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

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


                                   FORM 10-KSB

[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF
1934.

                     For the fiscal year ended June 30, 2000

[ ] TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
OF 1934.

          For the transition period from _____________ to _____________

                         Commission file number 0-11730

                             COGNIGEN NETWORKS, INC.
                 (Name of small business issuer in its charter)

          COLORADO                                        84-0189377
-------------------------------                       -------------------
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                       Identification No.)

7001 Seaview Avenue, N.W., Suite 210, Seattle, Washington           98117
---------------------------------------------------------         ----------
     (Address of principal executive offices)                     (Zip Code)

                                 (206) 297-6151
                          ---------------------------
                          (Issuer's telephone number)


         Securities registered under Section 12(b) of the Exchange Act:
                                      None
         Securities registered under Section 12(g) of the Exchange Act:
                                  common stock
                                (Title of class)

     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 for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements  for the past 90 days.
                               Yes __|X|__ No ____


<PAGE>


     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. _____

         State issuer's revenue for its most recent fiscal year:  $3,799,713

         The aggregate  market value of the voting and non-voting  common equity
held by non-affiliates at October 11, 2000, computed by reference to the closing
price on the OTC Bulletin Board was $15,963,408.

         The number of shares  outstanding  of each of the  issuer's  classes of
common equity on October 11, 2000, was 47,182,547.

         Transitional Small Business Disclosure Format   Yes ____   No __|X|__

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

<PAGE>


TABLE OF CONTENTS

PART I.

Item 1.  Description of Business.

Item 2.  Description of Property.

Item 3.  Legal Proceedings.

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


PART II

Item 5. Market for Common Equity and Related Stockholders Matters.

Item 6.  Management's Discussion and Analysis of Financial
         Condition or Plan of Operation.

Item 7. Financial Statements.

Item 8.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure.


PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance With Section 16(a) of the Exchange Act.

Item 10.  Executive Compensation.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

Item 12.  Certain Relationships and Related Transactions.

Item 13.  Exhibits and Reports on Form 8-K.




<PAGE>





PART I

Forward Looking Statements.

         The  discussion in this report  contains  forward  looking  statements,
including,  without limitation,  statements relating to Cognigen Networks,  Inc.
and its wholly-owned subsidiary,  Cognigen Switching Technologies, Inc. ("CST").
Although we believe  that the  expectations  reflected  in the  forward  looking
statements are reasonable,  we can give no assurance that such expectations will
prove  to  be  correct.   The  forward  looking  statements  involve  risks  and
uncertainties  that  affect our  business,  financial  condition  and results of
operations,  including  without  limitation,  our  possible  inability to obtain
additional financing,  lack of agent growth, the possible loss of key personnel,
rate  changes,  fee policy or  application  changes,  technological  changes and
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 1.  Description of Business.

BUSINESS

         We were  incorporated in May 1983 in Colorado to engage in the cellular
radio  and  broadcasting  business.  In  June  1988,  we  changed  our  name  to
Silverthorne  Production  Company and  commenced  operations  in the oil and gas
industry.  These  operations  were  discontinued  in 1989. From 1989 to 1999, we
attempted to locate  acquisition  prospects  and negotiate an  acquisition.  Our
pursuit of an acquisition did not materialize until August 1999 when we acquired
the assets of Inter-American  Telecommunications  Holding Corporation  ("ITHC").
The acquisition was accounted for as a reverse acquisition.

         We currently  operate in two  distinct  channels of direct and indirect
sales of  telecommunications  and personal technology  services.  The first is a
multi-faceted  network marketing  organization  which utilizes the Internet as a
platform   to   provide   customers   and   subscribers   with  a   variety   of
telecommunications and technology based products and services. Through a network
of  approximately  65,000  independent   representatives,   we  sell  direct  or
facilitate  the sale of third party  products  and services to more than 275,000
customers and  subscribers  worldwide.  Products  such as discount  domestic and
international long distance services, prepaid calling cards and paging, wireless
communications, computers and Internet-based telecommunications products make up
a major portion of our product suite. We have contractual agreements with a wide
variety  of product  and  service  vendors  that  provide  us with a  commission
percentage  of any  sale  made  through  one of our  supported  web  sites.  Our
web-based marketing division sells the products and services of industry leaders
such as AT&T,  WorldCom,  Sprint,  Verizon and Qwest.  We provide these services
through our  Internet  marketing  division,  which  represents a majority of our
distribution  power.  The  second  is a  recently  acquired,  facilities  based,
national and  international  telecommunications  services  provider,  CST, which
provides this same customer base and other direct clients with a wide variety of
discount international, phone card and private switching telephonic services.


<PAGE>



         In the mid 1990's we recognized the marketing potential of the Internet
and formed what we believe is one of the first  companies  to create a marketing
operation based exclusively on the Internet.  The initial concept, which remains
the foundation of our growth,  was to expand  marketing  potential by increasing
the number of independent  representatives  working within our corporate network
while at the same  time  continuing  to  increase  the  number of  products  and
services that these  representatives  could  provide to our  worldwide  customer
base.  To  facilitate  the  manageable  growth of this network and to be able to
provide the  representatives  with the support and marketing  edge necessary for
success,  we  developed  and  deployed  the "self  replicating"  web page.  This
proprietary technology automatically created a high content, personalized set of
e-commerce web pages for each new representative, at the time the representative
becomes a member of our  network.  Additionally,  a 7 x 24  Internet  accessible
"private  site"  is  instantly   created  for  the  new   representative.   Each
representative  can view the  representative's  records,  activity  and  account
status on which the  representative  is working.  The private site also contains
customer detail status, recommended training sources, frequently asked questions
("FAQs")  and  representative  benefits.  We also adopted a strategy of enabling
each  representative  to sell  telecommunications  services  and to recruit  new
representatives.   The  original  representative  receives  a  sales  commission
override  on  sales  generated  by  the  representatives  thus  recruited.   Our
commission  structure and plan enables our representatives to earn money without
the necessity of developing a subordinate  representative  base. Lately, we have
been adding 3,000 to 4,000  representatives each month. Over the past 18 months,
we have observed a positive  contribution  correlation between the number of our
representatives and our revenue.

         In  addition  to the  Internet-based  representative  network and CST's
direct  sales  efforts,  we are  engaged in an effort to develop  and  support a
variety of affiliate  program  offerings.  In these  programs,  large  affiliate
organizations  such as industry service providers and a variety of membership or
club related  businesses  can be utilized for commission  sharing.  We currently
have contracts for these programs that represent affiliate/affinity  populations
in excess of 600,000 potential buyers. As in any program of this nature,  actual
participation  and buying rates will be a small  subset of the target  audience,
but higher than non-affiliated web surfers.

         CST is licensed by the Federal  Communications  Commission ("FCC") as a
global   facilities-based/global  resale  services  national  and  international
carrier.  CST provides our  customer  base and other direct  clients with a wide
variety of discount  international,  phone card and private switching telephonic
services.  CST, through its multi-mode enhanced services platform,  provides its
customers with discounted domestic and international long distance voice and fax
service,  international  direct  dialing,  domestic  and  international  prepaid
calling cards and international  toll-free access. CST markets these services to
small and medium sized  businesses  and  residential  customers  throughout  the
world.  CST has three  fully  programmable  Cisco-VLO4K  multi-protocol  circuit
switches,  with a combined capability of more than 60 million minutes of traffic
per month, at its headquarters in San Luis Obispo,  California.  With additional
modest  enhancement  and CST's incumbent  technology,  we are well positioned to
deliver  the next  generation  of  enhanced  packet  telephony  services to both
individual  subscribers and enterprise clients.  Targeted  functionalities would
include services such as: VOIP, unified  messaging,  voice and data conferencing
and integrated wireless applications.


<PAGE>



Competition

         We compete with all of the  companies  for whom we sell  products as an
agent,  a number  of  companies  that  are  network  marketed  telecommunication
companies,   switching   companies   and   with   all   providers   who   retail
telecommunications and personal  communications products over the Internet. Many
of our competitors are larger and have greater capital resources than do we.

Regulation

         We are not  currently  subject to any  governmental  regulations  as an
Internet  marketer of  telecommunications  and  technology  based  products  and
services.   CST  is  regulated  by  the  FCC  as  a  Section  214  domestic  and
international facilities based carrier.

Employees

         As of October 11,  2000,  we had 18 full time  employees  and  fourteen
part-time  employees.  In  addition,  as of  October  11,  2000,  we  had  three
consultants.

Item 2.  Description of Property.

         We currently lease  approximately  3,457 square feet of office space at
7001 Seaview Avenue, N.W., Suite 210, Seattle,  Washington 98117,  pursuant to a
lease that will terminate in December 2001 and that currently  requires  monthly
rental payments of approximately  $3,025. We also currently lease  approximately
1,007  square  feet  of  office  space  at  6751  Academy  Road,  NE,  Suite  B,
Albuquerque,  New Mexico 87109, pursuant to a lease that will terminate in March
2003 and that  currently  requires  monthly  rental  payments of $1,390.49.  CST
leases  approximately  1,760 square feet of office  space at 3220 South  Higuera
Street, Suite 304, San Luis Obispo,  California 93401,  pursuant to a lease that
will terminate in April 2002 and that currently requires monthly rental payments
of $2,832.20.

Item 3.  Legal Proceedings.

         There are no material claims or lawsuits  currently pending in which we
are, or CST is, a party.

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

         No matter was  submitted  to a vote of our  securityholders  during our
fourth fiscal quarter ended June 30, 2000.

                                    PART II

Item 5. Market for Common Equity and Related Stockholders Matters.


<PAGE>



         Our common  stock is quoted on the NASD OTC  Bulletin  Board  under the
ticker symbol "CGNT." The following table sets forth, for the periods indicated,
the high and low closing bid price  quotations  for the common stock as reported
by the National  Quotation  Bureau,  LLC. Such quotations  reflect  inter-dealer
prices,  but do not include retail  mark-ups,  mark-downs or commissions and may
not necessarily represent actual transactions.

