---

# UNITED
STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

# FORM
10-QSB

# (X)  
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OFTHE SECURITIES
EXCHANGE ACT OF 1934For
the quarterly period ended September 30, 2006

# OR

# (   )  
TRANSITION REPORT UNDER SECTION 13 OR 15(d)OF THE EXCHANGE ACT
For the transition period from _____________ to ___________

# Commission
File Number 0-11730

COGNIGEN
NETWORKS, INC.(Exact name
of small business issuer as specified in its charter)

|Colorado                        |  | 84-1089377          | 
|------------------------------- |  | ------------------- | 
|(State or other jurisdiction of |  | (I.R.S. Employer    | 
|incorporation or organization)  |  | Identification No.) | 

6405 218th
Street SW, Suite 305Mountlake Terrace, WA 98043(Address of principal executive
offices)(425) 329-2300(Issuers Telephone number)N/A(Former name, former
address and former fiscal year, if changed since last report)

Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of The Exchange Act during the past 12 months (or 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. Yes  [X]    No
[   ]

Indicate
by checkmark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).  Yes  [   ]    No
[X]

# APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check  whether
the  registrant  filed all  documents  and reports  required to be filed by Section 12,
13 or 15(d) of The  Exchange Act  after the distribution of securities under a plan
confirmed by a court.  Yes  [   ]    No  [   ]

# APPLICABLE
ONLY TO CORPORATE ISSUERS

State the
number of shares outstanding of each of the issuers classes of common equity, as of
the latest practicable date.

|Class                         | Outstanding atOctober 31, 2006
|----------------------------- | ------------------------------
|Common Stock, $.001 par value |                               

Transitional
Small Business Disclosure Format (Check one):  Yes  [   ]    No
[X]





---

# COGNIGEN
NETWORKS, INC.
Commission
File Number: 0-11730
Quarter
Ended September 30, 2006
FORM
10-QSB

|                                                                  | 
|----------------------------------------------------------------- | 
|Part I - FINANCIAL INFORMATION                                    | 
|Item 1. Consolidated Financial Statements                         | 
|Consolidated Balance Sheets                                       | 
|Unaudited Consolidated Statements of Operations                   | 
|Unaudited Consolidated Statements of Cash Flows                   | 
|Notes to Unaudited Consolidated Financial Statements              | 
|Item 2. Managements Discussion and Analysis or Plan of Operation | 
|Item 3. Controls and Procedures                                   | 
|Part II - OTHER INFORMATION                                       | 
|Item 6. Exhibits                                                  | 
|Signatures                                                        | 

1



---

COGNIGEN
NETWORKS, INC.
Part I  Financial Information

Item 1.
Financial Statements

# Consolidated
Balance Sheets

|                                                                           | September 30,2006 | June 30,2006     
|-------------------------------------------------------------------------- | ----------------- | -----------------
|
|Assets                                                                     |                   |                  
|Current assets                                                             |                   |                  
|Cash                                                                       |                   | $               
|Accounts receivable, net                                                   |                   | 278,289          
|Marketing commissions receivable                                           |                   | 971,007          
|Other current assets                                                       |                   | 44,551           
|                                                                           |                   |                  
|Total current assets                                                       |                   | 1,293,847        
|                                                                           |                   |                  
|                                                                           |                   |                  
|Non-current assets                                                         |                   |                  
|Property, plant and equipment, net                                         |                   | 22,338           
|Deposits and other assets                                                  |                   | 159,388          
|Intangibles                                                                |                   | 137,163          
|                                                                           |                   |                  
|Total non-current assets                                                   |                   | 318,889          
|                                                                           |                   |                  
|                                                                           |                   |                  
|Total assets                                                               |                   | $   1,612,736    
|                                                                           |                   |                  
|                                                                           |                   |                  
|Liabilities and Stockholders Deficit                                      |                   |                  
|Current liabilities                                                        |                   |                  
|Accounts payable                                                           |                   | $      894,093   
|Accrued liabilities                                                        |                   | 315,829          
|Marketing commissions payable                                              |                   | 793,818          
|Receivables financing arrangement                                          |                   | 378,150          
|Other current liabilities                                                  |                   |                 
|                                                                           |                   |                  
|Total current liabilities                                                  |                   | 2,381,890        
|                                                                           |                   |                  
|                                                                           |                   |                  
|Other long-term liabilities                                                |                   | 15,952           
|                                                                           |                   |                  
|Total liabilities                                                          |                   | 2,397,842        
|                                                                           |                   |                  
|Commitments and contingencies                                              |                   |                  
|                                                                           |                   |                  
|Stockholders Deficit                                                      |                   |                  
|Preferred stock no par value, 20,000,000 shares authorized, 500,000 shares |                   |                  
|issued and outstanding, liquidation preference of $668,225                 |                   | 450,000          
|Common stock $.001 par value, 300,000,000 shares authorized; 10,169,584    |                   |                  
|issued and outstanding as of  September 30, 2006 and 8,753,764 as of       |                   |                  
|June 30, 2006                                                              |                   | 10,171           
|Additional paid-in capital                                                 |                   | 12,131,323       
|Accumulated deficit                                                        |                   | (13,376,600      
|                                                                           |                   |                  
|Total stockholders deficit                                                |                   | (785,106         
|                                                                           |                   |                  
|Total liabilities and stockholders deficit                                |                   | $   1,612,736    
|                                                                           |                   |                  
|                                                                           |                   |                  

2



---

COGNIGEN
NETWORKS, INC.Unaudited
Consolidated Statements of Operations

|                                         | Three Months EndedSeptember 30, |               
|---------------------------------------- | ------------------------------- | --------------
|
|
|Revenue                                  |                                 |               
|Marketing commissions                    |                                 | $ 1,503,409   
|Telecommunications                       |                                 | 800,680       
|Other                                    |                                 |              
|                                         |                                 |               
|Total revenue                            |                                 | 2,304,089     
|                                         |                                 |               
|                                         |                                 |               
|Operating expenses                       |                                 |               
|Commissions:                             |                                 |               
|Marketing                                |                                 | 1,080,387     
|Telecommunications                       |                                 | 113,842       
|Telecommunications                       |                                 | 490,455       
|Other                                    |                                 |              
|Selling, general and administrative      |                                 | 705,177       
|Depreciation and amortization            |                                 | 1,416         
|                                         |                                 |               
|Total operating expenses                 |                                 | 2,391,277     
|                                         |                                 |               
|                                         |                                 |               
|Income (loss) from operations            |                                 | (87,188       
|                                         |                                 |               
|Minority interest in losses of CBSi      |                                 |              
|Interest expense                         |                                 | (26,179       
|                                         |                                 |               
|                                         |                                 |               
|Income (loss) before income taxes        |                                 | (113,367      
|                                         |                                 |               
|Income taxes                             |                                 |              
|                                         |                                 |               
|Net income (loss)                        |                                 | (113,367      
|                                         |                                 |               
|Preferred dividends                      |                                 | (10,000       
|                                         |                                 |               
|                                         |                                 |               
|Net income (loss) attributable to        |                                 |               
|common shareholders                      |                                 | $   (123,367  
|                                         |                                 |               
|                                         |                                 |               
|Income (loss) per common share-          |                                 |               
|basic and diluted                        |                                 | $         (.01
|                                         |                                 |               
|                                         |                                 |               
|Weighted average number of common shares |                                 |               
|outstanding:                             |                                 |               
|Basic                                    |                                 | 9,215,652     
|                                         |                                 |               
|                                         |                                 |               
|Diluted                                  |                                 | 9,215,652     
|                                         |                                 |               
|                                         |                                 |               

