UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q



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

                For the quarterly period ended September 30, 2000

                                       OR

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

            For the transition period from ___________ to ___________


                         Commission file number: 1-5486

                             QUENTRA NETWORKS, 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)

    1640 South Sepulveda Boulevard, Suite 320, Los Angeles, California 90025
               (Address of principal executive offices) (Zip Code)

                                 (800) 935-8506
              (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.                               |X| YES |_| NO

At November 13, 2000, the Registrant had issued and outstanding an aggregate of
24,878,769 shares of its common stock.

<PAGE>

                             QUENTRA NETWORKS, INC.
                                AND SUBSIDIARIES

                                                                         Page

PART I. FINANCIAL INFORMATION

     Item 1. Financial Statements

               Balance Sheets................................................. 1

               Statements of Operations......................................  2

               Statements of Cash Flows......................................  3

               Notes to Financial Statements.................................  4

     Item 2. Management's Discussion and Analysis of Financial Condition and
             Results of Operations........................................... 10

     Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 14

PART II. OTHER INFORMATION

     Item 1. Legal Proceedings............................................... 16

     Item 2. Changes in Securities and Use of Proceeds....................... 16

     Item 4. Submission of Matters to a Vote of Security Holders............. 16

     Item 6. Exhibits and Reports on Form 8-K............................17 & 18

     Signatures.............................................................. 19

<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                     QUENTRA NETWORKS, INC. AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets
                (Dollars In Thousands, Except Per Share Amounts)


                                                         Sept. 30,     March 31,
                                                           2000          2000
                                                        -----------    ---------
                           Assets                       (Unaudited)
Current assets:

    Cash and cash equivalents                            $     865    $  16,278
    Receivables,  net of allowance of $1,919 at
       September 30, 2000 and $593 at March 31, 2000         4,051        3,628
    Deposits and other current assets                        1,887        1,842
                                                         ---------    ---------
        Total current assets                                 6,803       21,748
Property and equipment, net                                  7,155        4,668
Intangible assets, net                                       7,998        2,070
Investments and other assets                                 1,535        1,482
                                                         ---------    ---------
                                                         $  23,491    $  29,968
                                                         =========    =========

            Liabilities and Shareholders' Equity

Current liabilities:
    Lines of credit                                      $     423    $   1,705
    Accounts payable                                         9,518        6,665
    Accrued liabilities and other                            3,497        6,418
    Current  portion  of  long-term  debt and
      capital  lease obligations                             1,111        1,572
    Notes payable - current                                  1,742        2,130
    Discontinued operations - reserve for loss
       on disposal                                            --            792
    Discontinued operations - net current liabilities           26         --
                                                         ---------    ---------
                                                            16,317       19,282

Long-term debt                                               2,369        1,393
Capital lease obligations                                    1,613        1,369
Other liabilities                                            3,694          366

Commitments and contingencies

Shareholders' equity (deficit):
    Preferred stock - $.01 par value:  authorized
      10,000,000 shares;
      Series A: 124 shares issued and outstanding
        liquidation preference of $10,000 per share          1,570        1,570
      Series B:  3,157,895 issued and outstanding
        liquidation preference of $4.75 per share           27,338       27,338
    Common  stock -$1 par value: authorized
        70,000,000 shares,
      Issued 20,073,395 and 18,106,593 shares               20,073       18,107
    Additional paid-in capital                             139,957      132,075
    Deferred compensation                                     (242)        (278)
    Accumulated deficit                                   (183,441)    (165,497)
    Treasury stock at cost                                  (5,757)      (5,757)
                                                         ---------    ---------
        Total  shareholders' equity (deficit)                 (502)       7,558
                                                         ---------    ---------
                                                         $  23,491    $  29,968
                                                         =========    =========

            See notes to condensed consolidated financial statements.


                                       1
<PAGE>

                     QUENTRA NETWORKS, INC. AND SUBSIDIARIES
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)
                    (In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>

                                                                                 3 MONTHS ENDED                6 MONTHS ENDED
                                                                           ------------------------        ------------------------
                                                                           Sept. 30,       Sept. 30,       Sept. 30,       Sept. 30,
                                                                             2000            1999            2000            1999
                                                                           --------        --------        --------        --------
<S>                                                                        <C>             <C>             <C>             <C>
Net sales                                                                  $  7,214        $  2,447        $ 12,281        $  4,307
Cost of sales                                                                 6,595           2,099          10,870           3,512
                                                                           --------        --------        --------        --------
Gross profit                                                                    619             348           1,411             795
Selling and administrative expenses                                          12,482           3,164          18,620           5,620
                                                                           --------        --------        --------        --------
Operating loss                                                              (11,863)         (2,816)        (17,209)         (4,825)
Interest expense, net                                                          (196)           (328)           (184)           (680)

Other non-operating income                                                     --             6,208            --             6,392
                                                                           --------        --------        --------        --------

Income (loss) from continuing operations                                    (12,059)          3,064         (17,393)            887

Income (loss) from discontinued operations                                      112          (2,592)            (77)         (4,090)
                                                                           --------        --------        --------        --------

    Net income (loss)                                                      $(11,947)       $    472        $(17,470)       $ (3,203)
                                                                           ========        ========        ========        ========

Preferred stock dividends                                                  $   (242)       $    (75)       $   (474)       $   (154)
Net income (loss)                                                           (11,947)            472         (17,470)         (3,203)
                                                                           --------        --------        --------        --------
Income (loss) applicable to common shareholders                            $(12,189)       $    397        $(17,944)       $ (3,357)
                                                                           ========        ========        ========        ========
Income (loss) per common share - basic:
    Continuing operations                                                  $   (.64)       $    .23        $   --          $    .06
    Discontinued operations                                                     .01            (.20)           (.94)           (.34)
                                                                           --------        --------        --------        --------
      Net income (loss) per common share - basic                           $   (.63)       $    .03        $   (.94)       $   (.28)
                                                                           ========        ========        ========        ========
Income (loss) per common share - diluted:
    Continuing operations                                                  $   (.64)       $    .19        $   --          $    .05
    Discontinued operations                                                     .01            (.16)           (.94)       $   (.27)
                                                                           --------        --------        --------        --------
      Net income (loss) per common share - diluted                         $   (.63)            .03        $   (.94)       $   (.22)
                                                                           ========        ========        ========        ========
Weighted average number of common shares outstanding
     Basic                                                                   19,498          12,704          19,087          11,960
     Diluted                                                                 19,498          15,602          19,087          15,070

</TABLE>

            See notes to condensed consolidated financial statements.