                                           High Closing Bid   Low Closing Bid
                                           ----------------   ---------------

  Quarter ended June 30, 2000              $ 1.28125          $ 0.75
  Quarter ended March 31, 2000               2.625              1.25
  Quarter ended December 31, 1999            3.625              0.8125
  Quarter ended September 30, 1999:          1.00               0.1875

  Quarter ended June 30, 1999:             $ 0.30             $ 0.125
  Quarter ended March 31, 1999:              0.2815             0.03125
  Quarter ended December 31, 1998:           0.10               0.08
  Quarter ended September 30, 1998:          0.125              0.0625

         As a result of our common stock not being quoted on Nasdaq or listed on
the exchange,  an investor may find it more difficult to dispose of or to obtain
accurate quotations as to the market value of our common stock. In addition,  we
are subject to a rule promulgated by the Securities and Exchange Commission. The
rule  provides  that  various  sales  practice   requirements   are  imposed  on
broker/dealers  who sell our  common  stock to persons  other  than  established
customers  and  accredited  investors.  For  these  types of  transactions,  the
broker/dealer has to make a special suitability  determination for the purchaser
and have received the purchaser's  written consent to the transactions  prior to
sale.  Consequently,  the rule may have an  adverse  effect  on the  ability  of
broker/dealers  to sell our  common  stock,  which may  affect  the  ability  of
purchasers to sell our common stock in the open market.

         As of October  11,  2000,  there were  approximately  1,339  holders of
record of our common  stock.  The number of holders of record  does not  include
holders whose securities are held in street name.

         We have never paid and do not  anticipate  paying any cash dividends on
our common stock in the foreseeable future. We intend to retain any earnings for
use in our business operations and in the expansion of our business.

         No  securities  were sold by us during our  fiscal  year ended June 30,
2000,  that were not  registered  under the Securities Act of 1933 and that were
not previously reported in our Quarterly Reports on Form 10-QSB.


<PAGE>



Item 6.  Management's Discussion and Analysis or Plan of Operation.

Overview

     Priorto July 1, 1999 we were a publicly held shell that had no  operations.
On August 20, 1999 we acquired  all of the net assets of ITHC in exchange for up
to 49,041,397  shares of our common stock.  These assets primarily  consisted of
the operating  assets of Cognigen  Corporation that had previously been acquired
on July 1, 1999 by ITHC.  On April 14, 2000 we acquired  all of the stock of CST
in  exchange  for  2,041,445  shares of our  common  stock.  These  acquisitions
transformed us into a thriving  telecommunications  company with  specialties in
the sale through the internet of calling cards,  various local and long distance
services and discount  circuit  switched  telecommunications  services.  We also
provide innovative custom designed service plans.

         ITHC  was  incorporated  on  July  24,  1998  in  Delaware.  Since  its
inception,  ITHC had directed its efforts toward the  acquisition of assets that
would allow it to be engaged in direct and multilevel  agency marketing and sale
of long distance  service and products as well as the switching and transport of
voice, fax and data telephone and internet traffic and related services. On July
1, 1999,  ITHC acquired the net assets of Cognigen  Corporation  in exchange for
5,500 shares of ITHC's  common  stock and a note  payable of $300,000.  Cognigen
Corporation  was actively  marketing long distance  telephone  services over the
Internet.

         On July 11, 2000 we amended our Articles of Incorporation to change our
name from Silverthorne Production Company to Cognigen Networks, Inc.

Results of Operations

     ITHC was a developmental  stage company from its inception on July 24, 1998
through  June 30,  1999.  During  this stage,  ITHC  generated  no revenues  and
incurred only minimal operational costs. ITHC focused its efforts on the pursuit
of the  acquisition of business  opportunities.  On July 1, 1999, ITHC completed
the  acquisition of all the net assets of Cognigen  Corporation in a transaction
accounted for as a purchase.  Additionally,  in a transaction accounted for as a
reverse acquisition, ITHC acquired control of us. We were a non-operating public
shell corporation. As no operations existed for ITHC for the year ended June 30,
1999, no meaningful comparisons can be made.

     For  purposes  of this  Management's  Discussion  and  Analysis  or plan of
operations,  we believe that a discussion  regarding the major components of our
results  of  operations  for the year ended  June 30,  2000 will  provide a more
meaningful basis for analysis.

                         Fiscal Year Ended June 30, 2000

Total revenue for the year ended June 30, 2000 was  $3,779,713,  which consisted
of $1,138,165  of prepaid  calling card revenue,  and marketing  commissions  of
$2,598,008  related  to  commissions  received  for  sales of  telecommunication
products  through links provided from our web site.  These revenue  streams were
acquired  in  connection  with the  Cognigen  Corporation  acquisition.  We also
generated  other revenue of $63,540,  which  relates  primarily to long distance
telecommunication revenue generated through callback services for two and a half
months from our acquisition of CST.

         Our  operating  costs  consist  of prepaid  cards and pins of  $950,727
related to the cost of  service  provided  by third  party  carriers.  Marketing
commissions of $1,657,195 are  commissions  paid to agents  associated  with the
telecommunications product sales commissions received by us through our web site
links.

         Selling, general and administrative (SG&A) expenses were $8,734,444 for
the year ended June 30, 2000.  Non-cash stock based  compensation  of charges of
$6,052,004  are  included in SG&A  expenses  and are related to stock  issued to
employees  for  services   valued  at  $30,000  and  stock  options   issued  to
non-employees for services valued at $6,022,004 using the  Black-Scholes  option
pricing model. The remainder of SG&A expenses includes salaries,  consulting and
other  professional  fees,  travel and  related  costs,  and rents for our three
offices.  Our management  believes that our current  infrastructure  can support
increases in capacity of two to three times current sales levels  without having
to add significant additional costs. There can be no assurances that we will not
incur significant additional SG&A costs as a result of future growth.

         Depreciation and amortization was $ 261,510 for the year ended June 30,
2000 and consists of depreciation on furniture and telecommunications  equipment
and  amortization  of goodwill.  These costs are a direct result of our business
acquisitions during the year.

         Interest  expense  was  $144,492  for the  year  ended  June  30,  2000
resulting in an increase from June 30, 1999 of $76,678, which is a direct result
of additional debt assumed in our business acquisitions during the year.

                         Fiscal Year Ended June 30, 1999

         During  the  fiscal  year  ended  June  30,  1999,  we  engaged  in  no
significant  operations  other  than the  search  for,  and  identification  and
evaluation of, possible  acquisition  candidates.  No revenue was received by us
during the fiscal year. We realized a net loss of $51,283 during the fiscal year
ended June 30, 1999.

Liquidity and Capital Resources

     We have funded our  operations  to date from the sale of common  stock . At
June 30, 2000 we had cash and cash  equivalents of $717,344 and working  capital
of $734,152.

     Cash used by us for  operating  activities  during  the year ended June 30,
2000 was $2,167,135.  Additional  sources and uses of cash during the year ended
June 30, 2000 include net proceeds of $5,140,087 from stock issuances,  debt and
capital  lease  payments of  $1,090,914,capital  expenditures  of  $400,594  and
acquisition costs of $745,100 related to businesses acquired during the year.

     We currently have three notes payable and various capital leases with total
outstanding balances of $943,703 at June 30, 2000. Two of the notes are due July
1, 2001 and one is due February 12, 2001. We have  maturities of capital  leases
and notes payable of $421,551 required during the next twelve months

     Cash  generated  from  operations  was not  sufficient  to meet our working
capital  requirements for the year ended June 30, 2000,and may not be sufficient
to meet our  working  capital  requirements  for the  foreseeable  future.  As a
result,  we are exploring  various bridge  financing  and/or  additional  equity
financing to meet current operating  requirements  until operations can generate
sufficient  cash to become self  sustaining.  There can be no assurances that we
will be able to secure  additional  debt or equity  financing or that operations
will  produce  adequate  cash  flows  to  allow  us to  meet  all of our  future
obligations.

     We have no  significant  planned  capital  expenditures  covering  the next
twelve months.

     We  maintain  two  customer  databases   containing   archived  names  with
historical records of long distance telecommunication service users, to which we
intend to devote substantial  efforts during the next twelve months to transform
these names into active CST customer accounts. We have been in negotiations with
a telemarketing  firm to assist in the transformation of these names into active
accounts.  We  anticipate  an initial  cost of  approximately  $93,000 for these
telemarketing  services and have received a verbal commitment from a third party
to assist in funding these telemarketing costs, as necessary.

     We  have  also  entered  into an  option  agreement  with a  joint  venture
consisting  of the sellers of the customer  databases,  which  provides  that if
certain  targeted  levels of active  customers  cannot be  transformed  from the
databases,  our original  investment in these databases will be refunded through
the  forgiveness of the remaining debt  outstanding and the return of our shares
to  us.  We  believe  this   agreement  is  a  major  step  in  protecting   the
recoverability of the our original investment in these databases.


<PAGE>



Item 7. Financial Statements.

         Reference is made to the financial statements,  the reports thereon and
the notes thereto included as a part of this Annual Report on Form 10-KSB, which
financial statements, reports and notes are incorporated herein by reference.



Item 8.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure.

     On March 17, 2000, we engaged  Ehrhardt  Keefe Steiner & Hottman,  P.C., as
our principal independent accountants in place of Daniel Jankowski. On March 17,
2000,  we dismissed  Daniel  Jankowski.  The reports of Daniel  Jankowski on our
financial  statements  for the two fiscal years ended June 30, 1999,  contain no
adverse opinion or disclaimer of opinion,  nor were such reports  modified as to
uncertainty,  audit scope or accounting principles.  There were no disagreements
during  our two  fiscal  years  ended  June  30,  1999,  or any  interim  period
subsequent  thereto between us and Daniel  Jankowski on any matter of accounting
principles or practices,  financial statement  disclosure,  or auditing scope or
procedure which, if not resolved to the satisfaction of Daniel Jankowski,  would
have caused  Daniel  Jankowski  to make  reference in its reports to the subject
matter of such disagreements. The decision to change accountants was approved by
our Board of Directors.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        With Section 16(a) of the Exchange Act.

        Directors
        ---------

     The name,  position  with us, age of each of our  directors  and the period
during which each of our  directors  has served as one of our  directors  are as
follows:

Name and Position                              Age              Director Since
-----------------                              ---              --------------
Jimmy L. Boswell                               58               September 2000
Executive Vice President and Director

Troy D. Carl                                   34               September 2000
Vice President of Sales and Marketing
and Director

Darrell H. Hughes                              55               January 2000
Chairman of the Board, President
and Director


<PAGE>



Name and Position                              Age              Director Since
-----------------                              ---              --------------
David L. Jackson                               62               1990
Senior Vice President of Corporate
and Public Affairs,
Secretary and Director

David G. Lucas                                 60               September 2000
Treasurer, Chief Financial Officer
and Director


Executive Officers
------------------

     Our  executive  officers  are Jimmy L.  Boswell,  Troy D. Carl,  Darrell H.
Hughes, David L. Jackson and David G. Lucas.

