groups.

     Pursuant to the Merger,  the outstanding  shares of INET capital stock were
converted   into  the  right  to  receive   the   following   aggregate   merger
consideration: (i) a cash payment in the amount of $668,324, (ii) 178,470 shares
of the Company's common stock, and (iii) the right to receive  additional shares
of the  Company's  common  stock (the "Earnout  Shares")  to be  determined  as
provided in the next  paragraph  below.  The Company also made a cash payment of
$74,258 and issued 19,830 shares of the  Company's  common stock to  Receivables
Funding  Corporation in connection with the  cancellation of certain warrants to
purchase shares of INET common stock and the transfer of certain lines of credit
and other  contracts to the surviving  corporation in the Merger,  and made cash
payments  in the  aggregate  amount  of  $257,418  in  connection  with  certain
contractual releases.

     The Company  will issue the  Earnout  Shares in five  installments,  to the
extent  earned,  as follows:  (i) if INET's  earnings  before  interest,  taxes,
depreciation and amortization ("EBITDA") for the 12-month period from October 1,
1998 to September 30, 1999 exceed $100,000, the Company will issue the number of
Earnout Shares  determined by dividing  $500,000 by the average closing price of
the Company's  common stock over the 20 trading days preceding  August 31, 1999,
(ii) if INET's EBITDA for the 12-month  period from October 1, 1999 to September
30, 2000 exceeds  $100,000,  the Company will issue the number of Earnout Shares
determined  by dividing  $500,000 by the average  closing price of the Company's
common stock over the 20 trading days preceding August 31, 2000, (iii) if INET's
profits  before  taxes for the period  from  October  1, 1998 to March 31,  1999
exceed $215,000,  the Company will issue the number of Earnout Shares determined
by dividing  $250,000 by the average closing price of the Company's common stock
over the 20 trading days preceding March 31, 1999, (iv) if INET's profits before
taxes for the period from April 1, 1999 to March 31, 2000 exceed  $778,000,  the
Company will issue the number of Earnout Shares  determined by dividing $500,000
by the average  closing price of the Company's  common stock over the 20 trading
days  preceding  March 31, 2000,  and (v) if INET's profits before taxes for the
period from April 1, 2000 to March 31, 2001 exceed $1,200,000,  the Company will
issue the  number of Earnout  Shares  determined  by  dividing  $250,000  by the
average  closing  price of the  Company's  common stock over the 20 trading days
preceding  March 31, 2001.  The  issuance of the Earnout  Shares based on INET's
profits  before taxes for a given period may be  accelerated  to the extent that
the target for INET's profits before taxes is met for the preceding period.
The shares of the Company's common stock were issued in the Merger pursuant
the exemption from  registration  provided by Section 4(2) of the Securities Act
of 1933, as amended.

     The terms of the  Merger are set forth in the Stock  Acquisition  by Merger
Agreement, dated as of September 30,  1998, among the Company, INET Acquisition,
Inc., INET Interactive Network System, Inc., Claude Buchert, Helene Legendre and
First Rock Trustees,  Limited, a Gibraltar corporation,  trustee of the Guimauve
Trust,  a  Gibraltar  trust  dated  September 1,  1994,  which is attached as an
exhibit to this Current Report and is incorporated herein by reference,  and the
description of such terms herein is qualified by reference to such exhibit.

     The  Company  financed  the  acquisition  of  INET  by  using a part of the
proceeds of its recently  completed $7 million equity  private  placement with a
single institutional  investor.  Pursuant to the private placement,  the Company
sold 700  shares of 5%  Series A  Convertible  Preferred  Stock and a warrant to
purchase up to 225,000  shares of the Company's  common stock,  and received net
proceeds of approximately $6.3 million.

Item 7.  Financial Statements and Exhibits.

         (a)      Financial statements of business acquired.

          The  Company  will  file an  amendment  to this  Form  8-K  containing
     financial  statements of INET  Interactive  Network System,  Inc. not later
     than December 14, 1998.

         (b)      Pro forma financial information.

          The Company  will file an amendment  to this Form 8-K  containing  pro
     forma financial information not later than December 14, 1998.

         (c)      Exhibits

               2.1--Stock   Acquisition  by  Merger   Agreement,   dated  as  of
                    September 30, 1998, among Coyote Network Systems, Inc., INET
                    Acquisition,  Inc., INET Interactive  Network System,  Inc.,
                    Claude  Buchert,  Helene  Legendre and First Rock  Trustees,
                    Limited,  a Gibraltar  corporation,  trustee of the Guimauve
                    Trust, a Gibraltar trust dated September 1, 1994.
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 hereunto duly authorized.

                                        COYOTE NETWORK SYSTEMS, INC.

Date:  October 15, 1998
                                        BY     /s/ JAMES J. FIEDLER
                                               --------------------------------
                                               James J. Fiedler
                                               Chairman of the Board and
                                               Chief Executive Officer