                                       2
<PAGE>


                     QUENTRA NETWORKS, INC. AND SUBSIDIARIES
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                                              6 MONTHS ENDED
                                                                          ----------------------
                                                                           Sept. 30,   Sept. 30,
                                                                             2000        1999
                                                                          ----------  ----------
<S>                                                                       <C>         <C>
Operating activities:
    Net loss                                                              $(17,470)   $ (3,203)
Adjustments to reconcile loss to net cash used by operating activities:
    Depreciation and amortization                                            1,390         351
    Provision for doubtful accounts                                          1,326        --
    Gain on sale of AGT                                                       --        (6,209)
    Provision for loss on discontinued operations                             --           310
    Compensation expense related to stock options and warrants                 723         455
    Common stock and options granted for services                            1,054        --
    Net change in discontinued operations                                     (766)      1,010
    Changes in current assets and liabilities                                2,160      (3,537)
                                                                          --------    --------

Net cash used by operating activities                                      (11,583)    (10,823)
                                                                          --------    --------

Investing activities:
    Purchases of property and equipment                                     (2,458)       (570)
    Change in notes receivable                                                --         1,958
    Investment in joint ventures and other                                    (182)       --
    Acquisitions of Ariana and Polylink                                       (140)       --
    Net change in discontinued operations                                     --          (171)
                                                                          --------    --------

Net cash provided (used) by investing activities                            (2,780)      1,217
                                                                          --------    --------

Financing activities:
    Repayments of debt and capital lease obligations                        (1,710)        (60)
    Common stock issued, net of expenses                                      --        11,332
    Preferred dividends                                                       (474)       (154)
    Redemption of preferred stock                                             --        (4,000)
    Exercise of options and warrants                                         1,746        --
    Increase in note payable                                                   670       2,424
    Decrease in borrowing on line of credit                                 (1,282)       (125)
                                                                          --------    --------
Net cash provided (used) by financing activities                            (1,050)      9,417
                                                                          --------    --------

Decrease in cash and cash equivalents                                      (15,413)       (189)

Cash and cash equivalents:
    At beginning of the period                                              16,278       1,225
                                                                          --------    --------
    At end of the period                                                  $    865    $  1,036
                                                                          ========    ========

</TABLE>

            See notes to condensed consolidated financial statements.

                                       3
<PAGE>

                     QUENTRA NETWORKS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1 BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Certain prior year balances have been changed to conform to the
current period presentation.

Operating results for the three months ended September 30, 2000, are not
necessarily indicative of results to be expected for the fiscal year ending
March 31, 2001. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the fiscal year ended March 31, 2000.

NOTE 2 DISCONTINUANCE OF SWITCH BUSINESS

In May 2000, the Board of Directors of the Company approved a restructuring plan
that provides for the discontinuance and sale of the DSS Switch segment of the
business, which includes Coyote Technologies, LLC, Coyote Communications
Services, LLC and TelecomAlliance. As a result, the Company has reported the
operations of the DSS Switch business separately as discontinued operations in
the accompanying consolidated statement of operations. Also the assets and
liabilities of this segment are presented separately and summarized in the
accompanying consolidated balance sheets as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                            September 30, 2000   March 31, 2000
                                                            ------------------   --------------
                                                              (Unaudited)
<S>                                                             <C>                 <C>
Current assets (liabilities):
    Accounts receivable, net of reserves                        $   143             $ 1,642
    Inventory                                                       283               3,716
    Accrued liabilities                                            (452)             (2,189)
                                                                -------             -------
                                                                    (26)              3,169
    Less - reserve for loss on disposition                         --                (3,169)
                                                                -------             -------
Net current assets (liabilities) of discontinued operations     $   (26)            $  --
                                                                =======             =======

Non-current assets:
    Property and equipment, net                                 $  --               $ 2,118
    Capitalized software development and intellectual rights       --                 4,921
                                                                -------             -------
                                                                                      7,039
    Less - reserve for loss on disposition                         --                (7,039)
                                                                -------             -------
Net long-term assets of discontinued operations                 $  --               $  --
                                                                =======             =======
</TABLE>

On June 16, 2000, the Company entered into an agreement and bill of sale with
Carrier Solutions, LLC (Carrier Solutions) whereby the Company transferred all
of its interests in the switch business inventories and fixed assets to Carrier
Solutions. The purchase price for these assets is a percentage (60% for the
first year commencing June 16, 2000, 40% for the second year and 20% for the
third year) of the gross sale proceeds received by Carrier Solutions for its
sale of switch equipment. Additionally, the Company entered into a technology
license agreement with Carrier Solutions that grants a nonexclusive license to
use the DSS switch and all related intellectual property rights. As part of the
license agreement, the Company will receive a license fee of 10% of

                                       4
<PAGE>

Carrier Solutions' gross sales (as defined by the agreement) for three years
from June 16, 2000. As of September 30, 2000, there were no significant amounts
earned or due to the Company from Carrier Solutions for equipment sales or
license fees.

Expected operating losses relating to the discontinued operations from April 1,
2000 until the expected disposal date were included in a reserve against net
assets of discontinued operations at March 31, 2000. The Company recorded a
charge for estimated loss on disposal of the switch business of approximately
$11.0 million in the fourth quarter of fiscal 2000, which included an estimated
$3.0 million of expected losses of the segment for the first two quarters of
fiscal 2001. As of September 30, 2000, the Company has determined that no
reserve is required for expected future operating losses or loss on disposal of
the switch business.

The operating results relating to the discontinued operations are as follows
(dollars in thousands):

<TABLE>
<CAPTION>
                                              3 Months Ended                     6 Months Ended
                                     ----------------------------      ------------------------------
                                                (Unaudited)                       (Unaudited)
                                   Sept. 30, 2000   Sept. 30, 1999     Sept. 30, 2000  Sept. 30, 1999
                                   --------------   --------------     --------------  --------------
<S>                                  <C>              <C>              <C>              <C>
Net sales                            $    --          $   870          $      --        $ 3,516
                                     ========         =======          =========        =======

Income (loss) from discontinued
    operations                       $    112         $(2,588)         $     (77)       $(3,776)
                                     ========         =======          =========        =======
</TABLE>

After the decision to discontinue the switch business, the Company is operating
in only one segment, long distance services.

NOTE 3 ACQUISITIONS

On April 30, 2000, the Company purchased a certain customer base of
approximately 4,000 residential and small business long distance customers (the
"Matrix Base") from Group Long Distance, Inc., (GLDI), a non-facilities based
reseller of long distance services to more than 15,000 small and medium-sized
businesses and residential customers. The purchase price for the Matrix Base was
$1,000,000, payable with $50,000 in cash and a promissory note in the principal
amount of $950,000 bearing interest at 8%, with interest only payable monthly,
maturing April 30, 2002, secured by the assets sold. On May 1, 2000, the Company
entered into a Merger Agreement with GLDI pursuant to which a subsidiary of the
Company would merge into GLDI. The Company will issue 750,000 shares of the
Company's common stock (subject to adjustment based upon the trading price of
the common stock prior to closing) to GLDI's shareholders upon the consummation
of the merger; however, the minimum number of shares of common stock that the
Company will issue in the merger is 562,500 shares. Under the terms of the
agreement, either party may cancel the merger if the five-day average price of
the Company's common stock is less than $4.00 per share. The merger is subject
to certain closing conditions, including approval of the GLDI shareholders and
effectiveness of a registration statement registering the 750,000 shares to be
issued in the merger.