     Our executive officers are normally appointed annually at the first meeting
of our Board of Directors  held after the annual meeting of  shareholders.  Each
executive  officer will hold office until his or her  successor  duly is elected
and qualified, until his or her death or resignation or until he or she shall be
removed in the manner provided by our bylaws.

     There are no arrangements or  understandings  between any executive officer
and any other  person  pursuant to which any person was selected as an executive
officer.


<PAGE>



Background
----------

Name of Director
 or Officer         Principal Occupation for Last Five Years
----------------    ----------------------------------------
Jimmy L. Boswell    Mr. Boswell has been our Executive Vice President since July
                    2000, our Chief Operating  Officer since August 1999, one of
                    our directors  since  September 2000, was our President from
                    August 1999 to June 2000 and was one of our  directors  from
                    August 1999 to January 2000.  From July 1999 to the present,
                    Mr.  Boswell has also been the  President,  Chief  Operating
                    Officer and a director  of ITHC,  the net assets of which we
                    acquired in August  1999.  From January 1998 to the present,
                    Mr.  Boswell has also been the  President,  Chief  Executive
                    Officer and a director of CST, a long distance  national and
                    international  telephone  carrier  that we acquired in April
                    2000.  From November 1993 to September 1997, Mr. Boswell was
                    the  Vice  President  of  Engineering  and  Chief  Technical
                    Officer   of  Gateway   U.S.A.,   Inc.,   an   international
                    telecommunications  company.  Mr.  Boswell  graduated with a
                    degree in management from the University of Redlands.

Troy D. Carl        Mr. Carl has been one of our directors  since September 2000
                    and our Vice  President  of Sales  and  Marketing  since May
                    2000. Mr. Carl was the Vice President of Sales and Marketing
                    of our Cognigen  Division from  September  1999 to May 2000.
                    From November 1996 to September  1999, Mr. Carl was a Senior
                    Vice  President  of World  Connect  Communications,  Inc.  a
                    network  marketing  company.  Prior  thereto Mr. Carl was an
                    Assistant  Pastor of Believers  Center of  Albuquerque.  Mr.
                    Carl  graduated with a degree in theology from Word of Faith
                    Bible College.

Darrell H. Hughes   Mr. Hughes has been one of our directors since January 2000,
                    our Chairman of the Board and President  since July 2000 and
                    our Chief Executive Officer since October 1999. From October
                    1999 to the  present,  Mr.  Hughes  also has been the  Chief
                    Executive  Officer  of  ITHC,  the net  assets  of  which we
                    acquired in August  1999.  From April 1997  through  October
                    1999,  Mr.  Hughes was Vice  President  of Sales and Service
                    with AAA Washington, an automobile association. From October
                    1996 through March 1997,  Mr. Hughes was the Vice  President
                    of Engineering  with ITL, a long distance  telecom  company.
                    From  June 1996  through  October  1996,  Mr.  Hughes  was a
                    Manager of Program  Development for Siemens  Communications,
                    Inc.,  a worldwide  technology  and  communications  systems
                    provider.  From 1995 until 1996, Mr. Hughes was the Director
                    of Sales in the Northwest for Ascom Timeplex,  a provider of
                    voice, video and data communications. In September 1993, Mr.
                    Hughes  retired as an executive  with GTE, a local  exchange
                    carrier.  Mr. Hughes  graduated  with a bachelors  degree in
                    liberal  arts and a masters  degree in  management  from the
                    University of Redlands.

David L. Jackson    Mr.  Jackson has been our Senior Vice President of Corporate
                    and Public Affairs or our Vice  President  since August 1999
                    and our  Secretary  since August 1999 and was our  Treasurer
                    from August 1999 to July 2000, our President and Chairman of
                    the Board from 1996 to August 1999,  our Vice President from
                    1995 to 1996 and our President and the Chairman of the Board
                    from 1990 to 1992.  From  August  1999 to the  present,  Mr.
                    Jackson has also been a director and the  Secretary of ITHC,
                    the net  assets of which we  acquired  in August  1999.  Mr.
                    Jackson has been a licensed real estate broker in California
                    since 1991.  Mr.  Jackson  graduated with a bachelor of arts
                    degree from Northwest  Nazarene  University and with a Juris
                    Doctor degree from the University of Denver, College of Law.
                    Mr.  Jackson  was  admitted  to  practice  law in the United
                    States Federal Courts and various state courts. He practiced
                    in Colorado until 1997 when his name was removed as a result
                    of  disbarment  from the  list of  attorneys  authorized  to
                    practice  law in the  Colorado  Courts.  Mr.  Jackson  is an
                    arbitrator in dispute  resolution  of  commercial  and labor
                    law. He has been on the roster of arbitrators of the Federal
                    Mediation  and  Conciliation  Service of the  United  States
                    Government since March 1994.

David G. Lucas      Mr.  Lucas  has been one of our  directors  since  September
                    2000, our Treasurer  since July 2000 and our Chief Financial
                    Officer since December 1999.  From July 1999 to the present,
                    Mr.  Lucas also has been the Chief  Financial  Officer and a
                    director  of ITHC,  the net assets of which we  acquired  in
                    August 1999.  From April 1998 to the present,  Mr. Lucas has
                    been the Vice  President of Finance of CST, a long  distance
                    national  and   international   telephone  carrier  that  we
                    acquired in April 2000.  From July 1997 through  March 1998,
                    Mr. Lucas was the Controller for U.S.  Filter Corp., a water
                    treatment company. From 1994 to July 1997, Mr. Lucas was the
                    Controller for Gateway U.S.A., a long distance  national and
                    international  telephone carrier. Mr. Lucas graduated with a
                    bachelor of science degree in business  administration  from
                    Wayne State University and is a certified public accountant.

Directorships
-------------

         None of our  directors  is a director of any other  entity that has its
securities  registered  pursuant to Section 12 of the Securities Exchange Act of
1934 or that is subject to the requirements of Section 15(d) of the 1934 Act.


<PAGE>



Consultant
----------

     Kevin E.  Anderson is not one of our  executive  officers  but makes and is
expected to make a significant  contribution to our business.  Mr. Anderson, who
is 49, has been a consultant to us and our Board of Directors  since August 1999
and the founder and President of Cognigen  Corporation  since 1999. Mr. Anderson
may be deemed to control  us. Mr.  Anderson  graduated  from the  University  of
California at Los Angeles.

Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------

     Section 16(a) of the Securities  Exchange Act of 1934 requires our officers
and directors and persons who  beneficially own more than 10% of our outstanding
common stock to file reports of beneficial  ownership  with the  Securities  and
Exchange Commission and to furnish us with copies of the reports.

     Based  solely  on a  review  of  Forms  3, 4 and 5 and  amendments  thereto
furnished to us during our fiscal year ended June 30, 2000, the persons who were
either one of our directors or officers who beneficially  owned more than 10% of
our  common  stock who  failed to file on a timely  basis  reports  required  by
Section 16(a) of the Securities  Exchange Act of 1934 were: Jimmy L. Boswell who
failed to timely  file a Form 3 and failed to timely file three Forms 4, in each
of which Form 4 one  transaction  was reported;  Darrell H. Hughes who failed to
timely file two Forms 4, in each of which one  transaction  was  reported;  ITHC
which  failed to timely  file a Form 3 and two Forms 4, in each of which  Form 4
one  transaction  was  reported;  David L. Jackson who failed to timely file one
Form 4 in which  three  transactions  were  reported  and two Forms 4 in each of
which one transaction was reported; and David G. Lucas who failed to timely file
one Form 4 in which one  transaction  was reported.  We are also aware that CTC,
Kevin E. Anderson,  the Anderson  Family Trust #1 and Peter Tilyou may have been
delinquent  in filing a Form 3 and one or more Forms 4 during  our  fiscal  year
ended June 30, 2000.

Item 10.  Executive Compensation.

     The  following  table  provides  certain  information   pertaining  to  the
compensation  we and our subsidiary  paid during our last three fiscal years for
services  rendered by David L. Jackson,  Jimmy L. Boswell and Darrell H. Hughes,
all of whom were our chief  executive  officers for certain  periods  during our
fiscal year ended June 30, 2000.


<PAGE>



                              Annual Compensation
                              -------------------
<TABLE>
<CAPTION>

                                                                                          Long Term
                                                                                          Compensation
                                                                                          Awards
                                                                                          ------------
                              Fiscal                                      Other
                              Year                                        Annual          Securities
Name and                      Ended                                       Compen-         Underlying           All Other
Principal Position            June 30        Salary($)     Bonus($)       sation($)       Options(#)         Compensation($)
-----------------------       -------        ---------     --------       ---------       ----------         ---------------
<S>                           <C>            <C>           <C>            <C>             <C>                <C>

David L. Jackson              2000           $ 29,000      --  --          --  --         1,600,000(a)       $24,000(b)
President and Treasurer       1999           --  --        --  --          --  --         --  --             --  --
until August 20, 1999         1998           --  --        --  --          --  --         --  --             --  --
and Vice President and
Secretary thereafter

Jimmy L. Boswell              2000           $103,333      --  --          --  --        1,600,000(a)        --  --
President and Chief           1999           --  --        --  --          --  --        --  --              --  --
Operating Officer from        1998           --  --        --  --          --  --        --  --              --  --
August 20, 1999, through
June 30, 2000

Darrell H. Hughes             2000           $ 88,542      --  --          --  --         1,600,000(a)       --  --
President since July          1999           --  --        --  --          --  --         --  --             --  --
2000 and Chief Executive      1998           --  --        --  --          --  --         --  --             --  --
Officer since October
13, 1999
</TABLE>

     (a) On August 25,  2000,  Messrs.  Jackson,  Boswell  and Hughes  were each
granted a five-year  option to purchase  1,600,000 shares of our common stock at
an exercise price of $0.46. Each option is currently exercisable. However, we do
not have a sufficient  number of shares of our common stock  authorized for such
persons to be able to exercise  their  options.  We plan to hold a  shareholders
meeting in the next few months to propose the  adoption of an  amendment  to our
Articles of  Incorporation  to increase  the number of shares of common stock we
are authorized to issue.

     (b) The $24,000 was paid as consulting  fees prior to the time Mr.  Jackson
became one of our employees.