3



---

COGNIGEN
NETWORKS, INC.Unaudited
Consolidated Statements of Cash Flows

|                                                                             | Nine Months EndedSeptember 30, |             
|---------------------------------------------------------------------------- | ------------------------------ | ------------
|
|
|Cash flows from operating activities                                         |                                |             
|Net income (loss)                                                            |                                | $(113,367   
|                                                                             |                                |             
|Adjustments to reconcile net income (loss) to net cash provided by operating |                                |             
|activities:                                                                  |                                |             
|Depreciation and amortization                                                |                                | 1,416       
|Bad debt expense                                                             |                                | 11,352      
|Issuance of stock options and warrants                                       |                                | 9,422       
|Deferred tax expense                                                         |                                |            
|Changes in assets and liabilities:                                           |                                |             
|Accounts receivable                                                          |                                | 35,616      
|Commissions receivable, net                                                  |                                | (32,598     
|Other current assets                                                         |                                | 12,184      
|Accounts payable                                                             |                                | 262,017     
|Commissions payable                                                          |                                | (4,087      
|Accrued liabilities                                                          |                                | (101,085    
|Other current liabilities                                                    |                                | 20,578      
|                                                                             |                                |             
|Other liabilities                                                            |                                | 15,952      
|                                                                             |                                |             
|                                                                             |                                | 230,767     
|                                                                             |                                |             
|Net cash provided by (used in) operations                                    |                                | 117,400     
|                                                                             |                                |             
|                                                                             |                                |             
|Cash flows from investing activities                                         |                                |             
|Capital expenditures                                                         |                                | (16,978     
|Increase (decrease) other assets                                             |                                | (17,822     
|                                                                             |                                |             
|Net cash used in investing activities                                        |                                | (34,800     
|                                                                             |                                |             
|                                                                             |                                |             
|Cash flows from financing activities                                         |                                |             
|Payments on deferred commissions                                             |                                |            
|Increase (decrease) in receivables financing arrangement                     |                                | (82,600     
|                                                                             |                                |             
|Net cash provided by (used in) financing activities                          |                                | (82,600     
|                                                                             |                                |             
|                                                                             |                                |             
|Net increase (decrease) in cash and cash equivalents                         |                                |            
|                                                                             |                                |             
|Cash and cash equivalents-beginning of period                                |                                |            
|                                                                             |                                |             
|                                                                             |                                |             
|Cash and cash equivalents-end of period                                      |                                | $          
|                                                                             |                                |             
|                                                                             |                                |             

Supplemental
Disclosures of Cash Flow Information and Non-Cash Transactions

Cash payments
for interest expense during the three months ended September 30, 2006 and 2005 were
$26,179 and $8,865, respectively.

During the
three months ended September 30, 2006, the Company issued 1,246,028 common shares valued
at $137,163 for the  acquisition of 100% ownership of CBSi. See Note 4.

4



---

# COGNIGEN
NETWORKS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2006

Note
1  Description of Business

Cognigen
Networks, Inc. (the Company) was incorporated in May 1983 in the State of
Colorado. The Company is an Internet and relationship enabled marketer. The core
products that have been sold have been long distance telephone and personal
communications services. Revenue has been generated in two ways. First,
marketing commissions revenue has been generated from a number of vendors who
are represented on the Companys agent web sites and for whom the Company
sells their products and services via contractual agreements. Second,
telecommunications revenue has been generated through sales of the
Companys proprietary products and services through the Companys
agent web sites.

In
late July 2005, the Company formed LowestCostMall.com (LCM) an
online shopping website that offered thousands of products, ranging from
personal electronics, office products, and household items to toys, flowers and
jewelry, at discounted prices. LCM was offered by the agents through the same
methods they used to sell the Companys telecommunications and personal
technology services, with Vcommerce Corporation, an independent organization,
serving as the back office and provisioning all of the orders and direct
shipments from the manufacturer to the purchaser. However, because
LowestCostMall.com did not perform in accordance with expectations, by written
notification in July 2006, the Company terminated its agreement with
Vcommerce, and closed its down LCM operations.

On
July 7, 2006, the Company incorporated Cognigen Business Systems, Inc.
(CBSi). Through CBSi the Company provides integrated broadband
voice, data, video, and management communication and control support services to
the quick service retail (QSR) industry through an integrated suite
of services known as Retail Technologies CO-Op (RTC). CBSi was
formed by entry into an agreement with Anza Borrego Partners, Inc.
(ABP) pursuant to which the Company agreed to purchase two shares of
CBSi for $50,000 and ABP agreed to purchase two shares of CBSi in exchange for
contributing to CBSi all of ABPs assets (including intellectual property)
used, developed, or to be used in connection with its business plan for
providing RTC services to the QSR industry, including ABPs pilot
installations in various Subway restaurants located in San Diego County and
Oregon. The four shares of CBSi constitute all of the outstanding stock of CBSi.

In
connection with the formation of CBSi, the Company also obtained the option,
exercisable through September 7, 2006, to purchase ABPs two shares of CBSi
upon issuance to ABP of 1,246,028 shares of the Companys restricted common
stock. Pursuant to the terms of the option, the Company is also obligated to
deliver to ABP that number of shares of the Companys restricted common
stock as are equal to 5% of the pretax income of CBSi for the fiscal years
ending June 30, 2007, 2008 and 2009. Such common stock delivered to ABP will be
valued at the average market trading value of the common stock for the previous
20 trading days prior to the end of each fiscal year.

In
September 2006, the Company sent a letter to ABP in which the Company exercised
the option to purchase ABPs two shares of CBSi. The exercise was ratified
by the Companys Board of Directors on September 5, 2006. CBSi became a
wholly owned subsidiary of the Company in September 2006. CBSi offers its
bundled suite of integrated RTC broadband services to the approximately 21,000
Subway franchised restaurants located in the United States and plans to aggressively
pursue the over 1.5 million QSR industry establishments that, according to U.S.
Bureau of the Census data, comprise immediate market opportunities for
CBSis bundled RTC broadband services.

5



---

# COGNIGEN
NETWORKS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2006

Note 2
 Summary of Significant Accounting Policies

The
accompanying consolidated financial statements include the accounts of Cognigen
Networks, Inc. and its subsidiaries, Intandem Communications Corp. (Intandem),
LCM and CBSi. All intercompany accounts and transactions have been eliminated in
consolidation.

In the opinion
of management, all adjustments, consisting only of  normal recurring adjustments, have
been made to (a) the unaudited consolidated  statement of operations for the three months
ended September 30, 2006 and 2005,  respectively, (b) the unaudited consolidated balance
sheet as of September 30,  2006 and (c) the unaudited consolidated statements of cash
flows for the three  months ended September 30, 2006 and 2005, respectively, in order to
make the  financial statements not misleading.

The
accompanying unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for financial statements.
For further information, refer to the audited consolidated financial statements
and notes thereto for
the year ended June 30, 2006, included in the Companys Annual Report on
Form 10-KSB filed with the Securities and Exchange Commission.

The
preparation of the consolidated financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.

The
results for the three months ended September 30, 2006 may not necessarily be
indicative of the results for the fiscal year ending June 30, 2007.