In June 2000, the Company entered into a Stock Purchase Agreement with Ariana
Telecommunications, Inc. (Ariana) and its shareholders. Under this agreement, on
June 1, 2000 the Company acquired 100% of the stock of Ariana for shares of
Company common stock valued at $3,000,000. The Company has issued 714,786 shares
of common stock related to this acquisition. The agreement also provides for up
to an additional $3,000,000 of Company stock to be issued if certain earn-out
events occur. Ariana provides long distance services, primary through prepaid
calling cards, to targeted ethnic markets. Its core business is concentrated in
the Los Angeles-San Diego corridor.

In June 2000, the Company entered into a Stock Purchase Agreement to acquire
100% of the stock of Polylink Development, Ltd. for $250,000 cash and 150,000
shares of Company common stock valued at $900,000. Polylink Development, Ltd. is
a Hong Kong based telecommunications provider. The agreement provides for

                                       5
<PAGE>

an additional payment of $250,000 cash if an earn-out event occurs.
Additionally, the Company entered into an agreement to acquire 100% of the stock
of Polylink Gateway International, Inc., an affiliate of Polylink Development,
Ltd. for 108,064 shares of Company common stock valued at $648,384. These
acquisitions were consummated on June 2, 2000.

In connection with the above  acquisitions,  the Company  recorded  goodwill and
other  intangibles of  approximately  $5.6 million during the quarter ended June
30, 2000.

NOTE 4 DISPOSITION OF ASSETS

On October 27, 1999, pursuant to a Purchase Agreement, dated September 30, 1999,
among the Company, American Gateway Telecommunications, Inc. ("AGTI"), Coyote
Gateway, LLC d/b/a American Gateway Telecommunications, ("AGT"), Prinvest Corp.
("PVC"), Prinvest Financial Corp. ("PFC"; together with PVC, "Prinvest") and
Arnold A. Salinas ("Salinas"), the Company sold its approximately 80% membership
interest in AGT to AGT's remaining member, AGTI, which previously held an
approximately 20% membership interest in AGT (the "Sale"). As specified in the
Purchase Agreement, the sale was effective on September 30, 1999 and AGTI
established 100% control of the business as of that date. The revenue related to
AGT for the quarter ended June 30, 1999 was approximately $800,000. The Company
recognized a gain of $6.2 million from this sale in the second quarter of fiscal
year 2000.

NOTE 5 LIQUIDITY

As of September 30, 2000, the Company had cash and cash equivalents of $865,000
and a negative working capital of $9.5 million. In October 2000, we received
$6.8 million from a private placement of Company common stock and warrants.
Additionally, in October 2000, we acquired HomeAccess. At closing, HomeAccess
had approximately $1.5 million in cash. In conjunction with the HomeAccess
acquisition, the Company loaned Mr. Jerry Conrad, a former principal of
HomeAccess and Interim Chief Executive Officer, Chief Technology Officer and a
director of the Company, $2.0 million. See Note 12 - Subsequent Events for
further information on the private placement and the acquisition of HomeAccess.
The Company also received proceeds associated with the note payable discussed in
Note 6 of $600,000, net of expenses, during October 2000. In October 2000, the
Company also issued convertible promissory notes in the aggregate principal
amount of $5.5 million in connection with the cancellation of outstanding
warrants and put rights. The Company continues to pursue sources of debt and
equity funding in order to provide working capital necessary to run future
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."

NOTE 6 DEBT OBLIGATIONS

In September 2000, the Company obtained a new unsecured promissory note for
$1,150,000. Borrowings under this note bear interest at a rate of 9.0% per annum
and are convertible at any time through September 29, 2001 at the holder's
option into shares of the Company's common stock at a price of $2.75 per share,
subject to adjustment. Borrowings under this note are payable in monthly
installments of $250,000, commencing in October 2000, until all principal and
interest are paid in full. As of September 30, 2000, $460,000 was outstanding
under this note. During October, the Company borrowed an additional $690,000
under this promissory note.

In September 2000, the Company entered into a new capital lease obligation
related to the purchase of telecommunication equipment for Ariana. The lease
provides for 24 monthly payments of $42,370.00. In conjunction with this lease,
the Company issued 12,295 shares of Company common stock, granted 122,961
warrants at an exercise price of $2.22 per share, and pledged 250,000 shares of
Company common stock.

                                       6
<PAGE>

NOTE 7 STATEMENT OF CASH FLOWS

Non-cash investing and financing activities, which are excluded from the
consolidated statement of cash flows are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                           6 Months Ended
                                                                           --------------
                                                                            (Unaudited)
                                                                        Sept. 30,   Sept. 30,
                                                                          2000        2000
                                                                        ---------   ---------
<S>                                                                     <C>         <C>
Details of Ariana and Polylink acquisitions:
        Fair value of assets acquired                                   $ 1,610     $    --
        Goodwill recorded                                                 4,572          --
        Liabilities assumed                                              (1,439)         --
        Common stock issued                                              (4,603)         --
                                                                        -------     -------
        Net cash used in investing activities                           $   140     $    --
                                                                        =======     =======

        Conversion of Class B Units to common stock                     $    --     $   330
        Gain on sale of AGT                                                  --       6,209
        Preference stock conversion inducement                               --         200
        Issuance of debt for GLD customer base                              950          --
        Stock and non-cash compensation related to issuance
           of warrants with debt                                            360          --
        Issuance of common stock to former owners of INET
           in connection with earn out                                    1,175          --
        Non-cash exercise of stock options                                  167          --
</TABLE>

NOTE 8 LITIGATION SETTLEMENT

The Company has reached definitive settlement arrangements in connection with
litigation involving pending cases against the Company. In the first case, filed
in Cook County Circuit Court, Chicago, Illinois, in October 1998, Superior
Street Capital Advisors, LLC (Superior Street) seeks monetary damages and claims
that the Company is in breach of a November 12, 1997 letter agreement pursuant
to which Superior Street provided investment advice and financial consulting
assistance to the Company. Superior Street filed a second complaint in Cook
County Circuit Court, Chicago, Illinois, in December 1998, seeking injunctive
relief to order the Company to include its warrants in a Form S-3 that had been
filed by the Company with the SEC. In August 1999, Superior Street amended its
complaint seeking monetary damages and claiming that the Company's alleged delay
in including Superior Street's warrants in the Company's registration statement
on Form S-3 damaged Superior Street. The third case against the Company and
certain of its current and former directors was filed by Theodore Netzky
(Netzky) and the Ronald N. Weiser Trust (Weiser Trust), in the United States
District Court for the Northern District of Illinois in Chicago, Illinois, in
July 2000. Netzky and the Weiser Trust seek monetary damages and allege that Mr.
Fiedler, Quentra's former CEO and Chairman, advised Netzky and the Weiser Trust
not to exercise their warrants, and based on Mr. Fiedler's advice, did not
exercise their warrants, and were damaged based on Fiedler's advice. The
settlement agreement documents are in the final stages of negotiation. The terms
of the settlement provide for a cash payment of $150,000, issuance of shares of
Company common stock, and discounts in the exercise price of the warrants
currently held by the plaintiffs. During the quarter ended September 30, 2000,
the Company recorded a reserve

                                       7
<PAGE>

(included in other liabilities) and a charge against income of $1.5 million to
provide for the estimated liability associated with this pending settlement.