<PAGE>



Option Grants To Executive Officers

         The following  table sets forth the individual  grants of stock options
made by us during our last fiscal year ended June 30, 2000, to Messrs.  Jackson,
Boswell and Hughes:

<TABLE>
<CAPTION>

                             Number of
                             Securities           Percent of Total
                             Underlying           Options Granted
                             Options              to Employees in
Name                         Granted              Fiscal Year            Exercise Price         Expiration Date
----                         ----------           ----------------       --------------         ---------------
<S>                          <C>                  <C>                    <C>                    <C>

David L. Jackson             1,600,000                  25%                  $0.46                 8/25/2004

Jimmy L. Boswell             1,600,000                  25%                  $0.46                 8/25/2004

Darrell H. Hughes            1,600,000                  25%                  $0.46                 8/25/2004
</TABLE>

         The  following   table  provides   information   with  respect  to  the
unexercised  options  to  purchase  our common  stock  held by Messrs.  Jackson,
Boswell and Hughes as of June 30, 2000, the end of our last fiscal year:

<TABLE>
<CAPTION>

                         Number of Securities
                         Underlying Unexercised            Value of Unexercised In-the-Money
                         Options at Fiscal Year End        Options at Fiscal Year End
Name                     Exercisable/Unexercisable         Exercisable/Unexercisable(1)
----                     --------------------------        ---------------------------------
<S>                      <C>                               <C>

David L. Jackson               1,600,000 / 0                        $864,000 / $0

Jimmy L. Boswell               1,600,000 / 0                        $864,000 / $0

Darrell H. Hughes              1,600,000 / 0                        $864,000 / $0

</TABLE>

     (1) Calculated by multiplying the difference between the exercise price and
the  closing  bid price of $1.00 per  share on June 30,  2000 by the  applicable
number shares.  Does not give  consideration to commissions or other expenses of
sale.

     Messrs.  Jackson,  Boswell  and  Hughes  did not  exercise  any  options to
purchase shares of our common stock during the fiscal year ended June 30, 2000.

Stock Option Plan
-----------------

     We plan to adopt an incentive and non-statutory  option plan. The plan will
authorize  the granting of options to our  officers,  directors,  employees  and
consultants to purchase shares of our common stock.


<PAGE>



Item 11.  Security Ownership of Certain Beneficial Owners and Management.

         The  following  table sets forth as of October 11, 2000,  the number of
shares of our outstanding common stock beneficially owned by each of our current
directors,  sets  forth the  number of shares of our  outstanding  common  stock
beneficially  owned by all of our current executive  officers and directors as a
group, and sets forth the number of shares of our outstanding common stock owned
by each person who owned of record, or was known to own beneficially,  more than
five percent of the outstanding shares of our common stock:

                                   Amount and Nature of
Name and Address                   Beneficial Ownership(1)      Percent of Class
----------------                   -----------------------      ----------------
Jimmy L. Boswell                   2,618,468(2)                       5.4%
Suite 304
3220 South Higuera Street
San Luis Obispo, CA 93401

Troy D. Carl                            60,000                        0.1%
6751-B Academy Road, N.E.
Albuquerque, New Mexico 87109

Darrell H. Hughes                   4,148,883(3)                      8.5%
Suite 210
7001 Seaview Avenue N.W.
Seattle, WA 98117

David L. Jackson                   2,466,471(4)                       5.1%
3707 Calle Cortejo
Rancho Santa Fe, CA 92091

David G. Lucas                     2,618,468(5)                       5.4%
Suite 304
3220 South Higuera Street
San Luis Obispo, CA  93401

All current executive
officers and directors as        11,904,290(6)                       22.2%
a group (5 persons)

Cognigen Corporation             13,290,864(7)                       28.2%
2608 Second Avenue, Suite 108
Seattle, Washington 98121

Kevin E. Anderson                24,290,864(8)                       41.7%
2608 Second Avenue, Suite 108
Seattle, Washington 98120

Anderson Family Trust #1         24,290,864(8)(9)                    41.7%
2608 Second Avenue, Suite 108
Seattle, Washington 98120

Peter Tilyou                     28,244,656(10)(11)                  47.1%
2608 Second Avenue, Suite 108
Seattle, Washington 98120

         (1)      Except  as  indicated  below,  each person has sole and voting
and/or investment power over the shares listed.

         (2)      Includes  1,600,000 shares  underlying an option.  Mr. Boswell
currently  owns  approximately  2.6% of the  outstanding  common  stock of ITHC.
Pursuant to the terms of the  agreement  whereby we acquired the assets of ITHC,
ITHC will be entitled to receive  37,298,444 shares of our common stock. At this
time, we do not have a sufficient number of shares of common stock authorized to
issue the  37,298,444  shares  of our  common  stock to ITHC.  We plan to hold a
shareholders'  meeting  in the next few  months to propose  the  adoption  of an
amendment to our Articles of  Incorporation  to increase our  authorized  common
stock.  Mr. Boswell does not have sole or shared voting and/or  investment power
over the shares of our common stock that will be owned by ITHC.  Therefore,  Mr.
Boswell disclaims  beneficial ownership of the approximate 981,535 shares of our
common  stock  that  will  be   represented  by  Mr.   Boswell's   ownership  of
approximately  2.6% of the outstanding  common stock of ITHC. The 981,535 shares
are not included in the above table.

         (3)      Includes  1,600,000  shares  underlying an option.  Mr. Hughes
currently  owns  approximately  10.5% of the  outstanding  common stock of ITHC.
Pursuant to the terms of the  agreement  whereby we acquired the assets of ITHC,
ITHC will be entitled to receive  37,298,444 shares of our common stock. At this
time, we do not have a sufficient number of shares of common stock authorized to
issue the  37,298,444  shares  of our  common  stock to ITHC.  We plan to hold a
shareholders'  meeting  in the next few  months to propose  the  adoption  of an
amendment to our Articles of  Incorporation  to increase our  authorized  common
stock.  Mr. Hughes does not have sole or shared voting and/or  investment  power
over the shares of our common stock that will be owned by ITHC.  Therefore,  Mr.
Hughes disclaims beneficial ownership of the approximate 3,926,150 shares of our
common stock that will be represented by Mr. Hughes'  ownership of approximately
10.5% of the  outstanding  common stock of ITHC.  The  3,926,150  shares are not
included in the above table.

         (4)      Includes  1,600,000 shares  underlying an option.  Mr. Jackson
currently  owns  approximately  3.5% of the  outstanding  common  stock of ITHC.
Pursuant to the terms of the  agreement  whereby we acquired the assets of ITHC,
ITHC will be entitled to receive  37,298,444 shares of our common stock. At this
time, we do not have a sufficient number of shares of common stock authorized to
issue the  37,298,444  shares  of our  common  stock to ITHC.  We plan to hold a
shareholders'  meeting  in the next few  months to propose  the  adoption  of an
amendment to our Articles of  Incorporation  to increase our  authorized  common
stock.  Mr. Jackson does not have sole or shared voting and/or  investment power
over the shares of our common stock that will be owned by ITHC.  Therefore,  Mr.
Jackson disclaims  beneficial  ownership of the approximate  1,295,629 shares of
our  common  stock  that  will be  represented  by Mr.  Jackson's  ownership  of
approximately 3.5% of the outstanding common stock of ITHC. The 1,295,629 shares
are not included in the above table.


<PAGE>



         (5)      Includes  1,600,000  shares  underlying  an option.  Mr. Lucas
currently  owns  approximately  2.6% of the  outstanding  common  stock of ITHC.
Pursuant to the terms of the  agreement  whereby we acquired the assets of ITHC,
ITHC will be entitled to receive  37,298,444 shares of our common stock. At this
time, we do not have a sufficient number of shares of common stock authorized to
issue the  37,298,444  shares  of our  common  stock to ITHC.  We plan to hold a
shareholders'  meeting  in the next few  months to propose  the  adoption  of an
amendment to our Articles of  Incorporation  to increase our  authorized  common
stock.  Mr. Lucas does not have sole or shared  voting and/or  investment  power
over the shares of our common stock that will be owned by ITHC.  Therefore,  Mr.
Lucas disclaims  beneficial  ownership of the approximate  981,535 shares of our
common stock that will be represented by Mr. Lucas's  ownership of approximately
2.6% of the  outstanding  common  stock  of ITHC.  The  981,535  shares  are not
included in the above table.

         (6)      Includes the shares specified in the above footnotes.

         (7)      Cognigen Corporation currently owns approximately 57.9% of the
outstanding common stock of ITHC. Pursuant to the terms of the agreement whereby
we acquired  the assets of ITHC,  ITHC will be  entitled  to receive  37,298,444
shares of our common stock. At this time, we do not have a sufficient  number of
shares of common stock  authorized to issue the 37,298,444  shares of our common
stock to ITHC. We plan to hold a shareholders' meeting in the next few months to
propose the  adoption  of an  amendment  to our  Articles  of  Incorporation  to
increase our authorized  common stock.  Cognigen  Corporation  will be deemed to
beneficially  own  the  37,298,444  shares  of our  common  stock  that  will be
represented by Cognigen  Corporation's  ownership of approximately  57.9% of the
outstanding  common stock of ITHC. The 37,298,444 shares are not included in the
above table.

         (8)      Includes  11,000,000  shares of our common stock underlying an
option owned by the Anderson  Family Trust #1. Kevin E.  Anderson and members of
his family are the  beneficiaries  of the  Anderson  Family  Trust #1 which owns
approximately  98.9% of the  outstanding  common stock of Cognigen  Corporation.
Therefore,  Mr. Anderson may be deemed to beneficially own the 13,290,864 shares
of our common stock that Cognigen Corporation may be deemed to beneficially own.

         (9)      Represents the 24,290,864 shares that Kevin E. Anderson may be
deemed to beneficially own.

         (10)     Includes  the shares  owned by the  Anderson  Family Trust #1,
915,080  shares owned by Telkiosk,  Inc.,  750,000  shares  underlying an option
owned  by  Telkiosk,  1,288,712  shares  owned  by  Combined  Telecommunications
Consultancy,  Ltd.  ("CTC") and 1,000,000  shares  underlying an option owned by
CTC. Peter Tilyou is the sole trustee,  but not a  beneficiary,  of the Anderson
Family Trust #1. As managing  officer/director  of CTC and Telkiosk,  Mr. Tilyou
has voting and investment power over the shares of our common stock beneficially
owned by CTC and  Telkiosk.  Mr.  Tilyou is the  beneficial  owner of 33% of the
outstanding shares of Telkiosk and 25% of the outstanding shares of CTC.

         (11)     The  information  pertaining to the shares of our common stock
beneficially  owned by CTC and Telkiosk and the information  pertaining to Peter
Tilyou's  relationship  to both and to the Anderson  Family Trust #1 is based on
our shareholder records and information provided to us by Peter Tilyou.


<PAGE>



Item 12.  Certain Relationships and Related Transactions.