On
November 21, 2001, the Company entered into a Stock Redemption Agreement, as
amended, with the Anderson Family Trust (AFT), a substantial stockholder of the
Company, and Cantara Communications Corporation (Cantara) whereby AFT sold
2,712,501 shares of the Companys common stock to the Company in exchange
for the transfer by the Company to Cantara of the original Cognigen Agency and
all of its downline agents. As a result of this transaction, Cantara received
the contingent right to receive all of its direct sales commissions and
generational downline commission overrides. During the first twelve months of
the ownership by Cantara of the former Cognigen Agency, now renamed Cantara,
Cantara agreed to a capping of the commissions payable to it.  Thereafter
commencing January 2003, Cantara has received the full direct and generational
override commissions it is entitled to earn pursuant to the existing and current
Company commission structure applicable for all agents. Payment of commissions
to Cantara was totally contingent upon the generation of sales by it and its
downline agents and payment for the products and services sold by the
Companys customers and vendors. The sales are generated either directly by
employees of Cantara and/or its downline sub-agents. Cantara contracted with
Kevin E. Anderson Consulting,
Inc. (KEAC), a corporation owned by Kevin E, Anderson, founder of Cognigen
Communications Corporation and a beneficiary of the AFT, to manage Cantara for a
set monthly fee. AFT owns approximately 11% of the Companys common stock.
Currently, the monthly commission payment to Cantara is approximately 10% of the
total commissions paid monthly to all of the Companys agents.

6



---

# COGNIGEN
NETWORKS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2006

Note 2
 Summary of Significant Accounting Policies (continued)

The
following presents statement of operations data and proforma data. The proforma
data reflect certain comparative statement of operations accounts for the three
months ended September 30 that reflect the increase in commissions expense for
the three months ended September 30, 2005 had the payments to the stockholder,
paid under the Stock Redemption Agreement, during this period been accounted for
as commissions expense rather than a reduction to deferred commissions payable.
Thereafter, commission expense to Cantara was reflected in the statement of
operations.

|                                    | Pro FormaThree MonthsEndedSeptember 30,2006 | ActualThree MonthsEndedSeptember 30,2006 | Pro FormaThree MonthsEndedSeptember 30,2005 | ActualThree MonthsEndedSeptember 30,2005
|----------------------------------- | ------------------------------------------- | ---------------------------------------- | ------------------------------------------- | ----------------------------------------
|Total revenue                       |                                             | $ 2,304,089                              |                                             | $ 2,304,089                             
|                                    |                                             |                                          |                                             |                                         
|                                    |                                             |                                          |                                             |                                         
|Operating expenses:                 |                                             |                                          |                                             |                                         
|Marketing commissions               |                                             | 1,194,229                                |                                             | 1,194,229                               
|Telecommunications                  |                                             | 490,455                                  |                                             | 490,455                                 
|Other                               |                                             |                                         |                                             |                                        
|Selling, general and administrative |                                             |                                          |                                             |                                         
|                                    |                                             | 705,177                                  |                                             | 705,177                                 
|Depreciation and amortization       |                                             | 1,416                                    |                                             | 1,416                                   
|                                    |                                             |                                          |                                             |                                         
|Total operating expenses            |                                             | 2,391,277                                |                                             | 2,391,277                               
|                                    |                                             |                                          |                                             |                                         
|                                    |                                             |                                          |                                             |                                         
|Income (Loss) from operations       |                                             | $   (87,188                              | )                                           | $   (87,188                             
|                                    |                                             |                                          |                                             |                                         
|                                    |                                             |                                          |                                             |                                         

Note
3 Financing Arrangements

Accounts
Receivable Financing Arrangement

The
balance of receivables financing arrangement as of September 30, 2006 is
$378,150. This represents the amount of marketing commissions receivables that
have been pledged under an Accounts Receivable Purchase Agreement (Receivables
Purchase Agreement) with Silicon Valley Bank. The Receivables Purchase Agreement
provides for up to $1,250,000 in marketing commissions receivable to be used as
collateral for advances under the Receivables Purchase Agreement of which 75% of
the marketing commissions receivable balances are available in cash advances to
the Company. Interest charges are 1.3% per month on the marketing commissions
receivable balances used as collateral. The bank was given a Security Agreement
in the assets of the Company including any of the Companys copyrights,
trademarks, patents and mask works, as a condition to the Receivables Purchase
Agreement. The Receivables Purchase Agreement is renewable from year to year
unless terminated in writing by either party.

Term Loan

On
October 10, 2006, the Company entered into an agreement with Ven Core Solutions,
LLC (Ven Core) to borrow $250,000 in a term loan to be repaid
principal and interest of $9,000 monthly including interest at 16.7%. The loan
is fully amortizable over 36 months. As part of the agreement, the Company
issued to Ven Core 75,000 warrants to purchase 75,000 shares of restricted
common stock of the Company valued at 5,093 based on a Black Scholes calculation.
The warrants were granted at $.12 per share and are
exercisable for up to seven years from date of grant. The Company also gave Ven
Core a lien behind Silicon Valley Bank and Global Crossing on all assets of the
company, to the extent of the loan balance outstanding until the loan is fully
paid. Commitment and documentation fees of $5,500 were paid to Ven Core. These
fees are being amortized over three years as an adjustment to interest expense.
This loan was funded on October 11, 2006.

7



---

# COGNIGEN
NETWORKS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2006

Note
4 Stockholders Deficit

Preferred
Stock

As of
September 30, 2006, the Company has authorized 20,000,000 shares of preferred
stock. The Company has designated 500,000 shares as 8% Convertible Series A.

On
October 17, 2002 the Company issued 500,000 shares of 8% Convertible Series A
Preferred Stock (Preferred Stock) to Stanford Venture Capital Holdings, Inc. for
$500,000. Each share of the 8% Convertible Series A Preferred Stock is
convertible, at the option of the holder, into one share of the Companys
common stock for a period of five years. After five years the Preferred Stock is
automatically converted to common stock. The Preferred Stock does not have
voting rights and has a liquidation preference of $1.00 per share. In
conjunction with the issuance of the Preferred Stock, the Company paid $30,000
in cash and issued 64,516 shares of the Companys common stock valued at
$20,000 to unaffiliated third-parties as a finders fee.

Dividends
on the Preferred Stock are cumulative at the rate of 8% per annum of the
liquidation value, $1.00 per share, are payable in cash, when and if declared by
the Board of Directors, and are preferential to any other junior securities, as
defined. The Board has not declared any such dividends. Because of the
cumulative nature of these dividends, if all dividends were to be declared the
balance owing would be $218,225 as of September 30, 2006.

CBSi

In
connection with the formation of CBSi, the Company also obtained the option,
exercisable through September 7, 2006; to purchase ABPs two shares of CBSi
upon issuance to ABP of 1,246,028 shares of the Companys restricted common
stock. Pursuant to the terms of the option, the Company is also obligated to
deliver to ABP that number of shares of the Companys restricted common
stock as are equal to 5% of the pretax income of CBSi for the fiscal years
ending June 30, 2007, 2008 and 2009. Such common stock delivered to ABP will be
valued at the average market trading value of the common stock for the previous
20 trading days prior to the end of each fiscal year. In September 2006, the
Company sent a letter to ABP in which the Company exercised the option to
purchase ABPs two shares of CBSi. The exercise was ratified by the
Companys Board of Directors on September 5, 2006. CBSi became a wholly
owned subsidiary of the Company in September 2006. See Note 1.

BayHill
Agreement

By
mutual agreement in May of 2006, BayHill and the Company agreed to terminate the
agreement. In September 2006, BayHill and the Company agreed to issue to BayHill
169,792 restricted common shares of Cognigen in return for canceling any further
financial obligations Cognigen had to BayHill under the original agreement and
canceling outstanding warrants given to BayHill. These restricted common shares
will have piggyback rights and a one time demand right to register if the
Company is able to bring in $5,000,000 in equity or new funding. See Note 5.