NOTE 9 SHAREHOLDERS' EQUITY

Common Stock and Convertible Preferred Stock

At the Annual Stockholders Meeting on July 27, 2000, the Company's stockholders
approved an amendment to the Company's Restated Certificate of Incorporation to
increase the authorized number of shares of capital stock. The authorized number
of shares was increased from 35,000,000 to 80,000,000, of which 70,000,000 were
designated as Common Stock and 10,000,000 were designated as Preferred Stock.

During the quarter ended September 30, 2000, the Company issued 52,143 shares of
common stock to financial consulting entities in consideration for past
services. The stock was issued on various dates during September 2000, based on
the market value of the stock on the measurement date that the shares were
granted. Additionally, on September 28, 2000, the Company issued 30,000 shares
of common stock to an employee in connection with the termination of his
employment. On September 6, 2000, the Company issued 277,647 shares to the
former shareholders of Ariana in conjunction with the market price guarantee
included in the acquisition agreement.

Options and Warrants

During the quarter ended September 30, 2000, the Board of Directors granted
five-year options to purchase a total of 417,300 shares of the Company's common
stock to certain employees. The per share exercise prices of these grants are
equal to the closing market price of the Company's common stock on the grant
date and range from $3.44 to $5.00. These options vest in one-third increments
over three years. In addition, the Company issued 562,211 options and warrants
to non-employees for past services, which resulted in a Black Scholes value of
$700,000. These options or warrants vested immediately. The exercise prices of
these grants are equal to market price on the date of grant except for 122,961
warrants issued with an exercise price of $2.22 per share.

During the quarter ended September 30, 2000, a total of 59,619 vested options
were exercised for $0.17 million in accordance with the terms of the Coyote
Technologies Employees Non-Qualified Stock Option Plan and The 1986 Diana
Corporation Option Plan.

During the quarter ended  September 30, 2000, a total of 558,125 vested warrants
were exercised for $1.6 million in accordance  with the terms of each respective
warrant agreement.

NOTE 10 RELATED PARTY TRANSACTIONS

In June 2000, in consideration of additional services provided under the
consulting agreement with KRJ, the Company's Board of Directors resolved to
present for shareholder approval the issuance of 2,500,000 shares of common
stock and the grant of warrants to purchase 2,400,000 shares of common stock at
an exercise price per share of $7.00 to KRJ. The vesting of the shares and the
exercisability of the warrants are dependent on the average bid price of our
common stock for twenty consecutive trading days exceeding certain amounts that
range from $12 to $30 per share. The Company will determine the charge to
earnings, if any, if and when shareholder approval is obtained.

In June 2000, the Board of Directors approved the grant of options under the
Equity Plan to purchase an additional 750,000 shares of Common Stock to James
McCullough, the Company's former CEO, at $7.00 per share. Mr. McCullough's
employment with the Company terminated in November 2000 and all 750,000 shares
became vested at that time.

                                       8
<PAGE>

NOTE 11 EARNINGS AND LOSS PER COMMON SHARE

The basic loss per common share is determined by using the weighted average
number of shares of common stock outstanding during each period. Diluted loss
per common share is equal to the basic loss per share for all periods with a
loss from continuing operations. The effect of options and warrants would be
antidilutive. In computing the earnings or net loss per share applicable to
common stock shareholders, all dividends on preferred stock have been deducted
from the earnings or added to the losses to arrive at the earnings or losses
applicable to common shares as follows:

<TABLE>
<CAPTION>
                                              3 Months Ended                     6 Months Ended
                                     ----------------------------      ------------------------------
                                                (Unaudited)                       (Unaudited)
                                   Sept. 30, 2000   Sept. 30, 1999     Sept. 30, 2000  Sept. 30, 1999
                                   --------------   --------------     --------------  --------------
<S>                                  <C>              <C>              <C>              <C>
Net income (loss)                    $(11,947)        $    472         $  (17,470)      $ (3,203)
Preferred dividend                       (242)             (75)              (474)          (154)
                                     --------         --------         ----------       --------

Net income (loss) applicable to
    common stock                     $(12,189)        $    397         $  (17,944)      $ (3,357)
                                     ========         ========         ==========       ========
</TABLE>

NOTE 12 SUBSEQUENT EVENTS

In addition to the subsequent events discussed elsewhere, the following events
have occurred subsequent to September 30, 2000:

In October 2000, the Company issued convertible promissory notes in the
aggregate principal amount of $5.5 million. The notes bear interest at a rate
equal to 8% per annum, with interest due and payable on a quarterly basis
commencing on December 29, 2000. The holders may at any time convert all or part
of the outstanding principal amount and accrued and unpaid interest on the notes
into shares of the Company's common stock at a conversion price equal to $3.25
per share. The notes are due and payable on October 6, 2005, however, the
holders of the notes may demand payment, in full or in part, at any time after
October 6, 2001. The Company may prepay the notes at any time after the closing
sales price of its common stock equals or exceeds $6.00 per share for 20
consecutive trading days and after providing 60 days notice of its desire to
prepay the note. These notes were issued to the holders, and as consideration
for the cancellation, of warrants to purchase 500,000 shares of the Company's
common stock that were issued to First Venture Leasing in March 2000 in
connection with the Financial Services Agreement with First Venture. These
warrants were held by various transferees of First Venture. These warrants
entitled the holders the right to sell the warrants back to the Company, or put
right, for $5.5 million at any time between October 1, 2000 and December 31,
2000, if a registration statement registering the shares issuable upon
conversion of the Company's Series B Preferred Stock was not declared effective
on or prior to October 1, 2000. The Company agreed to issue the notes to the
holders of the warrants in order to terminate such put rights. At March 31,
2000, the Company recorded a charge against income of $3.9 million associated
with the 500,000 warrants. During the quarter ended September 30, 2000, the
Company recorded a charge against income of $1.6 million related to the
additional liability associated with these put rights. At September 30, 2000, a
reserve of $1.6million related to this transaction was included in other
liabilities.

The Company has other warrants to purchase shares of its common stock with put
rights still outstanding. The holders of warrants to purchase 50,000 shares have
exercised their put right and requested that the Company pay them $550,000. The
Company is negotiating with these holders and have requested that they agree to
cancel their warrants and put rights in exchange for the Company's issuance of
convertible promissory notes in the aggregate principal amount of $550,000,
containing terms substantially similar to the notes described above. The Company
is examining its alternatives to resolve this issue. At March 31, 2000, the
Company recorded a charge against income of $930,000 associated with the
warrants still outstanding with put rights. During the quarter ended September
30, 2000, the Company recorded a reserve (included in other

                                       9
<PAGE>

liabilities) and an additional charge against income of $390,000 related to the
liability associated with the put rights.

In October 2000, the Company acquired HomeAccess Microweb. As consideration for
the acquisition, the Company issued DQE Enterprises 1,767,603 shares of its
Series C Convertible Preferred Stock and Barbara Conrad 2,651,404 shares of its
common stock. The holder of the Series C Preferred Stock is entitled to receive
6% cumulative dividends per year commencing on December 31, 2000. Such dividends
are payable in shares of the Company's common stock or in cash, at the Company's
option, on a quarterly basis. At its option, and at any time, the holder may
convert any shares of Series C Preferred Stock into shares of common stock at a
conversion price of $4.75 per share, subject to adjustment.