     On August 20, 1999, we completed the first  closing of the  acquisition  of
all of the assets of ITHC in exchange for 29,242,953 shares of our common stock.
On December 27, 1999, we agreed with ITHC that the total number of shares of our
common stock that were to be issued at the first closing was  11,742,953  shares
rather than 29,242,953 shares and the total number of shares to be issued at the
second closing was 37,298,444 shares. Further, we and ITHC made it clear that we
were acquiring all of the assets and assuming all of the  liabilities of ITHC as
of August 20, 1999.


     As a result of ITHC's receipt of the 11,742,953  shares of our common stock
and a previous  purchase of  12,602,431  shares of our common stock by ITHC from
David L. Jackson,  Patricia A.  Jackson,  Karrie R. Jackson and Eric J. Sunsvold
for a total of $190,000,  ITHC owned 24,345,384 shares, or approximately  54.0%,
of our  outstanding  shares of common stock. We loaned ITHC $190,000 to purchase
the  12,602,431  shares.  The loan has not yet been  repaid.  In May 2000,  ITHC
distributed the remaining 24,195,384 shares pro rata to its shareholders.

     The second closing between us and ITHC will be held at such time as we have
enough  additional  shares authorized to complete the issuance of the additional
37,298,444  shares to ITHC. We  understand  that ITHC will then  distribute  the
37,298,444 shares pro rata to its shareholders.

     The assets of ITHC consisted of electronically archived customer data bases
consisting  of  approximately   95,000   individual   residential  and  business
long-distance telephone service subscriber accounts;  agency, reseller and other
agreements and contracts ITHC had with carriers, switched resellers,  unswitched
resellers, consolidators or other providers of long-distance and local telephone
service; ITHC's accounts receivable,  commissions receivable, future commissions
that may be payable from any of the  carriers,  switched  resellers,  unswitched
resellers, consolidators or other providers of long-distance and local telephone
service;  ITHC's  computer  software,  proprietary  programs  and  applications,
computers,  monitors,  peripherals,  printers,  copiers, telephone PABX systems,
office  furniture and fixtures,  office  leases;  customer data bases,  customer
lists and print and electronic records relating to customers; ITHC's inventories
and orders for prepaid  telephone cards;  ITHC's new accounts;  ITHC's websites,
pages,  links  and  agreements  as well as  ITHC's  Internet  domains  and email
addresses;  agreements  with  ITHC's  agents and  subagents;  exclusive  use and
control  of the name  "Cognigen"  and its  attendant  copyright,  trade name and
trademark and service mark registrations;  ITHC's intellectual property;  ITHC's
lines of credit with  carriers,  prepaid  card  providers,  switched  resellers,
switchless  resellers  and  other  providers  of local and  long-distance  phone
service,  ITHC's  cash  and  all  of the  outstanding  stock  of  Inter-American
Telecommunications Corporation, a non-operating subsidiary of ITHC.

     ITHC,  which  was  incorporated  in  July  1998,  acquired  the  assets  it
transferred  to us for a total of  $1,600,000 in  promissory  notes,  which were
assumed by us, and 7,500 shares of ITHC's common stock. ITHC originally acquired
the assets in 1998 and 1999 from Inter-American  Telecommunications Corporation,
Telkiosk, CTC and Cognigen Corporation, all of which were incorporated in 1998.

     ITHC, through Cognigen  Corporation,  its e-commerce division,  was a major
marketer of long-distance telecommunications services. Operating on the Internet
via  thousands of Web sites,  Cognigen  Corporation  marketed  both domestic and
international  long-distance  telephone service as well as prepaid calling cards
through a network of approximately  40,000  independent  agents to approximately
157,000 subscribers worldwide.


<PAGE>



         On August 20,  1999,  and on December  27,  1999,  Jimmy L. Boswell and
David G.  Lucas  were  directors,  officers  and  owners  of less than 5% of the
outstanding common stock of ITHC.  Further, on August 20, 1999, David L. Jackson
and his wife were our sole directors and officers.  On December 27, 1999,  David
L.  Jackson  was a director  of ITHC and owned  less than 5% of the  outstanding
common stock of ITHC. As of December 27, 1999,  Darrell H. Hughes was an officer
of ITHC and owned  approximately  10.5% of the outstanding common stock of ITHC.
As of August 20, 1999, and as of December 27, 1999,  Cognigen  Corporation owned
approximately 64.7% and 57.9%, respectively,  of the outstanding common stock of
ITHC,  Inter-American  Telecommunications  Corp.  and Telkiosk,  Inc. each owned
approximately  5.9% and 5.3%,  respectively,  of the outstanding common stock of
ITHC,  and  CTC  owned  approximately  7.9%  and  7.1%,  respectively,   of  the
outstanding  common stock of ITHC. As of August 20, 1999, and as of December 27,
1999,  Kevin E.  Anderson,  through  the  Anderson  Family  Trust #1 which  owns
approximately  98.9% of the  outstanding  common stock of Cognigen  Corporation,
controlled us and ITHC.  Peter Tilyou is the sole trustee of the Anderson Family
Trust #1 but is not a beneficiary of the trust.

          We believe  that the  transaction  between us and ITHC on December 27,
1999, at which time we may be deemed to have been  affiliated  with ITHC, was at
least as fair to us as we could have obtained from an unaffiliated  third party.
We did not obtain a fairness  opinion in connection  with the August 20, 1999 or
December 27, 1999 transactions with ITHC.

         On  September  14,  1999,  Peter  Tilyou,  pursuant  to  the  authority
previously granted to him by ITHC, amended an agreement dated as of September 1,
1999 between ITHC and CCRI Corp. The agreement  specified the compensation  CCRI
Corp.  was to receive  for  assisting  ITHC in raising  capital.  The  amendment
provided that CCRI Corp.  would receive a bonus of 200,000  shares of our common
stock.  Of the 200,000  shares,  50,000 shares were to be  unrestricted.  It was
later determined that CCRI Corp. would assist us in raising  additional  capital
and that ITHC  would not raise any  capital.  When CCRI  Corp.  did assist us in
raising  additional  capital,  we felt obligated to provide CCRI Corp.  with the
compensation  and bonus that ITHC had agreed to pay.  We were unable on November
10 and 11, 1999, to provide the 50,000 shares of our  unrestricted  common stock
for delivery to the two persons  affiliated with CCRI Corp. As an  accommodation
to us,  Peter  Tilyou,  as  Managing  Director  of  Combined  Telecommunications
Consultancy,  Ltd.  ("CTC"),  arranged  for CTC to deliver  50,000  unrestricted
shares of our common stock to the two persons  affiliated with CCRI Corp. In May
2000,  Peter Tilyou on behalf of CTC  requested  that we  reimburse  CTC for the
value of the 50,000 shares of our common stock.  The  reimbursement  request was
based upon the closing prices of our common stock on November 10 and 11, 1999. A
total of $175,000 was paid to CTC.

         We also believe that the transaction between us and CTC was at least as
fair to us as we could have obtained from an independent third party.

         On  August  25,  1999,  we  granted   five-year   options  to  purchase
approximately  32,400,000  shares  of our  common  stock at $0.46  per  share to
various persons including the Anderson Family Trust #1 (12,000,000 shares) which
is affiliated with us and of which Kevin E. Anderson and his family are the sole
beneficiaries,  Jimmy L. Boswell  (1,600,000  shares),  CTC (4,000,000  shares),
Darrell H. Hughes (1,600,000 shares),  Inter-American  Telecommunications  Corp.
(800,000 shares), David L. Jackson (1,600,000 shares), David G. Lucas (1,600,000
shares) and Telkiosk, Inc. (800,000 shares).


<PAGE>



         On July 22, 1999, ITHC and CST entered into a Carrier Service Agreement
that was assumed by us in connection  with the  acquisition  by us of all of the
assets of ITHC.  Under the terms of the  three-year  agreement,  ITHC  agreed to
migrate to CST domestic and international dial-around and callback long distance
subscribers  pursuant to a  telemarketing  campaign to be conducted  with ITHC's
personnel.  CST agreed to provide office space, long distance telephone service,
PABX and  telephone  handsets,  at its cost,  to support up to 12  telemarketing
personnel and  workstations.  ITHC agreed to provide the computer  terminals and
peripherals,  furniture and fixtures required for the  telemarketing  personnel.
CST also agreed to provide customer service personnel. CST agreed to charge ITHC
a rate to each destination equal to CST's cost plus 15%. The rate charged by CST
included  all  switching  services.  CST also agreed to provide  all  accounting
services in  connection  with the  agreement.  All accounts  sent to CST by ITHC
remained  the  property of ITHC.  ITHC  provided  CST with  advance  payments of
approximately  $570,000  to help cover  CST's cost in  providing  long  distance
services  for  telemarketing,  customer  service and carrier  transport  for the
accounts of ITHC that migrate to CST.

         On  April  25,  2000,  the  CST  shareholders  transferred  all  of the
outstanding  CST  shares  of  common  stock  to us in  exchange  for a total  of
2,041,445  shares of our common stock.  The number of shares of our common stock
issued to the CST  shareholders  in exchange  for CTS shares was  determined  by
negotiations between CST's shareholders and us and was based on the market price
of our common  stock,  which on April 25, 2000 had a closing  price of $1.00 per
share, the fact our common stock issued in the exchange was not to be registered
and estimates of the value of CST's assets, staff, technology, revenue-producing
capabilities  and  physical  location.  CST's  assets  that were  acquired by us
pursuant to the exchange  included a facility lease,  equipment leases and CST's
customer base.

         Jimmy L. Boswell was our President and is our Executive  Vice President
and Chief  Operating  Officer and is Chairman of the Board,  President and Chief
Executive Officer of CST. Mr. Boswell was one of the CST shareholders.  Prior to
the exchange,  Mr. Boswell  beneficially  owned  approximately  18.7% of the CST
shares.  Pursuant to the exchange,  Mr. Boswell  received  381,750 shares of our
common stock. Immediately following the exchange, Mr. Boswell beneficially owned
a total of 1,981,750  shares of our common  stock,  including  1,600,000  shares
underlying  an  option.  In  addition,  a  promissory  note  in  the  amount  of
approximately  $87,547.50  that was payable to Mr. Boswell by CST was terminated
as a part of the exchange.

         David G. Lucas is our  Treasurer and Chief  Financial  Officer and is a
Director, Vice President and Chief Financial Office of CST. Mr. Lucas was one of
the CST  shareholders.  Prior to the  exchange,  Mr.  Lucas  beneficially  owned
approximately 18.7% of the CST shares.  Pursuant to exchange, Mr. Lucas received
381,750  shares of our common stock.  Immediately  following  the exchange,  Mr.
Lucas  beneficially  owned a total of  1,981,750  shares  of our  common  stock,
including 1,600,000 shares underlying an option. In addition,  a promissory note
in the amount of  approximately  $49,176.92 that was payable to Mr. Lucas by CST
was terminated as a part of the exchange.