8



---

# COGNIGEN
NETWORKS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2006

Note
5  Stock Options and Warrants

BayHill
Agreement

On
November 22, 2005, the Company and the BayHill Group LC (BayHill) entered into
an agreement whereby BayHill agreed to provide services to assist the Company in
developing business strategies and other corporate matters, including assisting
the Company in its strategic planning activities, raising capital, finding
companies for the Company to acquire, assisting the Company in its investor
relations activities and serving in various interim management capacities as
requested. The term of the agreement was for six months. Cognigen gave BayHill a
notice of termination of this contract which ended May 21, 2006.

For
providing services pursuant to the agreement, the Company paid BayHill $10,000
per month for six months commencing November 22, 2005. Of the $10,000, one half
was accrued until the Company received cumulative equity funding in amounts
greater than $1,000,000 or acquired another business or businesses which have at
least $1,000,000 in cash.

The
Company agreed to grant BayHill warrants to purchase 437,500 shares of common
stock at an exercise price of $.23 per share. The warrants were to vest
according to a schedule if the Company met certain parameters. The Company had
agreed to grant BayHill certain piggyback and demand registration rights.

By
mutual agreement in May 2006, BayHill and the Company agreed to terminate the
agreement. In September 2006, BayHill and the Company agreed to issue to BayHill
169,792 restricted common shares of Cognigen in return for canceling any further
financial obligations Cognigen had to BayHill under the original agreement and
canceling outstanding warrants given to BayHill. These restricted common shares
will have piggyback rights and a one time demand right to register if the
Company is able to bring in $5,000,000 in equity or new funding.

Stock Option
Plan

The
Company has established the 2001 Incentive and Non-statutory Stock Option Plan
(the Plan), which authorizes the issuance of up to 625,000 shares of the
Companys common stock. The Plan will remain in effect until 2011 unless
terminated earlier by an action of the Board. All employees, board members and
consultants of the Company are eligible to receive options under the Plan at the
discretion of the Board. Options issued under the Plan vest according to the
individual option agreement for each grantee.

In
September, 2006, the Company granted an officer of the Company who became the
vice president of sales and marketing, options to purchase 210,000 shares of
common stock of the Company valued at 4,329 based on a Black Scholes calculation. These options vest over three years, are
exercisable at the then market value and expire in five years from the date of
grant.

As of
September 30, 2006, the number of stock options outstanding under the Plan was
459,000.

As of
September 30, 2006, the number of stock options outstanding not under any plan
was 435,000.

As of
September 30, 2006, there were 625,000 warrants outstanding that were
exercisable into shares of common stock of the Company.

9



---

# COGNIGEN
NETWORKS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2006

Note 6
 Commitments and Contingencies

LowestCostMall

On
April 19, 2005, the Company entered into a Services Agreement with Vcommerce
Corporation pursuant to which Vcommerce agreed to provide the Company with the
back office for an online retail store, which the Company began offering to
customers in July 2005 through its sales agent force and subsidiary, LCM.
Pursuant to the Services Agreement, Cognigen paid Vcommerce $55,000 and has
accrued $25,000 on its balance sheet. In addition, the Company was to pay
Vcommerce a fee of $4,000 per month for monthly hosting services and other fees
as agreed upon by the Company. The Services Agreement was transferred to LCM
with a guarantee of such provisions in the agreement by Cognigen Networks, Inc.

LCM
did not perform in accordance with expectations, thus by written notification in
July 2006, the Company terminated its agreement with Vcommerce, and has
closed down LCM operations. According to the termination clause in the Services
Agreement, the Company has accrued a $24,000 termination fee in its balance
sheet.

Other
Contingencies

The
Company has granted a security interest to Global Crossing Bandwidth, Inc.
(Global Crossing) in the assets of the Company to the extent the assets relate
to services provided by Global Crossing and to the extent any amounts remain
outstanding to Global Crossing. This security interest is second to an existing
security interest by Silicon Valley Bank described in Note 3.

Note
7  Related Party Information

Stock
Redemption Agreement between the Company, the Anderson Family Trust, Cantara
Communications Corporation, and Kevin E. Anderson Consulting, Inc.

On
December 7, 2001, the Company closed a transaction in which it purchased, or
redeemed, 2,712,500 shares of the Companys common stock from the Anderson
Family Trust. The Anderson Family Trust delivered shares from those owned by
Cognigen Corporation, a company 98.9 % owned by AFT, to satisfy its obligation
pursuant to the transaction. Kevin E. Anderson and members of his family are the
beneficiaries of AFT. Kevin E. Anderson may be deemed to beneficially own the
shares of our common stock owned by AFT.

As
consideration for the return of the 2,712,500 shares to us, among other
consideration, the Company transferred to Cantara, an affiliate of Kevin E.
Anderson, the rights to become the up-line for our current accounts and thereby
be entitled to commissions, fees and bonuses on our current customer accounts,
with a commission not to exceed 12%, which commissions were agreed to be capped
by Cantara through December 31, 2002. The amount of commissions, fees and
bonuses that Cantara is entitled to is totally contingent upon the generation of
sales by it and its down line agents and payment for the products and services
sold by the Companys customers and vendors. The sales are generated either directly by
Cantara and/or its down-line sub-agents. For the three months ended September
30, 2006 and 2005, the Company paid Cantara $109,581 and $133,299 in
commissions, respectively. In addition, as a part of the transaction, the
Companys agreement with Kevin E. Anderson Consulting, Inc., pursuant to
which the Company paid Kevin E. Anderson Consulting, Inc. consulting fees of
$14,583 per month, was cancelled and Kevin E. Anderson was retained through
March 31, 2003 at the rate of $1,000 per month to provide up to 20 hours
telecommuting consulting services to the Company per month.

10



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# COGNIGEN
NETWORKS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2006

Note 7
 Related Party Information (continued)

Stock
Redemption Agreement between the Company, the Anderson Family Trust, Cantara
Communications Corporation, and Kevin E. Anderson Consulting, Inc. (continued)

In
March 2003, the Company entered into a separate consulting agreement with Kevin
E. Anderson Consulting, Inc to provide expanded consulting and
technical/administrative services. For the three months ended September 30, 2006
and 2005, the Company paid Kevin E. Anderson Consulting, Inc. $13,500 and
$13,500, respectively, pursuant to the consulting agreement.

For
the three months ended September 30, 2006 and 2005, Cognigen also paid members
of Kevin E. Andersons family $14,000 and $13,500 in agent commissions,
respectively.

On
December 9, 2005, the Company entered into an agreement, as amended, with AFT
and Cantara (the Cantara Purchase Agreement). Under the Cantara Purchase
Agreement, the Company has paid the AFT a total of $135,000 as of September 30,
2006. The Stock Redemption Agreement will terminate if the Company pays AFT a
total of $1,500,000 by March 15, 2011 pursuant to a schedule set forth in the
Cantara Purchase Agreement, as amended. The next payments are due on October 15,
2006, November 15, 2006 and December 15, 2006 of $5,000 each. Payments during
subsequent months increase until all payments totaling $1,550,000 by March 15,
2011 are made. AFT continues to receive 100% of the amount due to the Cantara
Agency until December 29, 2006, if all required payments are made, at which time
the company will begin receiving 10% of commission due. Thereafter, the
percentage that the AFT receives reduces as the Company makes additional
payments. The Company has the right to prepay any unpaid amounts due at any time
and stop all payments to the AFT under the Stock Redemption Agreeement.