Concurrently with the HomeAccess acquisition the Company completed a private
placement with accredited investors and sold units at $11.00 per unit. Each unit
is comprised of four shares of common stock and warrants to purchase one share
of common stock. The Company issued 2,588,000 shares of its common stock and
647,843 warrants to purchase shares of its common stock at an exercise price of
$2.75 per share. The Company received approximately $6.8 million, net of fees
and expenses associated with the placement. The warrants are immediately
exercisable and expire three years from the date of issuance.

In connection with the HomeAccess acquisition, the Company entered into a
personal services agreement with Jerry Conrad, a former principal of HomeAccess,
pursuant to which he became the Company's Chief Technology Officer and a
director. Under the terms of the personal services agreement, the Company loaned
Mr. Conrad $2.0 million by issuing him a promissory note. Under the note,
generally, if Mr. Conrad remains an employee of the Company, on the second,
third and fourth anniversaries of the closing of the acquisition, the Company
will forgive the principal and accrued interest under the note. In addition,
under the personal services agreement the Company agreed to pay Mr. Conrad a
bonus of $500,000 payable in twelve equal monthly installments and a bonus of
$1.5 million payable at such time as the Company has received a $7.5 million
license fee or similar payment from Albertson's Inc. In November 2000, the
Company's Board appointed Mr. Conrad as our interim Chief Executive Officer,
succeeding Mr. James McCullough.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

General

Discontinuance of Switch Segment

In May 2000, we decided to discontinue and dispose of our switch business
including the manufacture, development, sale and service of DSS Switches and IP
Gateway equipment. Prior to the May 2000 decision, this segment was our largest
segment in terms of revenues.

Expected operating results relating to the discontinued operations from April 1,
2000 until the expected disposal date was included in a reserve against net
assets of discontinued operations at March 31, 2000. We recorded a charge for
estimated loss on disposal of the switch business of approximately $11.0 million
in the fourth quarter of fiscal 2000, which included an estimated $3.0 million
of expected losses of the segment for the first two quarters of fiscal 2001. We
disposed of this segment as of June 30, 2000. We recorded an additional charge
of $77,000 for the six months ended September 30, 2000 for estimated loss on
disposal. As of September 30, 2000, we determined there was no reserve required
for future losses of this discontinued operation.

Following this decision to discontinue the operations of the telecommunications
switching business, our business is reported for as one continuing operating
segment, long distance services.

As a result of the discontinuances, dispositions, acquisitions and other events
described above, the comparison of year-to-year results may not be meaningful.

                                       10
<PAGE>

Results of Operations

The results for the three and six months ended September 30, 1999 have been
restated to reflect the operations of our DSS Switch business segment separately
as discontinued operations. The following discussion relates to the continuing
operations of the long distance services and our corporate administration
offices.

The long distance services business was comprised of three subsidiaries during
the periods reported: American Gateway Telecommunications, or AGT, which was
acquired in April 1998 and sold effective September 1999; INET, which was
acquired in September 1998; and Ariana Telecommunications, Inc. (Ariana) which
was acquired in June 2000.

Three Months Ended September 30, 2000 versus Three Months Ended
September 30, 1999

During the second quarter of fiscal year 2001, revenues were up $4.8 million, or
200%, to $7.2 million compared to $2.4 million during the second quarter of
fiscal year 2000. This increase was due primarily to new wholesale customers in
the Pacific Rim and the prepaid calling card services provided by Ariana. During
the quarter ended September 30, 2000 we had revenue from international wholesale
customers of $1.4 million; conversely, during the quarter ended September 30,
1999 we had no revenue from international wholesale customers. Revenue from
prepaid calling card service was $3.6 million for the second quarter of fiscal
year 2001; during the quarter ended September 30, 1999, we had no revenue from
these services. Revenues from our retail long distance services were relatively
the same between quarters.

Due to the increase in wholesale and prepaid traffic, which had lower margins
than retail traffic, gross profit decreased from 14% of revenues, or $348,000,
for the second quarter of fiscal 2000 to 9%, or $619,000, during the second
quarter of fiscal 2001. Although the actual cost of minutes has not increased,
wholesale and prepaid traffic are sold at lower prices causing gross margins to
be smaller than retail traffic. During the quarter ended September 30, 1999, we
only provided retail long distance services.

During the second quarter of fiscal year 2001, selling and administrative costs
were $12.5 million compared to $3.2 million during the second quarter of fiscal
year 2000. This increase is largely due to several large charges, many of which
were non-cash transactions recorded during the second quarter. These charges
include the following: $2.0 million related to estimated obligations associated
with settlements related to put rights of certain outstanding warrants (See Note
12); $1.6 million for write-offs of investments in telecommunication companies;
$1.5 million for a settlement of a litigation matter (See Note 8); $600,000 for
stock and options issued for various settlements; and $600,000 related to an
increase in reserve for bad debt, a major portion of which relates to one
customer. Other factors contributing to the increase in selling and
administrative costs during the quarter ended September 30, 2000, included legal
fees of $600,000 associated with additional regulatory filings; goodwill
amortization of $600,000; and engineering costs of $500,000. Additionally, the
selling and administrative costs of Ariana are included in the quarter ended
September 30, 2000, whereas no such costs are included in the prior year's
quarter as Ariana was acquired in June 2000.

For the second quarter of fiscal 2001 net interest expense was $196,000 compared
to net interest expense of $328,000 for the second quarter of fiscal 2000. The
decrease is due to interest income earned on cash and cash equivalents during
the second quarter of 2001 and a slight decrease in outstanding debt. The loss
from continuing operations was $12.1 million for the second quarter of fiscal
year 2001 compared to income from continuing operations of $3.1 million for the
second quarter of fiscal year 2000. This decline is due partially to the
increase in selling and administrative costs described above. Additionally,
during the quarter ended September 30, 2000, we had non-operating income of $6.2
million from the sale of AGT.

                                       11
<PAGE>

The income from discontinued operations for the second quarter of fiscal year
2001 was $100,000 compared to a loss of $2.6 million for the second quarter of
fiscal 2000. The switch business was disposed of during June 2000, and any
future loss had been provided for as of June 30, 2000.

Overall, the net loss was $11.9 million for the second quarter of fiscal year
2001, compared to net income of $500,000 a year earlier.

Six Months Ended September 30, 2000 versus Six Months Ended September 30, 1999

During the first six months of fiscal year 2001, revenues were up $8.0 million,
or 186%, to $12.3 million compared to $4.3 million during the first six months
of fiscal year 2000. This increase was due primarily to new wholesale customers
in the Pacific Rim and the prepaid calling card services provided by Ariana.
During the six months ended September 30, 2000 we had revenue from international
wholesale customers of $2.3 million; during the six months ended September 30,
1999 we had no revenue from international wholesale customers. Revenue from
prepaid calling card services was $4.7 million for the first six months of
fiscal year 2001; during the six months ended September 30, 1999, we had no
revenue from these services. Revenues from our retail long distance services
increased approximately $1.0 million from the six months ended September 30,
1999 compared to the six months ended September 30, 2000.