         Two of the other CST shareholders  were our employees.  Otherwise,  the
other CST shareholders had no affiliation with us.


<PAGE>



         We believe that the transaction between us and the CST shareholders was
at least as fair to us as we could have obtained from an unaffiliated  party. We
did not obtain a fairness opinion in connection with the transaction.

         On October 11, 2000, we entered into an agreement  with JVTEL,  a joint
venture  between  Telkiosk and CTC,  that gives us the option to sell to JVTEL a
database  of  off-shore  and  domestic  telephone  service  subscribers  that we
acquired from ITHC.  According to the terms of the agreement,  in the event that
we have not  activated a minimum of 5,000 of the accounts by March 30, 2001,  we
have the option to sell the  accounts to JVTEL for  $1,300,000.  The  $1,300,000
will be paid to us in such number of shares of our common stock that is equal to
$1,300,000,  less the forgiveness of debt and interest due to JVTEL on March 30,
2001, divided by the closing bid price of our common stock on March 30, 2001.

         We have employment agreements with Jimmy L. Boswell,  Darrell H. Hughes
and David G. Lucas pursuant to which they are paid annual  salaries of $120,000,
$125,000 and $90,000,  respectively. In addition, Messrs. Boswell and Lucas, who
have employment  agreements that commenced on August 1, 2000, and that terminate
on July 31, 2000, were each paid $100,000 as an initial bonus in connection with
their  employment  agreements.  The initial bonus is deemed earned on a pro rata
basis over the  two-year  period of each  employment  agreement in the amount of
$4,167 per month.  An early  termination  of the  employment  agreements  by the
employees  without  cause or by us with cause  obligates the employees to return
the  unearned  portions of their  initial  bonuses to us. In  addition,  between
December  1999 and March 31, 2000,  we paid David L. Jackson a fee of $6,000 per
month for providing  services to us. On April 1, 2000,  David L. Jackson  became
one of our  employees  with an annual  salary of $120,000.  We also have assumed
agreements  with Kevin E.  Anderson and Peter Tilyou  pursuant to which Kevin E.
Anderson Consulting,  Inc. and CTC are paid or are to be paid consulting fees of
$14,583 and $10,000 per month, respectively.

Item 13.  Exhibits and Reports on Form 8-K.

(a)      Exhibits and Index of Exhibits.

  EXHIBIT NO.  DESCRIPTION AND METHOD OF FILING
  -----------  --------------------------------

          2.1  Stock  Purchase  and  Asset  Acquisition  Agreement  by and among
               Inter-American     Telecommunications     Holding    Corporation,
               Silverthorne   Production  Company,   et  al.   (incorporated  by
               reference to Exhibit 2 to our Current  Report on Form 8-K/A dated
               August 29, 1999).

          2.2  Amendment  dated  December 27, 1999, to Stock  Purchase and Asset
               Acquisition     Agreement    by    and    among    Inter-American
               Telecommunications  Holding Corporation,  Silverthorne Production
               Company et al.  (incorporated  by  reference  to Exhibit 2 to our
               Current Report on Form 8-K dated March 6, 2000).


          2.3  Stock for Stock Exchange  Agreement  dated April 14, 2000, by and
               among    the     shareholders     of     Aquila     International
               Telecommunications,  Inc.  and  Silverthorne  Production  Company
               (incorporated  by reference to Exhibit 2 to our Current Report on
               Form 8-K, dated May 2, 2000).

          3.1  Articles of Incorporation filed on May 6, 1983.

          3.2  Articles of Amendment to Articles of Incorporation  filed on June
               23, 1988.

          3.3  Articles of Amendment to the Articles of  Incorporation  filed on
               July 12, 2000.

          3.4  Bylaws as  amended  through  December  8, 1999  (incorporated  by
               reference to Exhibit 3.1 to Cognigen's  Form 10-Q for the quarter
               ended December 31, 1999).

          10.1 Employment  Agreement  dated  August 1,  2000,  between  Cognigen
               Networks, Inc. and Jimmy L. Boswell.

          10.2 Employment  Agreement  dated  August 1,  2000,  between  Cognigen
               Networks, Inc. and David G. Lucas.

          10.3 Employment  Agreement  dated  October 5, 1999,  between  Cognigen
               Networks, Inc. and Darrell H. Hughes.

          10.4 Option to Sell Accounts  Agreement dated October 6, 2000, between
               Cognigen Networks, Inc. and JVTEL.

          10.5 Stock Purchase and Asset Sale  Agreement  dated November 4, 1998,
               between   Inter-American   Telecommunications   Corporation   and
               Combined Telecommunications Consultancy, Ltd.

          10.6 Stock  Purchase  and Asset  Sale  Agreement  dated  July 1, 1999,
               between   Inter-American   Telecommunications   Corporation   and
               Cognigen Corporation.

          10.7 Form of Option to Purchase Common Stock

          16   Letter  from  Daniel  Jankowski  (incorporated  by  reference  to
               Exhibit 16.0 to Cognigen's Current Report on Form 8-K dated March
               21, 2000)

          21   Subsidiaries

          27   Financial Data Schedule.

          (b)  Reports on Form 8-K.

         On May 5, 2000, we filed a Current Report on Form 8-K,  reporting under
Item 2 the acquisition by us of Aquila International  Telecommunications,  Inc.,
n/k/a  Cognigen  Switching  Technologies,  Inc.,  and  filed the Stock for Stock
Exchange Agreement as an exhibit under Item 7.

         On June 16, 2000,  we filed an amendment to our Current  Report on Form
8-K that was filed on May 5, 2000, to file under Item 7 the financial statements
required to be filed in connection with our acquisition of Aquila  International
Telecommunications, Inc.


<PAGE>


                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated:  October 12, 2000
                                       COGNIGEN NETWORKS, INC.


                                       /s/ Darrell H. Hughes
                                       ---------------------------------
                                       Darrell H. Hughes, Chairman of the Board,
                                       President, and Chief Executive Officer


                                       /s/  David G. Lucas
                                       -------------------
                                       David G. Lucas, Treasurer,
                                       Chief Financial Officer and Principal
                                       Accounting Officer

         In accordance with the Exchange Act, this report has been signed by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

         SIGNATURE                     TITLE             DATE
         ---------                     -----             ----

         /s/  Jimmy L. Boswell
         ---------------------
         Jimmy L. Boswell              Director          October 12, 2000


         /s/  Troy D. Carl
         -----------------
         Troy D. Carl                  Director          October 12, 2000


         /s/  Darrell H. Hughes
        -----------------------
         Darrell H. Hughes             Director          October 12, 2000


         /s/  David L. Jackson
         ---------------------
         David L. Jackson              Director          October 12, 2000


         /s/  David G. Lucas
         -------------------
         David G. Lucas                Director          October 12, 2000

<PAGE>

                             Cognigen Networks, Inc.

                              Financial Statements
                                  June 30, 2000

                                Table of Contents

                                                                           Page

Independent Auditors' Reports...............................................F-1

Consolidated Financial Statements

         Consolidated Balance Sheets........................................F-3

         Consolidated Statements of Operations..............................F-4

         Consolidated Statements of Stockholders' Equity....................F-5

         Consolidated Statements of Cash Flows..............................F-6

Notes to Consolidated Financial Statements..................................F-7



<PAGE>


                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Cognigen Networks, Inc.
Seattle, Washington

We  have  audited  the  accompanying  consolidated  balance  sheet  of  Cognigen
Networks,   Inc.  and  subsidiaries  as  of  June  30,  2000,  and  the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the  year  then  ended.   These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance  about  whether  the  consolidated  financial  statements  are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting  principles used and significant
estimates  made by management,  as well as evaluating  the overall  consolidated
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Cognigen Networks,
Inc. and  subsidiaries as of June 30, 2000, and the results of their  operations
and their cash  flows for the year then  ended,  in  conformity  with  generally
accepted accounting principles.

                                Ehrhardt Keefe Steiner & Hottman PC

August 25, 2000,  except the first paragraph of Note 12,
as to which the date is October 10, 2000
Denver, Colorado


<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors
Inter-American Telecommunications
 Holding Corporation
Seattle, Washington

We have audited the  accompanying  consolidated  statements of operations,  cash
flows, and changes in  stockholders'  equity for the period from inception (July
24, 1998)  through June 30, 1999 of  Inter-American  Telecommunications  Holding
Corporation  (a  development  stage  company)(accounting  acquirer  of  Cognigen
Networks,  Inc.).  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also included
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  results of its operations,
its cash flows and its  changes  in  stockholders'  equity  for the period  from
inception  (July 24, 1998)  through June 30, 1999 in conformity  with  generally
accepted accounting principles.

Denver, Colorado
January 20, 2000

                                                      /s/ Comiskey & Company
                                                      ----------------------
                                                      Comiskey & Company
                                                      PROFESSIONAL CORPORATION


<PAGE>


                             COGNIGEN NETWORKS, INC.

                           Consolidated Balance Sheet
                                  June 30, 2000


                                     Assets

Current assets
Cash                                                 $   717,344
Accounts receivable, net of allowance
 for doubtful accounts of $5,000                          61,046
Commissions receivable, net of allowance
 for doubtful accounts of $25,000                        538,163
Employee receivable                                        1,661
Inventory                                                133,486
Other current assets                                     417,028
Deferred tax asset - current (Note 6)                          -
                                                               -
Total current assets                                   1,868,728
                                                     -----------
Property, plant and equipment, net of
 accumulated depreciation of $363,121 (Note 3)           486,291
                                                     -----------
Other assets
Deposits and other assets                                 88,552
Goodwill, net                                          3,655,017
Customer lists                                         1,300,000
Deferred tax asset - non current                               -
                                                               -
Total other assets                                     5,043,569
                                                     -----------
Total assets                                         $ 7,398,588
                                                     ===========

                 Liabilities and Stockholders' (Deficit) Equity

Current liabilities
Accounts payable                                     $    97,420
Other accrued liabilities                                108,324
Interest payable                                         239,421
Commissions payable                                      326,681
Payroll taxes payable                                     21,179
Current portion of capital leases (Note 5)               106,551
Current portion of notes payable (Note 4)                315,000
                                                     -----------
Total current liabilities                              1,214,576

Long-term portion of capital leases (Note 5)              12,152
Long-term portion of notes payable (Note 4)              510,000
                                                     -----------
Total liabilities                                      1,736,728

Commitments and Contingencies (Note 11)

Stockholders' (deficit) equity
Common stock $.001 par value, 50,000,000 shares
 authorized; 14,411,039 and 46,980,547 issued
 and outstanding at June 30, 1999 and 2000, and
 37,298,444 to be issued shares (2000) (Note 2)           84,278
Additional paid-in capital                            13,594,051
Accumulated deficit                                   (8,016,469)
                                                     -----------
Total stockholders' (deficit) equity                   5,661,860
                                                     -----------
Total liabilities and stockholders' (deficit) equity $ 7,398,588
                                                     ===========

                See notes to consolidated financial statements.