Consulting
Arrangements with Combined Telecommunications Consultancy, Ltd. and Commission Payments
to Telkiosk, Inc.

The
Company previously had an agreement with Combined Telecommunications
Consultancy, Ltd. (CTC), of which slightly less than 35% is owned by Peter
Tilyou, pursuant to which CTC received a percentage of a transaction if CTC
introduced a transaction to the Company and was paid a consulting fee of $150
per hour for providing consulting services to the Company. Although this
agreement was not formally renewed, it is the Companys intentions to pay
CTC under the same structure for any services rendered to the Company. In
conjuction with the term loan described in Note 5, the Company paid CTC $14,000 under
terms of the agreement for assistance in the sales of the mentioned assets.

Payments to
Former Chief Executive Officer

Thomas
S. Smith resigned as the Companys Chief Executive Officer in September
2005. After Mr. Smith resigned, the Company had an oral agreement with Thomas S.
Smith pursuant to which the Company retained Mr. Smith or any law firm with
which he became associated with to provide certain legal services to the Company
on a monthly retainer of $12,500 per month. The agreement was terminable upon 60
days by written notice by either party which notice was given by the Company to
Mr. Smith on December 22, 2005. After this date, the Company continued to use
law firms which who Mr. Smith was associated for legal services which amounted
to approximately $30,000 for the three months ended September 30, 2006.

Note
8  Subsequent Events

Sale of
Proprietary Telecomunications Accounts

On
October 13, 2006, the Company agreed to sell and closed the sale of its interest
in the majority of its telecommunications one plus accounts for which it records
telecommunications revenue through sales of proprietary products and services.
The sales price offered to the Company and agreed to by the Board of Directors
was 1.5 multiplied by monthly revenue of the accounts from the third full
monthly billing cycle. The buyer paid $200,000 down and will pay the remainder
upon reaching regulatory approval, but retaining $25,000 until six months after
regulatory approval to address potential tax and other miscellaneous
liabilities. The sales price was determined reasonable by management based on
other similar proposals received for the same assets and based on industry
trends. The proceeds are intended to be used as working capital for the Company
and towards operational start up activities in its subsidiary CBSi. Had these
assets been sold as of July 1, 2006 revenues for the three months ended
September 30, 2006 would have been lower by approximately $700,000. The loss
from operations would have been approximately the same.

11



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Item 2.     MANAGEMENTS
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview

We
are an Internet and relationship enabled marketer. The core products that we
have sold have been long distance telephone and personal communications
services. We have generated revenue in two ways. First, marketing commissions
revenue has been generated from a number of vendors who are represented on our
agent web sites and for whom we sell their telecommunications and other products
and services via contractual agreements. Second, we have generated
telecommunications revenue through sales of our proprietary products and
services through our agent web sites. Our founder, Kevin E. Anderson, pioneered
our Internet based long distance telecommunication marketing opportunity in the
1990s. We have invested millions of dollars in developing business systems
for our independent agent network around the world. To date, over 860,000
customers have purchased telecommunication and personal technology services and
products from our websites. Each of the individuals, who are currently
registered as our agents, has a website that is replicated from the main
www.ld.net site.

In
late July 2005, the Company formed LowestCostMall.com (LCM) an
online shopping website that offered thousands of products, ranging from
personal electronics, office products, and household items to toys, flowers and
jewelry, at discounted prices. LCM was offered by the agents through the same
methods they used to sell the Companys telecommunications and personal
technology services, with Vcommerce Corporation, an independent organization,
serving as the back office and provisioning all of the orders and direct
shipments from the manufacturer to the purchaser. However, because
LowestCostMall.com did not perform in accordance with expectations, by written
notification in July 2006, the Company terminated its agreement with
Vcommerce and has closed down LCM operations.

On
July 7, 2006, the Company incorporated Cognigen Business Systems, Inc.
(CBSi). Through CBSi the Company provides integrated broadband
voice, data, video, and management communication and control support services to
the quick service retail (QSR) industry through an integrated suite
of services known as Retail Technologies CO-Op (RTC. CBSi offers its
bundled suite of integrated RTC broadband services to the approximately 21,000
Subway franchised restaurants located in the United States and to aggressively
pursue the over 1.5 million QSR industry establishments that, according to U.S.
Bureau of the Census data, comprise immediate market opportunities for
CBSis bundled RTC broadband services.

We
continue to make a strategic transition in our business profile and delivery of
telecommunications products and services. We began our business as an agent,
representing and selling the telecommunications services and products of outside
vendors primarily to residential users, and then moved to selling multiple
branded products and services whereby the customer and account are owned by us.
We refer to these later products and services as our proprietary products and
services. The most significant impact of this strategic transition is that by
billing our owned customer accounts, we generate approximately five to seven
times as much revenue compared to commission revenue we receive from vendors.
Although we have agreed to sell the majority of our existing primarily
residential oriented proprietary telecommunications accounts, it is our
intentions that this will be more than replaced by our sales within CBSi of
higher margined accounts such as broadband services for which we will record top
line revenue.

Through
the acquisition of multiple state licenses, billing capability, and new
distribution channels, we can grow revenue, maintain closer contact to our
customers, and control bottom line retention and contribution to a greater
degree including that which we do in CBSi with our broadband services.

See
additional discussion of liquidity and capital resources below.

12



---

Three Months
Ended September 30, 2006 Compared to Three Months Ended September 30, 2005

Total
revenue for the three months ended September 30, 2006 was $2,304,089 compared to
$2,821,872 for 2005. Marketing commissions revenue was $1,503,409 for 2006
compared to $1,741,972 for the prior year. Telecommunications revenue was
$800,680 for 2006 as compared to $1,073,617 for 2005.

Marketing
commissions revenue for 2006 decreased by $238,563 from that of 2005, or 14%.
This decrease reflects increases in sales of cellular products more than offset
by decreases in sales of long distance products.

Telecommunications
revenue decreased $272,937 for 2006 compared to 2005, or 25%. This decrease
results from lower sales of our proprietary products and services, as well as,
lower selling prices of those products and services due to declining long
distance rates.

Marketing
commissions expense decreased slightly from $1,093,684 for 2005 to $1,080,387
for 2006, an decrease of $13,297, or 1%. The decrease is largely related to the
decrease in the sales of long distance products. The higher percentage in
marketing commissions expense as a percentage of the related revenue compared to
the prior year results from a difference in product mix between the periods and
the payment of higher commission expense to certain master sales agents who have
been added to our sales agent force to increase volume and sell certain products
and services such as cellular products.

In
addition, marketing commission expense increased in October 2005 when we began
accruing payments to Cantara as marketing commissions expense. During the three
months ended September 30, 2006, the Company expensed approximately $120,000
related to payments made to Cantara as marketing commissions. In the prior
period, these payments were reflected as a reduction of the amounts owed to
Cantara as a result of the Stock Redemption Agreement entered into in November
2001 (see Note 2 to the Consolidated Financial Statements). Accordingly, we
reported income from operations for the three months ended September 30, 2005 of
$79,004. If we had accounted for payments to Cantara in the prior period in a
manner similar to the current year, we would have reported a net loss for that
period of approximately $50,000. This change in accounting did not effect on
our cash flows since we have been paying approximately $120,000 to $150,000 of
marketing commissions each quarter to Cantara related to this obligation. See
proforma information in Note 2 to the Consolidated Financial Statements.