During the first six months of fiscal year 2001, selling and administrative
costs were $18.6 million compared to $5.6 million during the second quarter of
fiscal year 2000. This increase is primarily due to several large charges, many
of which were non-cash transactions, recorded during the quarter ended September
30, 2000. These charges include the following: $2.0 million related to estimated
obligations associated with settlement related to put rights of certain
outstanding warrants (See Note 12); $1.6 million for write-offs of investments
in telecommunication companies; $1.5 million for a settlement of a litigation
matter (See Note 8); $600,000 for stock and options issued for various
settlements; and $1.3 million related to increase in reserve for bad debt. Other
factors contributing to the increase in selling and administrative costs for the
six months ended September 30, 2000, were legal and accounting fees of $1.3
million associated with additional regulatory filings; goodwill amortization of
$800,000; and engineering costs of $500,000. Additionally, the selling and
administrative costs of Ariana are included in the six months ended September
30, 2000 whereas no cost was included in the prior year's period as Ariana was
acquired in June 2000.

For the six months ended September 30, 2000 there was net interest expense of
$184,000 compared to net interest expense of $680,000 for the six months ended
September 30, 2000. The decrease is due to interest income earned on cash and
cash equivalents during the first six months of fiscal year 2001 and a decrease
in outstanding debt.

The loss from continuing operations was $17.4 million for the first six months
of fiscal year 2001 compared to income from continuing operations of $900,000
for the first six months of fiscal year 2000. This decline is due partially to
the increase in selling and administrative costs described above. Additionally,
during the six months ended September 30, 1999, we had non-operating income of
$6.4 million from the sale of AGT.

The loss from discontinued operations for first six months of fiscal year 2001
was $0.1 million compared to a loss of $4.1 million for the first six months of
fiscal 2000. The switch business was disposed of during June 2000, and any
future loss had been provided for as of June 30, 2000.

Overall, the net loss was $17.5 million for the second quarter of fiscal year
2001, compared to a net loss of $3.2 million a year earlier.

                                       12
<PAGE>

Liquidity and Capital Resources

As of September 30, 2000, we had a negative working capital of $9.5 million and
cash and cash equivalents of $865,000. In October 2000, we received $6.8
million, net of fees and expenses from a private placement of the Company common
stock and warrants. Also in October 2000, we acquired HomeAccess, which had
approximately $1.5 million of working capital at closing. In conjunction with
the HomeAccess acquisition, the Company loaned Mr. Jerry Conrad $2.0 million.
The Company also received proceeds from a note payable of $600,000 during
October 2000.

During the first six months of fiscal 2001 we used net cash for operating
activities of $11.6 million compared to $10.8 million used by operating
activities during the first six months of fiscal 2000. This decline in operating
cash flow is due primarily to the increase in the losses incurred in our
continuing long distance service operations.

We used cash for investing activities of $2.8 million during the first six
months of fiscal 2001 compared to $1.2 million generated from investing
activities in the corresponding period of fiscal 2000. This increase is from
capital expenditures on equipment purchases of $2.5 million during the first six
months of fiscal 2000.

Financing activities used cash of $1.1 million during the first six months of
fiscal 2001 compared to $9.4 million provided during the first six months of
fiscal 2000. During the first six months of fiscal year 2000 we received cash of
$11.3 million from the issuance of common stock.

We had capital lease obligations of $2.6 million at September 30, 2000, payable
through 2004.

We had a $2.2 million revolving line of credit secured against certain trade
receivables. As at September 30, 2000 $423,000 had been drawn against the line
representing the maximum amount available at that time. This line of credit
bears interest at the bank's prime rate (9.5% at September 30, 2000) plus 3%.
The line of credit expired on August 31, 2000. As of November 6, 2000, the
outstanding balance on the line was $143,000. We expect to pay off the line by
the end of the third quarter of fiscal year 2001.

We have a long-term obligation in the amount of $1.5 million at September 30,
2000 in connection with principal and interest due on subordinated debentures,
which bear interest of 11.25% per year. The debentures mature in January 2002
and interest only is due until such time.

We have a long-term obligation in the amount of $950,000 in connection with a
promissory note issued in connection with the acquisition of the Matrix Base
from Group Long Distance, which bears interest at 8% per annum. The promissory
note provides for monthly interest only payments, with the entire principal
balance due on April 30, 2002.

In September 2000, we obtained a new unsecured promissory note that provides for
borrowings up to $1.2 million. Borrowings under this note bear interest at a
rate of 9.0% per annum and are convertible at any time through September 29,
2001 at the holder's option into shares of our common stock at a price of $2.75
per share, subject to adjustment. Borrowings under this note are payable in
monthly installments of $250,000 commencing in October 2000 until all principal
and interest are paid in full. As of September 30, 2000, $460,000 was
outstanding under this note. During October, we borrowed an additional $690,000
under this promissory note.

We believe that our cash on hand at September 30, 2000, the proceeds from our
October 2000 private placement and cash received from the acquisition of
HomeAccess will fund our debt obligations and ongoing operations through the
third quarter of fiscal 2001. We are in the process of negotiating third-party
lease funding in connection with previously purchased switch equipment.
Additionally, we continue to pursue other sources of debt and equity funding in
order to provide working capital necessary to run future operations. We believe
that

                                       13
<PAGE>

we will be able to continue to fund our operations and acquisitions by obtaining
additional outside financing; however, we cannot assure you that we will be able
to obtain the necessary financing when needed on acceptable terms or at all. If
we are not able to obtain the necessary financing, it could have a significant
adverse affect on our business including our ability to pay our outstanding
indebtedness and other liabilities, and to operate our business as planned. We
have been advised by our independent public accountants that, if prior to the
completion of their audit of our financial statements for the year ending March
31, 2001 we are unable to demonstrate our ability to fund our operations for the
next 12 months, their auditors' report on those financial statements will be
modified for the contingency related to our ability to continue as a going
concern.

Recently Issued Accounting Standards

In June 1998 and June 1999, the AICPA issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" and SFAS No., 137 which deferred
the effective date of SFAS No. 133. We will adopt the standard in April 2001 and
do not expect the adoption to have any material impact on our financial position
or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is not currently subject to a significant level of direct market
risk related to foreign currency exchange rates, commodity prices or equity
prices. The Company has no derivative instruments and does not expect to derive
a material amount of its revenues from interest bearing securities. Currently
the Company has no significant foreign operations. To the extent that the
Company establishes significant foreign operations in the future, it will
attempt to mitigate risks associated with foreign currency exchange rates
contractually and through the use of hedging activities and other means
considered appropriate. The Company holds no equity market securities, but does
face equity market risk relative to its own equity securities. This risk is most
likely to be manifested by influencing the Company's ability to raise debt or
equity financing, if needed.

The Company's primary market risk exposure is interest rate risk related to
borrowings under its revolving line of credit.

Interest Rate Sensitivity Model

The table below presents the principal (or notional) amounts and related
interest of our borrowings by expected maturity dates. The table presents the
borrowings that are sensitive to changes in interest rates and the effect on
interest expense of future hypothetical changes in such rates.