<PAGE>

                                                COGNIGEN NETWORKS, INC.

                                         Consolidated Statements of Operations

                                                   For the Years Ended
                                                        June 30,
                                            ----------------------------------
                                               1999                   2000
                                            -----------           ------------

Revenue

Prepaid cards and pins                      $         -           $  1,138,165
Marketing commissions                                 -              2,598,008
Other                                                 -                 63,540
                                                      -           ------------
Total revenue                                         -              3,799,713
                                                      -           ------------

Operating expenses

Prepaid cards and pins                                -                950,727
Marketing commissions                                 -              1,657,195
Selling, general and administrative                   -              8,734,444
Depreciation and amortization                         -                261,510
                                                      -           ------------
Total operating expenses                              -             11,603,876
                                                      -           ------------

Loss from operations                                  -             (7,804,163)

Interest expense                                 67,814                144,492
                                            -----------           ------------

Loss before income taxes                        (67,814)            (7,948,655)

Income taxes (Note 6)                            16,531                (16,531)
                                            -----------           ------------

Net loss                                    $   (51,283)          $ (7,965,186)
                                            ===========           ============

Loss per common share
 - basic and diluted                        $         -           $      (0.10)
                                            ===========           ============

Weighted average number of
 common shares outstanding -
 basic and diluted                           11,377,137             78,549,437
                                            ===========           ============

                See notes to consolidated financial statements.

<PAGE>



                 Consolidated Statements of Stockholders' Equity
                    From July 24, 1998 through June 30, 2000


<TABLE>
<CAPTION>
                                                                                                                         Total
                                                             Common Stock              Additional                     Stockholders'
                                                ---------------------------------       Paid-in        Accumulated      (Deficit)
                                                        Shares            Amount        Capital          Deficit         Equity
                                                --------------------     --------     ------------     -----------     -----------
                                                (as adjusted Note 2)
<S>                                             <C>                      <C>          <C>              <C>             <C>

Balance July 24, 1998 (inception)                                 -      $      -     $          -     $         -     $         -

Common stock issued for intangible assets
 (Note 7)                                                 11,377,137           20                -               -              20

Net loss for the period July 24, 1998 to
  June 30, 1999                                                   -             -                -         (51,283)        (51,283)
                                                  ------------------     --------     ------------     -----------     -----------

Balance June 30, 1999                                     11,377,137     $     20     $          -     $   (51,283)        (51,263)

Stock issued in connection  with  Cognigen
 acquisition and employment agreements
 (Notes 7 and 8)                                          42,664,260           55           30,000               -          30,055

Reverse acquisition (Note 7)                              15,757,047       69,723         (261,957)              -        (192,234)

Common stock issued for cash net of
 $727,474 in expenses                                     12,489,102       12,489        5,127,598               -       5,140,087

Value of options issued for services
 (Note 8)                                                          -             -       6,022,004               -       6,022,004

Retirement of stock at cost                                  (50,000)         (50)         (18,950)                        (19,000)

Stock issued in connection with
 acquisition of Cognigen Switching
 (Note 7)                                                  2,041,445        2,041        2,695,356               -       2,697,397

Net loss                                                           -             -                -     (7,965,186)     (7,965,186)
                                                  ------------------     --------     ------------     -----------     -----------

Balance at June 30, 2000                                  84,278,991     $ 84,278     $ 13,594,051     $(8,016,469)    $ 5,661,860
                                                  ==================     ========     ============     ===========     ===========
</TABLE>

                See notes to consolidated financial statements.
<PAGE>



                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                                       June 30,
                                                                                     -------------------------------------------
                                                                                           1999                    2000
                                                                                     -------------------     -------------------
<S>                                                                                  <C>                     <C>

Cash flows from operating activities
   Net loss                                                                          $           (51,283)    $        (7,965,186)
                                                                                     --------------------    -------------------
   Adjustments to reconcile net loss to net cash provided by operating activities
   Depreciation and amortization                                                                       -                 261,510
   Stock options granted to non-employees and stock issued to employees for
    services                                                                                           -               6,052,004
   Deferred taxes                                                                                (16,531)                 16,531
   Changes in assets and liabilities
    Receivables                                                                                        -                 218,461
    Commission receivable                                                                              -                (484,149)
    Inventory                                                                                          -                (108,410)
    Other current assets                                                                               -                (340,120)
    Accounts payable                                                                                   -                  53,276
    Other accrued expenses                                                                        67,814                 218,919
    Other assets                                                                                       -                 (89,971)
                                                                                     -------------------     -------------------
                                                                                                  51,283               5,798,051
                                                                                     -------------------     -------------------
       Net cash used in operations                                                                     -              (2,167,135)
                                                                                     -------------------     -------------------

Cash flows from investing activities
   Capital expenditures                                                                                -                (400,594)
   Cash paid in business acquisitions net of cash acquired (Note 7)                                    -                (555,100)
                                                                                     -------------------     -------------------
       Net cash used in investing activities                                                           -                (955,694)
                                                                                     -------------------     -------------------

Cash flows from financing activities
   Net proceeds from stock issuance                                                                    -               5,140,087
   Distribution related to reverse acquisition                                                         -                (190,000)
   Payments on notes payable                                                                                          (1,090,000)
   Payment on capital leases                                                                           -                    (914)
   Retirement of stock                                                                                 -                 (19,000)
                                                                                     -------------------     -------------------
       Net cash used in financing activities                                                           -               3,840,173
                                                                                     -------------------     -------------------

Net increase in cash                                                                                   -                 717,344

Cash and cash equivalents - beginning of period                                                        -                       -
                                                                                     -------------------     -------------------

Cash and cash equivalents - end of period                                            $                 -     $           717,344
                                                                                     ===================     ===================
</TABLE>

Cash paid for  interest was $19,834  (2000) and $0 (1999).  Cash paid for income
taxes was $0 in 2000 and 1999.

Non-cash investing and financing activities (Note 9).


                See notes to consolidated financial statements.

<PAGE>


                             COGNIGEN NETWORKS, INC.

                   Notes to Consolidated Financial Statements


Note 1 - Description of Business and Summary of Significant Accounting Policies

The Company was  incorporated  in May 1983 in the State of Colorado to engage in
the cellular radio and  broadcasting  business and to engage in any other lawful
activity  permitted  under Colorado law. In June 1988,  the Company  changed its
name to Silverthorne  Production Company (Silverthorne) and commenced operations
in the oil and gas industry.  These operations were  discontinued in 1989. Since
1989,  Silverthorne has attempted to locate acquisition  prospects and negotiate
an  acquisition.  Silverthorne's  pursuit of an acquisition  did not materialize
until  August  20,  1999,  with the  purchase  of the  assets of  Inter-American
Telecommunications  Holding  Corporation  (ITHC),  which was  accounted for as a
reverse acquisition. The surviving entity changed its name to Cognigen Networks,
Inc. in July 2000.

Cognigen  Networks,  Inc.  (the Company) is engaged in the business of providing
telecommunications  products and services to worldwide  markets.  The  Company's
activities  include  selling  prepaid  calling  cards,  providing call switching
services,  and Internet marketing of  telecommunications  products and services,
pagers, and computers.

Principles of Consolidation

These consolidated  financial  statements include the accounts of Inter-American
Telecommunications  Corporation (ITHC), Cognigen Corporation (Cognigen), and the
Company.  Also  included are the accounts and results of  operations of Cognigen
Switching  Technologies,  Inc. (Cognigen  Switching) from April 15, 2000 through
year-end.  All  significant  intercompany  balances and  transactions  have been
eliminated in consolidation.

The comparative June 30, 1999,  financial  statements reflect those of ITHC, the
accounting  acquirer,  in the  reverse  acquisition  (Note  7).  ITHC was in the
development stage in prior years.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents  include cash on
hand and in checking and savings accounts at financial institutions. On occasion
these balances exceed  federally  insured limits.  At June 30, 2000, the Company
had approximately $709,000 in excess of federally insured limits.

Inventories

Inventory  consists of advertising  supplies and prepaid  calling cards held for
resale and is valued at the lower of cost or market. Calling cards are purchased
from a variety of vendors at a discount from the face value. Excise tax of 3% of
the face value is paid at the time of  purchase.  When the calling card is sold,
the excise tax is collected and offset against the prepaid excise tax.


<PAGE>




Note 1 - Description of Business and Summary of Significant Accounting Policies
 (continued)

Property and Equipment

Property and equipment are stated at cost.  Depreciation  is provided  using the
straight-line  method for  financial  reporting  purposes  at rates based on the
following estimated useful lives:

                                                Years
                                               -------
Furniture and fixtures                          3 - 7
Computer equipment                              3 - 5
Equipment                                       3 - 5
Leasehold improvements                          3 - 5
Capitalized software                            3 - 5

Software  developed  to support  the  self-replicating  Web pages used to market
telecommunication  services and administer agents' sales and related commissions
has been capitalized  according to the provisions of AICPA Statement of Position
98-1  "Accounting  for Costs of Computer  Software  Developed  or  Obtained  for
Internal Use".

Intangible Assets

Intangible assets are stated at cost and consist of goodwill and customer lists.
Goodwill is amortized using the straight-line method over three years.  Customer
lists will be amortized over five years, once they are utilized in operations.

Valuation of Long-Lived Assets

The Company assesses valuation of long-lived assets in accordance with Statement
of Financial  Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived  Assets and for  Long-Lived  Assets to be disposed of. The Company
periodically  evaluates the carrying  value of long-lived  assets to be held and
used,   including  goodwill  and  other  intangible  assets,   when  events  and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the anticipated  undiscounted cash flow from such asset
is separately identifiable and is less than its carrying value. In that event, a
loss is recognized  based on the amount by which the carrying  value exceeds the
fair market  value of the  long-lived  asset.  Fair market  value is  determined
primarily using the  anticipated  cash flows  discounted at a rate  commensurate
with the risk involved.