Telecommunications
commissions expense decreased from $155,840 for 2005 to $113,842 for 2006, a
decrease of $41,998, or 27%. This decrease is consistent with the decrease
described above in telecommunications revenue.

Telecommunications
expense, or carrier costs, decreased from $689,904 for 2005 to $490,455 for
2006, or a decrease of $199,449, or 29%. This decrease correlates to the
decrease in telecommunications revenue described above. The margins on our
telecommunications revenue decreased compared to the prior period reflective of
higher carrier costs and a highly competitive market for long distance customers
being driven by declining long distance rates.

Selling,
general and administrative expenses decreased $88,914 or 11% for 2006 compared
to 2005. This decrease is largely attributable to lower bad debt expense on the
sales of our proprietary products and general expenses reductions in several
other areas as we try and contain expenses.

Interest
expense for 2006 of $26,179 compared to $8,865 for 2005. The increase relates to
higher average debt levels than in the prior period.

13



---

Liquidity
and Capital Resources

We
have historically funded our operations primarily from sales of securities,
loans and operations. As of September 30, 2006 we effectively had no cash and
cash equivalents as everything had been applied to the receivables financing
arrangement. Negative working capital was $1,088,043. Cash provided by
operations during the three months ended September 30, 2006 was $117,400. Cash
used in financing activities of $82,600 related to payment on receivable
financing arrangement balances.

We
have a balance outstanding under a receivables financing arrangement with
Silicon Valley Bank as of June 30, 2006 of $378,150. This represents the amount
of marketing commissions receivables that have been pledged under an Accounts
Receivable Purchase Agreement (Receivables Purchase Agreement) with a bank. The
Receivables Purchase Agreement provides for up to $1,250,000 in marketing
commissions receivable to be used as collateral for advances under the
Receivables Purchase Agreement of which 75% of the marketing commissions
receivable balances are available in cash advances to us. Interest charges are
1.3% per month on the marketing commissions receivable balances used as
collateral. After one year, the Receivables Purchase Agreement is from year to
year unless terminated in writing by either party. We are in compliance with the
terms and conditions of the Receivables Purchase Agreement.

On
October 10, 2006, the Company entered into an agreement with Ven Core Solutions,
LLC (Ven Core) to borrow $250,000 in a term loan to be repaid
monthly as principal and interest at approximately 16.7% interest rate. The loan
is fully amortizable over 36 months. As part of the agreement, the Company
issued to Ven Core 75,000 warrants to purchase 75,000 shares of restricted
common stock of the Company. The warrants were granted at $.12 per share and are
exercisable for up to seven years from date of grant. The Company also gave Ven
Core a lien behind Silicon Valley Bank and Global Crossing on all assets of the
Company, to the extent of the loan balance outstanding until the loan is fully
paid. Commitment and documentation fees of $5,500 were paid to Ven Core. This
loan was funded on October 11, 2006.

On
October 13, 2006, the Company agreed to sell and sold its interest in the
majority of its telecommunications one plus accounts for which it records
telecommunications revenue through sales of proprietary products and services.
The sales price offered to the Company and agreed to by the Board of Directors
was 1.5 multiplied by monthly revenue of the accounts from the third full
monthly billing cycle. The buyer paid $200,000 down and will pay the remainder
upon reaching regulatory approval, but retaining $25,000 until six months after
regulatory approval to address potential tax and other miscellaneous
liabilities. The sales price was determined reasonable by management based on
other similar proposals received for the same assets and based on industry
trends. The proceeds are intended to be used as working capital for the Company
and towards operational start up activities in its subsidiary CBSi.

Cash
flows generated from operations and from our receivables financing arrangement
were sufficient to meet our working capital requirements for the three months
ended September 30, 2006, but may not be sufficient to meet our working capital
requirements for the foreseeable future or provide for expansion opportunities.
We incurred $113,367 in net losses although we did have cash flows
for operations of $117,400.

As
previously mentioned, we have acquired CBSi and we anticipate that this new
business venture will generate profit from operations in 2008. In October 2006
we closed on a new financing that, as discussed in Note 3 to the consolidated
financial statements, generated $250,000 for us. We are in negotiations to
replace our current financing agreements related to debt financing in an
opportunity that will reduce our cost of borrowing. In addition, we are in
discussions with interested parties to bring in equity that will also help
reduce our cost of borrowing and allow us to pursue opportunities with CSBi. On
October 13, 2006, we closed on a transaction where, as discussed in Note 8 to
the consolidated financial statements, we sold certain of our telecommunication
accounts and received $200,000.

14



---

There
can be no assurance we will be able to secure additional debt or equity
financing, that we will be able to reduce or eliminate more costs and expenses
or that cash flows from operations will produce adequate cash flow to enable us
to meet all of our future obligations or to be able to expand. However, we
believe that we will be successful in producing sufficient cash flows from all
collective sources to continue for at least the next twelve months.

Forward
Looking Statements

Certain
of the information discussed herein, and in particular in this section entitled
Managements Discussion and Analysis or Plan of Operation,
contains forward looking statements that involve risks and uncertainties that
might adversely affect our operating results in the future in a material way.
Such risks and uncertainties include, without limitation, our possible inability
to become or remain certified as a reseller in all jurisdictions in which we
apply or are currently certified, the possibility that our proprietary customer
base will not grow as we expect, our possible inability to obtain additional
financing, the possible lack of producing agent growth, our possible lack of
revenue growth, our possible inability to add new products and services that
generate increased sales, our possible lack of cash flows, our possible loss of
key personnel, the possibility of telecommunication rate changes and
technological changes and the possibility of increased competition. Many of
these risks are beyond our control. We are not entitled to rely on the safe
harbor provisions of Section 27A of the Securities Act of 1933, as amended, or
Section 21E of the Securities Exchange Act of 1934 as amended, when making
forward-looking statements.

Item 3.     Controls
and Procedures

(a)   
Evaluation of disclosure controls and procedures.

Under
the supervision and with the participation of our management, including our
Acting Chief Executive Officer and our Chief Financial Officer, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures ( as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934) at the end of the period covered by this report. Based
upon that evaluation, our Acting Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are effective.

In
preparing prior audits, our auditors identified potential deficiencies within
our internal control framework which have the potential to result in a material
control weakness. These potential control deficiencies relate to the manner in
which we process transactions to record telecommunications revenue and related
accounts receivable as our current processes and procedures require substantive
manual intervention, estimation and reliance on several sources of information
that are not integrated with our accounting system.

In
addition, our Chief Financial Officer oversees our accounting and general
internal control process. As we have a very limited staff, we can not afford the
luxury of having other financial accounting minded management members at his
level that would help either crosscheck or advise in the accounting or financial
reporting process. Although, our Chief Financial Officer is constantly involved
in consultation with peers in the field of accounting and reporting, this
situation could potentially result in a material control weakness.

15



---

Our
certifying officer does not believe that the potential control deficiencies
constitute material weaknesses because of the number of compensating internal
controls already in place. However, we are a small company and due to the fact
that we have a limited number of employees, we are not able to have proper
segregation of duties. Thus, we may be deemed to have material weaknesses in our
internal control structure because of the lack of segregation of duties.

(b)   
Changes in internal controls.

There
were no changes made in our internal controls over financial reporting during
the period covered by this report or, to our knowledge, in other factors that
could affect these controls subsequent to the date of their evaluation.