                                    Twelve Months Ended September 30
                                    --------------------------------
                                       (U.S. Dollars - Thousands)
                                    2000     2001     2002     2003
                                    ----   ------   ------   ------

        Line of credit borrowings   $423   $   --   $   --   $   --
        Interest expense (A)          53       --       --       --
        Interest expense (B)          57       --       --       --
        Interest expense (C)          49       --       --       --

        |X|     The borrowings bear interest at the bank's prime rate plus 3%
                for the line of credit.

        |X|     The interest expense shown for line (A) is based upon the actual
                bank's prime rate at September 30, 2000 of 9.5%.

        |X|     The interest expense shown for line (B) is based upon a
                hypothetical increase of one percentage point in the bank's
                prime rate to 10.5%.

                                       14
<PAGE>

        |X|     The interest expense shown for line (C) is based upon a
                hypothetical decrease of one percentage point in the bank's
                prime rate to 8.5%.

Forward Looking Statements


All statements other than historical statements contained in this Report on Form
10-Q constitute "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Without limitation, these forward
looking statements include statements regarding new products expected to be
introduced by the Company in the future, statements about the Company's business
strategy and plans, statements about the status of litigation matters and other
claims, statements about the adequacy of the Company's working capital and other
financial resources, and in general statements herein that are not of a
historical nature. Any Form 10-K, Annual and Quarterly Reports to Shareholders,
Form 10-Q, Form 8-K or press release of the Company may include forward-looking
statements. In addition, other written or oral statements which constitute
forward looking statements have been made or may in the future be made by the
Company, including statements regarding future operating performance, short- and
long-term revenue and earnings estimates, backlog, the status of litigation, the
value of new contract signings, and industry growth rates and the Company's
performance relative thereto. These forward-looking statements rely on a number
of assumptions concerning future events, and are subject to a number of
uncertainties and other factors, many of which are outside of the Company's
control, that could cause actual results to differ materially from such
statements. These include, but are not limited to: risks associated with changes
in the Company's business strategy and operations, recent acquisitions, recent
operating losses, no assurance of profitability, the need to increase sales,
liquidity deficiency and, in general, the other risk factors set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000.
The Company does not undertake any obligation to update or revise any forward
looking statements whether as a result of new information, future events or
otherwise.

                                       15
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We have reached definitive settlement arrangements in connection with litigation
involving pending cases against us. In the first case, filed in Cook County
Circuit Court, Chicago, Illinois in October 1998, Superior Street Capital
Advisors, LLC (Superior Street) seeks monetary damages and claims that we are in
breach of a November 12, 1997 letter agreement pursuant to which Superior Street
provided investment advice and financial consulting assistance to us. Superior
Street filed a second complaint in Cook County Circuit Court, Chicago, Illinois,
in December 1998, seeking injunctive relief to order us to include its warrants
in a Form S-3 that had been filed by us with the SEC. In August 1999, Superior
Street amended its complaint seeking monetary damages and claiming that our
alleged delay in including Superior Street's warrants in our registration
statement on Form S-3 damaged Superior Street. The third case against us and
certain of our current and former directors was filed by Theodore Netzky
(Netzky) and the Ronald N. Weiser Trust (Weiser Trust), in the United States
District Court for the Northern District of Illinois in Chicago, Illinois in
July 2000. Netzky and the Weiser Trust seek monetary damages and allege that Mr.
Fiedler, Quentra's former CEO and Chairman, advised Netzky and the Weiser Trust
not to exercise their warrants, and based on Mr. Fiedler's advice, did not
exercise their warrants, and were damaged based on Fiedler's advice. The
settlement agreement documents are in the final stages of negotiation. The terms
of the settlement provide for a cash payment of $150,000, issuance of shares of
our common stock, and discounts in the exercise price of the warrants currently
held by the plaintiffs. During the quarter ended September 30, 2000, we recorded
a reserve (included in other liabilities) and a charge against income of $1.5
million to provide for the estimated liability associated with this pending
settlement.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Information regarding issuances of securities not registered under the
Securities Act of 1933 is incorporated by reference from Note 9 of the Condensed
Consolidated Financial Statements in Item 1 of Part I. The sale of such
securities was exempt from registration under Section 4(2) of the Securities Act
of 1933.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

An annual meeting of the Company's stockholders was held on July 27, 2000, in
Los Angeles, California, for the purpose of electing a director, authorizing an
amendment to the Company's Restated Certificate of Incorporation to increase the
authorized number of shares of capital stock from 35 million to 80 million, to
approve the Company's 2000 Equity Incentive Plan, to amend the Company's
Restated Certificate of Incorporation to change the name of the Company to
Quentra Networks, Inc. and to ratify the Board of Directors' selection of Arthur
Andersen LLP as the Company's independent auditors for the fiscal year ended
March 31, 2000.

The following votes were cast by the Company's stockholders:

  Shares Voted   Shares Voted   Shares Voted   Shares Voted    Shares Voted
  ------------   ------------   ------------   ------------    ------------
       For         Against        Withheld        Abstain      Broker Nonvotes
                   -------        --------        -------      ---------------

Election of Mr. Daniel Latham as a director:
  16,204,606       52,990            0               0               0

Charter amendment to increase authorized share capital:
   9,816,487      568,201           N/A           138,836            0

Approval of 2000 Equity Incentive Plan:
   9,635,390      737,888           N/A           150,246            0

                                       16
<PAGE>

Charter amendment to change name:
  16,451,960      118,503           N/A           137,133            0

Ratification of selection of auditors:
  16,504,256       70,987           N/A           132,353            0

The other directors whose terms continued after the annual meeting were John M.
Eger, J. Thomas Markley and James R. McCullough. Mr. Markley and Mr. McCullough
resigned from the Board of Directors in August 2000 and November 2000
respectively.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a)   Exhibits:

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

        2.1     Stock Acquisition by Merger Agreement, dated as of September 30,
                1998, among the Registrant, 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 (incorporated herein by reference to
                Exhibit 2.1 of Registrant's Form 8-K dated September 30, 1998
                filed on October 15, 1998).

        2.2     Amended and Restated Agreement and Plan of Merger dated October
                5, 2000 by and among the Registrant, HomeAccess Microweb, Inc.,
                DQE Enterprises, Inc., Barbara Conrad and Jerry Conrad
                (incorporated herein by reference to Exhibit 2.1 of Registrant's
                Form 8-K dated October 5, 2000, filed on October 10, 2000).

        2.3     First Amendment to Stock Acquisition by Merger Agreement, dated
                as of June 2, 2000 among the Registrant, 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.

        3.1     Restated Certificate of Incorporation (incorporated herein by
                reference to Exhibit 3.01 of Registrant's Form 10-Q for the
                quarter ended September 30, 1998 filed on November 16, 1998).

        3.2     Certificate of Correction of Certificate of Amendment of
                Restated Certificate of Incorporation (incorporated herein by
                reference to Exhibit 3.02 of Registrant's Form 10-Q for the
                quarter ended June 30, 2000 filed on August 14, 2000).