Part
II  Other Information

Item
6.  Exhibits

EXHIBIT
NO.            DESCRIPTION AND METHOD OF FILING

|2.1 |  | Stock for Stock Exchange Agreement dated May 12, 2004 by among Jimmy L. Boswell,
David G. Lucas, Reginald W., Einkauf and John D. Miller (incorporated by
reference to Exhibit 2.1 to our Current Report on Form 8-K filed on June 3,
2004).
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1 |  | Articles of Incorporation filed on May 6, 1983 (incorporated by reference to
Exhibit 3.1 to our Annual Report on Form 10-KSB for the year ended June 30,
2000).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.2 |  | Articles of Amendment to our Articles of Incorporation filed on June 23,
1988 (incorporated by reference to Exhibit 3.2 to our Annual Report on Form
10-KSB for the year ended June 30, 2000).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.3 |  | Articles of Amendment to our Articles of Incorporation filed on July 12, 2000
(incorporated by reference to Exhibit 3.3 to our Annual Report on Form 10-KSB
for the year ended June 30, 2000).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.4 |  | Articles of Amendment to our Articles of Incorporation filed on March 16, 2001
(incorporated by reference to our Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2001).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.5 |  | Articles of Amendment to our Articles of Incorporation filed on October 16, 2002
(incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K
filed on November 4, 2002).3.6 Bylaws as amended through May 17, 2005,
(incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K
filed on May 19, 2005).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.1 |  | Purchase Agreement among us, Stanford Financial Group Company, Inc. and Stanford
Venture Capital Holdings, Inc. (incorporated by reference to Exhibit 10 to our
Current Report on Form 8-K filed on November 4, 2002).
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 |  | Form of Option to Purchase Common Stock (incorporated by reference to Exhibit
10.7 to our Annual Report on Form 10-KSB for the year ended June 30, 2000).
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 |  | 2001 Incentive and Nonstatutory Stock Option Plan (incorporated by reference to
Exhibit 10 to our Quarterly Report on Form 10-QSB for the quarter ended March
31, 2001).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 |  | Stock Redemption Agreement dated November 30, 2001 between us, the Anderson
Family Trust, Cantara Communications Corporation, Kevin E. Anderson Consulting,
Inc. (without Exhibits A and B) (incorporated by reference to Exhibit 10.1 to
our Current Report on Form 8-K filed on December 20, 2001).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16



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EXHIBIT
NO.            DESCRIPTION AND METHOD OF FILING

|10.5 |  | Transitional Supplemental Consulting Engagement letter dated July 11, 2002,
between us and Kevin E. Anderson Consulting, Inc. (incorporated by reference to
Exhibit 10.10 to our Annual Report on Form 10-KSB for the year ended June 30,
2002).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 |  | Consultancy Engagement Agreement dated September 9, 2002, by and between us and
Combined Telecommunications Consultancy, Ltd and letter dated September 9, 2003
extending the Consulting Engagement Agreement (incorporated by reference to
Exhibit 10.11 to our amended Annual Report Form 10-KSB/A for the year ended June
30, 2003.)
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 |  | Modified Supplemental Consulting Engagement letter dated March 4, 2003 between
us and Kevin Anderson (incorporated by reference to our amended Annual Report on
Form 10-KSB/A for the year ended June 30, 2003).
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 |  | Extension of Modified Supplemental Consulting Engagement Agreement dated
February 9, 2004 between us and Kevin Anderson Consulting, Inc. (incorporated by
reference to Exhibit 2.1 to our Quarterly Report on Form 10-QSB for the Quarter
ended December 31, 2003).
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 |  | Amendment dated September 9, 2004, to Consulting Engagement Agreement between us
and Combined Telecommunications Consultancy, Ltd. (incorporated by reference to
Exhibit 10.15 to our Annual Report on Form 10-KSB for the fiscal year ended June
30, 2004).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 |  | Accounts Receivable Purchase Agreement dated December 26, 2003, between us and
Silicon Valley Bank (incorporated by reference to Exhibit 10.16 to our Annual
Report on Form 10-KSB for the fiscal year ended June 30, 2004).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.11 |  | Accounts Receivable Purchase Modification Agreement dated November 24, 2004
between us and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 to
our Current Report on Form 8-K filed on December 10, 2004).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 |  | Letter Agreement with Segal & Co. Incorporated dated February 28, 2005
(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K
filed on March 1, 2005).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 |  | An Agreement Granting a First Right of Refusal to Purchase Enterprise Assets
(incorporated by reference to our Current Report on Form 8-K filed on June 23,
2005).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 |  | Agreement dated November 22, 2005, between the BayHill Group LLC and us
(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K
filed on November 25, 2005).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.15 |  | Agreement dated December 9, 2005, among us, the Andersen Family Trust No. 1 and
Cantara Communications corporation (incorporated by reference to reference to
Exhibit 10.1 to our Current Report on Form 8-K filed on December 15, 2005).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

17



---

EXHIBIT
NO.            DESCRIPTION AND METHOD OF FILING

|10.16 |  | Email dated April 21, 2006, terminating the BayHill Group LLC Agreement dated
November 22, 2005 (incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on May 15, 2006).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.17 |  | Amendment #1, dated March 14, 2006, to Agreement Dated December 9, 2005, among
us, the Andersen Family Trust No. 1 and Cantara Communications Corporation
(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K
filed on May 15, 2006).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.18 |  | Amendment #2, dated May 12,, 2006, to Agreement Dated December 9, 2005, among
us, the Andersen Family Trust No. 1 and Cantara Communications Corporation
(incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K
filed on May 15, 2006).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.19 |  | Common Stock Purchase Agreement, dated July 7, 2006, among us, Anza Borrego
Partners, Inc., and Cognigen Business Systems, Inc. (incorporated by reference
to Exhibit 10.1 to our Current Report on Form 8-K filed on July 17, 2006).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 |  | Termination Agreement, dated September 8, 2006, between us and Custom Switching
Technologies, Inc (incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on September 11, 2006).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.21 |  | Settlement Agreement and Mutual Release, dated September 8, 2006, between us and
Custom Switching Technologies, Inc (incorporated by reference to Exhibit 10.2 to
our Current Report on Form 8-K filed on September 11, 2006).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.22 |  | Loan and Security Agreement Number 1601, between us and Ven Core Solutions, LLC,
including Warrant Purchase Agreements dated October 10, 2006 (incorporated by
reference to Exhibit 10.22 to our Form 10-KSB filed on October 13, 2006).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.23 |  | Asset Purchase Agreement dated October 13, 2006, between us and Acceris
Management and Acquisition LLC, including Management Services Agreement(incorporated by
reference to Exhibit 10.23 to our Form 10-KSB filed on October 13, 2006).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24. |  | Amendment #3, dated October 13, 2006, to Agreement dated December 9, 2005
between us, the Anderson Family Trust No. 1 and Cantara Communications
Corporation(incorporated by
reference to Exhibit 10.24 to our Form 10-KSB filed on October 13, 2006).
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14.1 |  | Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1
to our Annual Report on Form 10-KSB for the year ended June 30, 2004).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

|21 |  | Subsidiaries
|-- |  | ------------

|31 |  | Certification
of Chief Executive and Chief Financial Officer required by Rule 13a-14(a).
|-- |  | ----------------------------------------------------------------------------------------

|32 |  | Certification of Chief Executive and Chief Financial Officer required by Section
906 of the Sarbanes-Oxley Act of 2002.
|-- |  | -----------------------------------------------------------------------------------------------------------------------

18



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SIGNATURES

In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

COGNIGEN
NETWORKS, INC.

|                                                           | 
|---------------------------------------------------------- | 
|By:  /s/ Gary L. Cook                                      | 
|Gary L. Cook                                               | 
|Acting Chief Executive Officer and Chief Financial Officer | 

19



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# EXHIBIT
INDEX

EXHIBIT
NO.            DESCRIPTION AND METHOD OF FILING

|2.1 |  | Stock for Stock Exchange Agreement dated May 12, 2004 by among Jimmy L. Boswell,
David G. Lucas, Reginald W., Einkauf and John D. Miller (incorporated by
reference to Exhibit 2.1 to our Current Report on Form 8-K filed on June 3,
2004).
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1 |  | Articles of Incorporation filed on May 6, 1983 (incorporated by reference to
Exhibit 3.1 to our Annual Report on Form 10-KSB for the year ended June 30,
2000).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.2 |  | Articles of Amendment to our Articles of Incorporation filed on June 23,
1988 (incorporated by reference to Exhibit 3.2 to our Annual Report on Form
10-KSB for the year ended June 30, 2000).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.3 |  | Articles of Amendment to our Articles of Incorporation filed on July 12, 2000
(incorporated by reference to Exhibit 3.3 to our Annual Report on Form 10-KSB
for the year ended June 30, 2000).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.4 |  | Articles of Amendment to our Articles of Incorporation filed on March 16, 2001
(incorporated by reference to our Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2001).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.5 |  | Articles of Amendment to our Articles of Incorporation filed on October 16, 2002
(incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K
filed on November 4, 2002).3.6 Bylaws as amended through May 17, 2005,
(incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K
filed on May 19, 2005).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.1 |  | Purchase Agreement among us, Stanford Financial Group Company, Inc. and Stanford
Venture Capital Holdings, Inc. (incorporated by reference to Exhibit 10 to our
Current Report on Form 8-K filed on November 4, 2002).
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 |  | Form of Option to Purchase Common Stock (incorporated by reference to Exhibit
10.7 to our Annual Report on Form 10-KSB for the year ended June 30, 2000).
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 |  | 2001 Incentive and Nonstatutory Stock Option Plan (incorporated by reference to
Exhibit 10 to our Quarterly Report on Form 10-QSB for the quarter ended March
31, 2001).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 |  | Stock Redemption Agreement dated November 30, 2001 between us, the Anderson
Family Trust, Cantara Communications Corporation, Kevin E. Anderson Consulting,
Inc. (without Exhibits A and B) (incorporated by reference to Exhibit 10.1 to
our Current Report on Form 8-K filed on December 20, 2001).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 |  | Transitional Supplemental Consulting Engagement letter dated July 11, 2002,
between us and Kevin E. Anderson Consulting, Inc. (incorporated by reference to
Exhibit 10.10 to our Annual Report on Form 10-KSB for the year ended June 30,
2002).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 |  | Consultancy Engagement Agreement dated September 9, 2002, by and between us and
Combined Telecommunications Consultancy, Ltd and letter dated September 9, 2003
extending the Consulting Engagement Agreement (incorporated by reference to
Exhibit 10.11 to our amended Annual Report Form 10-KSB/A for the year ended June
30, 2003.)
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20



---

EXHIBIT
NO.            DESCRIPTION AND METHOD OF FILING

|10.7 |  | Modified Supplemental Consulting Engagement letter dated March 4, 2003 between
us and Kevin Anderson (incorporated by reference to our amended Annual Report on
Form 10-KSB/A for the year ended June 30, 2003).
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 |  | Extension of Modified Supplemental Consulting Engagement Agreement dated
February 9, 2004 between us and Kevin Anderson Consulting, Inc. (incorporated by
reference to Exhibit 2.1 to our Quarterly Report on Form 10-QSB for the Quarter
ended December 31, 2003).
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 |  | Amendment dated September 9, 2004, to Consulting Engagement Agreement between us
and Combined Telecommunications Consultancy, Ltd. (incorporated by reference to
Exhibit 10.15 to our Annual Report on Form 10-KSB for the fiscal year ended June
30, 2004).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 |  | Accounts Receivable Purchase Agreement dated December 26, 2003, between us and
Silicon Valley Bank (incorporated by reference to Exhibit 10.16 to our Annual
Report on Form 10-KSB for the fiscal year ended June 30, 2004).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.11 |  | Accounts Receivable Purchase Modification Agreement dated November 24, 2004
between us and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 to
our Current Report on Form 8-K filed on December 10, 2004).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 |  | Letter Agreement with Segal & Co. Incorporated dated February 28, 2005
(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K
filed on March 1, 2005).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 |  | An Agreement Granting a First Right of Refusal to Purchase Enterprise Assets
(incorporated by reference to our Current Report on Form 8-K filed on June 23,
2005).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 |  | Agreement dated November 22, 2005, between the BayHill Group LLC and us
(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K
filed on November 25, 2005).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.15 |  | Agreement dated December 9, 2005, among us, the Andersen Family Trust No. 1 and
Cantara Communications corporation (incorporated by reference to reference to
Exhibit 10.1 to our Current Report on Form 8-K filed on December 15, 2005).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.16 |  | Email dated April 21, 2006, terminating the BayHill Group LLC Agreement dated
November 22, 2005 (incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on May 15, 2006).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.17 |  | Amendment #1, dated March 14, 2006, to Agreement Dated December 9, 2005, among
us, the Andersen Family Trust No. 1 and Cantara Communications Corporation
(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K
filed on May 15, 2006).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.18 |  | Amendment #2, dated May 12,, 2006, to Agreement Dated December 9, 2005, among
us, the Andersen Family Trust No. 1 and Cantara Communications Corporation
(incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K
filed on May 15, 2006).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21



---

EXHIBIT
NO.            DESCRIPTION AND METHOD OF FILING

|10.19 |  | Common Stock Purchase Agreement, dated July 7, 2006, among us, Anza Borrego
Partners, Inc., and Cognigen Business Systems, Inc. (incorporated by reference
to Exhibit 10.1 to our Current Report on Form 8-K filed on July 17, 2006).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 |  | Termination Agreement, dated September 8, 2006, between us and Custom Switching
Technologies, Inc (incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on September 11, 2006).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.21 |  | Settlement Agreement and Mutual Release, dated September 8, 2006, between us and
Custom Switching Technologies, Inc (incorporated by reference to Exhibit 10.2 to
our Current Report on Form 8-K filed on September 11, 2006).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.22 |  | Loan and Security Agreement Number 1601, between us and Ven Core Solutions, LLC,
including Warrant Purchase Agreements dated October 10, 2006(incorporated by
reference to Exhibit 10.22 to our Form 10-KSB filed on October 13, 2006).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.23 |  | Asset Purchase Agreement dated October 13, 2006, between us and Acceris
Management and Acquisition LLC, including Management Services Agreement(incorporated by
reference to Exhibit 10.23 to our Form 10-KSB filed on October 13, 2006).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24. |  | Amendment #3, dated October 13, 2006, to Agreement dated December 9, 2005
between us, the Anderson Family Trust No. 1 and Cantara Communications
Corporation(incorporated by
reference to Exhibit 10.24 to our Form 10-KSB filed on October 13, 2006).
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14.1 |  | Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1
to our Annual Report on Form 10-KSB for the year ended June 30, 2004).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

|21 |  | Subsidiaries
|-- |  | ------------

|31 |  | Certification
of Chief Executive and Chief Financial Officer required by Rule 13a-14(a).
|-- |  | ----------------------------------------------------------------------------------------

|32 |  | Certification of Chief Executive and Chief Financial Officer required by Section
906 of the Sarbanes-Oxley Act of 2002.
|-- |  | -----------------------------------------------------------------------------------------------------------------------

22



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