        3.3     Certificate of Amendment of Restated Certificate of
                Incorporation (incorporated herein by reference to Exhibit 3.03
                of Registrant's Form 10-Q for the quarter ended June 30, 2000
                filed on August 14, 2000).

        3.4     By-Laws of Registrant, as amended March 7, 1997 (incorporated
                herein by reference to Exhibit 3.2 of Registrant's Form 10-K for
                the fiscal year ended March 31, 1997).

        3.5     Certificate of Designations, Preferences and Rights of Series B
                Preferred Stock (incorporated herein by reference to Exhibit 4.2
                of Registrant's Form 8-K dated January 31, 2000 filed on
                February 14, 2000).

        3.6     Certificate of Designations, Preferences and Rights of Series C
                Preferred Stock filed on October 19, 2000 (incorporated herein
                by reference to Exhibit 4.1 of Registrant's Form 8-K dated
                October 19, 2000 filed on October 25, 2000).

        4.1     Form of Warrants dated October 19, 2000 issued to various
                investors to purchase up to 647,843 shares of common stock at
                $2.75 per share (incorporated herein by reference to Exhibit 4.2
                of Registrant's Form 8-K dated October 19, 2000 filed on October
                25, 2000).

        4.2     Stock Purchase Agreement dated September 21, 2000, as amended on
                October 10, 2000, between the Registrant and various investors
                (incorporated herein by reference to Exhibit 4.3 of Registrant's
                Form 8-K dated October 19, 2000 filed on October 25, 2000).

                                       17
<PAGE>

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

        4.3     8% Convertible Promissory Note dated October 6, 2000 between the
                Registrant, as payor, and Omega Capital Partners, L.P., as
                payee, in the aggregate principal amount of $1,848,000 (Notes in
                the aggregate principal amount of $ 3,652,000 were issued to
                nine (9) other holders as set forth on Schedule A to this
                Exhibit) (incorporated by reference to Exhibit 4.1 of
                Registrant's Form 8-K dated October 5, 2000 filed October 10,
                2000).

        4.4     Warrant dated April 12, 2000 to purchase 50,000 shares of the
                common stock of the Registrant issued to First Venture Leasing
                LLC (incorporated by reference to Exhibit 4.2 of Registrant's
                Form 8-K dated October 5, 2000 filed October 10, 2000).

        10.1    Form of Stock Option Agreement under 2000 Equity Incentive Plan.

        10.2    Separation Agreement dated as of April 30, 2000 between the
                Registrant and Brian Robson.

        10.3    Employment Agreement dated as of April 15, 2000 between the
                Registrant and Timothy Atkinson.

        27.0    Financial Data Schedule

b)      Reports on Form 8-K:

               None.


                                       18
<PAGE>

                                   SIGNATURES

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


                                        QUENTRA NETWORKS, INC.


DATE:    November 14, 2000              By:    /s/Jerry Conrad
                                               ---------------------------------
                                               Jerry Conrad
                                               Interim Chief Executive Officer
                                               (Principal Executive Officer)


DATE:    November 14 2000               By:    /s/Cheryl Johnson
                                               ---------------------------------
                                               Cheryl Johnson
                                               Chief Financial Officer
                                               (Principal Financial and
                                                Accounting Officer)


                                       19
<PAGE>

                                  Exhibit Index

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


        2.1     Stock Acquisition by Merger Agreement, dated as of September 30,
                1998, among the Registrant, 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 (incorporated herein by reference to
                Exhibit 2.1 of Registrant's Form 8-K dated September 30, 1998
                filed on October 15, 1998).

        2.2     Amended and Restated Agreement and Plan of Merger dated October
                5, 2000 by and among the Registrant, HomeAccess Microweb, Inc.,
                DQE Enterprises, Inc., Barbara Conrad and Jerry Conrad
                (incorporated herein by reference to Exhibit 2.1 of Registrant's
                Form 8-K dated October 5, 2000, filed on October 10, 2000).

        2.3     First Amendment to Stock Acquisition by Merger Agreement, dated
                as of June 2, 2000 among the Registrant, 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.

        3.1     Restated Certificate of Incorporation (incorporated herein by
                reference to Exhibit 3.01 of Registrant's Form 10-Q for the
                quarter ended September 30, 1998 filed on November 16, 1998).

        3.2     Certificate of Correction of Certificate of Amendment of
                Restated Certificate of Incorporation (incorporated herein by
                reference to Exhibit 3.02 of Registrant's Form 10-Q for the
                quarter ended June 30, 2000 filed on August 14, 2000).

        3.3     Certificate of Amendment of Restated Certificate of
                Incorporation (incorporated herein by reference to Exhibit 3.03
                of Registrant's Form 10-Q for the quarter ended June 30, 2000
                filed on August 14, 2000).

        3.4     By-Laws of Registrant, as amended March 7, 1997 (incorporated
                herein by reference to Exhibit 3.2 of Registrant's Form 10-K for
                the fiscal year ended March 31, 1997).

        3.5     Certificate of Designations, Preferences and Rights of Series B
                Preferred Stock (incorporated herein by reference to Exhibit 4.2
                of Registrant's Form 8-K dated January 31, 2000 filed on
                February 14, 2000).

        3.6     Certificate of Designations, Preferences and Rights of Series C
                Preferred Stock filed on October 19, 2000 (incorporated herein
                by reference to Exhibit 4.1 of Registrant's Form 8-K dated
                October 19, 2000 filed on October 25, 2000).

        4.1     Form of Warrants dated October 19, 2000 issued to various
                investors to purchase up to 647,843 shares of common stock at
                $2.75 per share (incorporated herein by reference to Exhibit 4.2
                of Registrant's Form 8-K dated October 19, 2000 filed on October
                25, 2000).

        4.2     Stock Purchase Agreement dated September 21, 2000, as amended on
                October 10, 2000, between the Registrant and various investors
                (incorporated herein by reference to Exhibit 4.3 of Registrant's
                Form 8-K dated October 19, 2000 filed on October 25, 2000).

        4.3     8% Convertible Promissory Note dated October 6, 2000 between the
                Registrant, as payor, and Omega Capital Partners, L.P., as
                payee, in the aggregate principal amount of $1,848,000 (Notes in
                the aggregate principal amount of $ 3,652,000 were issued to
                nine (9) other holders as set forth on Schedule A to this
                Exhibit) (incorporated by reference to Exhibit 4.1 of
                Registrant's Form 8-K dated October 5, 2000 filed October 10,
                2000).

        4.4     Warrant dated April 12, 2000 to purchase 50,000 shares of the
                common stock of the Registrant issued to First Venture Leasing
                LLC (incorporated by reference to Exhibit 4.2 of Registrant's
                Form 8-K dated October 5, 2000 filed October 10, 2000).

        10.1    Form of Stock Option Agreement under 2000 Equity Incentive Plan.

        10.2    Separation Agreement dated as of April 30, 2000 between the
                Registrant and Brian Robson.

                                       20
<PAGE>

        10.3    Employment Agreement dated as of April 15, 2000 between the
                Registrant and Timothy Atkinson.

        27.0    Financial Data Schedule

                                       21