Commissions Receivable

Commissions    receivable    represent    amounts   due   from   providers   for
telecommunication   services  used  by  subscribers.   Typically  providers  pay
commissions  due to the Company  forty-five  days after the usage  month-end  to
allow for billing and collection.


<PAGE>




Note 1 - Description of Business and Summary of Significant Accounting Policies
 (continued)

Commissions Receivable (continued)

An allowance for doubtful  accounts of $0 and $25,000 at June 30, 1999 and 2000,
respectively,  has been  established  by the  Company to provide  for  potential
uncollectible  accounts  and is deemed to be  adequate  by  management  based on
historical results.

Commissions Payable

Commissions payable represent amounts due to agents as commission related to the
usage for which the Company is due commission  income from its providers.  It is
the  Company's  policy to pay  commissions  to its agents  only after  receiving
commissions  due from its providers.  This policy results in  approximately  two
months commission payable at any point in time.

Income Taxes

The Company uses the asset and liability  method of accounting for income taxes.
Under the asset and liability  method,  deferred tax assets and  liabilities are
recognized for the future tax consequences  attributable to differences  between
the financial  statement carrying amounts of existing assets and liabilities and
their  respective tax basis.  Deferred tax assets and  liabilities  are measured
using  enacted tax rates  expected  to be  recovered  or settled.  The effect on
deferred tax assets and  liabilities  of a change in tax rates is  recognized in
income in the period that includes the enactment date.

Revenue Recognition

The Company  records  commission  income when the  underlying  telecommunication
service is rendered.  Commission income does not include amounts paid separately
to carriers for telecommunication services provided.

Calling  card  revenue is  recorded  when the  calling  cards are  shipped.  The
Company's  policy is to delay  shipment of calling  cards for a two-week  period
after  receipt of cash to allow for  processing.  This delay results in deferred
revenue,  which is recorded as a liability  until the calling cards are shipped.
Calling   card   revenue   includes   amounts   paid   for   the   cost  of  the
telecommunications services provided by third-party carriers.

Revenue  from long  distance  phone  services  is  recorded  when  services  are
rendered.

Use of Estimates

The  preparation  of  consolidated   financial  statements  in  conformity  with
generally accepted  accounting  principles 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 consolidated
financial  statements and the reported  amounts of revenues and expenses  during
the reporting period. Actual results could differ from those estimates.


<PAGE>




Note 1 - Description of Business and Summary of Significant Accounting Policies
 (continued)

Loss Per Share

Loss per common  share has been  computed by dividing  net loss by the  weighted
average number of shares of common stock outstanding  during the period.  Shares
issued  in the  initial  capitalization  of the  Company  have been  treated  as
outstanding  since inception.  Diluted earnings per share reflect the effects of
dilutive common equivalent shares;  however,  during loss periods these dilutive
securities are exlcuded as their effect is antidilutive.  Accordingly, basic and
diluted  earnings per share are the same.  For the years ended June 30, 2000 and
1999,  potential  dilutive  securities  consist of 32,400,000  stock options and
1,500,000 warrants and no stock options or warrants, respectively.

Advertising Costs

Advertising  costs are expensed as  incurred.  Total  advertising  costs for the
years ended June 30, 2000 and 1999, were $200,127 and $0, respectively.

Recently Issued Accounting Pronouncements

SFAS No. 133,  "Accounting for Derivative  Instruments  and Hedging  Activities"
requires  companies  to record  derivatives  on the  balance  sheet as assets or
liabilities,  measured  at fair market  value.  Gains or losses  resulting  from
changes in the values of those  derivatives  are  accounted for depending on the
use of the  derivative  and whether it qualifies for hedge  accounting.  The key
criterion for hedge accounting is that the hedging  relationship  must be highly
effective in achieving  offsetting changes in fair value or cash flows. SFAS No.
133 is effective  for fiscal  years  beginning  after June 15, 2000.  Management
believes  that the adoption of SFAS No. 133 will have no material  effect on the
Company's financial statements.

In March 2000,  the FASB  issued FASB  Interpretation  No. 44,  "Accounting  for
Certain  Transactions  Involving  Stock  Compensation"  ("FIN  44"),  which  was
effective July 1, 2000, except that certain conclusions in this  Interpretation,
which cover specific events that occur after either December 15, 1998 or January
12,  2000  are  recognized  on a  prospective  basis  from  July 1,  2000.  This
Interpretation  clarifies the  application  of APB Opinion 25 for certain issues
related to stock issued to employees.  The Company  believes its existing  stock
based  compensation  policies and procedures are in compliance  with FIN 44, and
therefore,  the  adoption  of FIN 44 had no  material  impact  on the  Company's
financial condition, results of operations or cash flows.

In December 1999, the  Securities and Exchange  Commission  ("SEC") issued Staff
Accounting  Bulletin ("SAB") 101, which provides guidance on applying  generally
accepted   accounting   principles  to  selected  revenue   recognition  issues.
Management  believes  that the  Company's  revenue  recognition  policies are in
accordance with SAB 101.


<PAGE>




Note 2 - Basis of Presentation

All common stock share amounts have been  retroactively  adjusted to reflect the
ratio of shares issued by the Company in connection with the reverse acquisition
of ITHC (Note 7). The ratio of shares  issued of 5,688.57  shares of the Company
to each share of ITHC stock represents 54,041,397 newly issued shares and shares
to be issued in exchange for 9,500 shares of ITHC common stock.

All per share  amounts  reflect  the  37,298,444  shares the Company has a legal
obligation to issue in the future in connection with the reverse  acquisition of
ITHC,  and have been treated as outstanding  from the date of acquisition  (Note
12).

Note 3  - Property and Equipment

Property and Equipment consists of the following:

                                                            June 30,
                                                              2000
                                                        ----------------
      Furniture and fixtures                            $         19,063
      Computer equipment                                         137,905
      Equipment                                                  373,281
      Leasehold Improvements                                     180,996
      Software                                                   138,167
                                                        ----------------
                                                                 849,412

      Less accumulated depreciation                             (363,121)
                                                        ----------------

                Total                                   $        486,291
                                                        ================



<PAGE>




Note 4 - Notes Payable

Notes payable consists of the following:

                                          June 30,           June 30,
                                            1999               2000
                                         -----------        ----------
8% unsecured promissory notes
 payable to a related entity,
 principal and interest due
 upon maturity at July 1, 2000,
 subsequently extended to
 July 1, 2001                            $   500,000        $  200,000

8% unsecured promissory note
 payable to a related entity,
 principal and interest due
 upon maturity at July 1, 2000,
 subsequently extended to
 July 1, 2001                                800,000           310,000

12% secured promissory note
 payable to a related entity,
 principal and interest due upon
 maturity at February 12, 2001.                    -           315,000
                                         -----------        ----------
                                           1,300,000           825,000

Less current portion                        (700,000)         (315,000)
                                         -----------        ----------

                                         $   600,000        $  510,000
                                         ===========        ==========


Note 5 - Capital Lease Obligations

The Company leases certain equipment under non-cancelable lease agreements.  The
monthly payments on these leases range from $332 to $7,227,  including interest,
and these leases  expire in various  years  through  2003.  The  property  under
capital  leases as of June 30,  2000,  has a cost of  $266,378  and  accumulated
depreciation of $185,953.

The future  minimum  lease  payments  under  capital  leases and the net present
values of the future minimum lease payments are as follows:

         Year Ending June 30,                                   Amount
         --------------------                                -------------
              2001                                                 114,417
              2002                                                  13,024
              2003                                                   3,372
                                                             -------------
              Total                                                130,813
              Less amount representing interest                    (12,110)
                                                             -------------
              Present value of minimum lease payments              118,703
              Less current portion                                (106,551)
                                                             -------------

              Long-term capital lease obligation             $      12,152
                                                             =============


Note 6 - Income Taxes

Deferred  tax  liabilities  and assets are  determined  based on the  difference
between the financial  statement assets and liabilities and tax basis assets and
liabilities  using the tax rates in effect for the year in which the differences
occur. The measurement of deferred tax assets is reduced,  if necessary,  by the
amount of any tax benefits that, based on available  evidence,  are not expected
to be realized.

The components of the provision for income tax expense (benefit) are as follows:

                                                   June 30,
                                    --------------------------------------
                                        1999                    2000
                                    --------------          --------------

     Current                        $                       $           -
     Deferred                              (16,531)                 16,531
                                    --------------          --------------

                                    $      (16,531)         $       16,531
                                    ==============          ==============

The deferred income tax assets and liabilities  result  primarily from differing
depreciation and amortization periods of certain assets,  provision for doubtful
accounts,  provision for product  returns and  allowances,  net  operating  loss
carryforwards  and the recognition of certain  expenses for financial  statement
purposes and not for tax purposes.  The Company has approximately  $1,913,000 of
net operating loss carryforwards, which expire through 2020 if unused.

The net current and  long-term  deferred  tax  liabilities  in the  accompanying
balance sheet include the following items:

                                              June 30,           June 30,
                                               1999                2000
                                           -------------       ------------

     Current deferred tax asset            $           -        $     9,325
     Current deferred tax liability                    -                  -
                                           -------------       ------------
     Valuation allowance                               -             (9,325)
                                           -------------       ------------

                                           $           -       $          -
                                           =============       ============

     Long-term deferred tax asset          $      16,531       $    713,487
     Long-term deferred tax liability                  -                  -
     Valuation allowance                               -           (713,487)
                                           -------------       ------------

                                           $      16,531       $          -
                                           =============       ============



<PAGE>




Note 6 - Income Taxes (continued)

Rate Reconciliation

The  reconciliation  of income tax expense  (benefit)  by  applying  the Federal
statutory rates to the Company's effective income tax rate is as follows:

                                                        June 30,
                                           --------------------------------
                                               1999               2000
                                           -------------       ------------

Federal statutory rate                             (25.0)%            (34.0)%
State tax on income, net of federal
 income tax benefit                                 (3.3)              (3.3)
Nondeductible expenses                               3.9               28.1
Valuation allowance                                   -                 9.4
                                           -------------      -------------

                                                   (24.4)%              0.2%
                                           =============       ============


Note 7 - Business Acquisitions

Acquisition of customer databases

On  November 4, 1998,  ITHC  acquired a customer  database of 54,034  individual
subscribers  from  TelKiosk  Inc.  (TelKiosk)  in  exchange  for  2,844,285,  as
adjusted,  shares of ITHC common stock,  and a $500,000  promissory note payable
due  November 4, 1999 (and  subsequently  extended  until July 1, 2001 as to the
remaining $200,000 balance due). TelKiosk is partially owned by a former officer
and director of ITHC. This is an  electronically  archived  database  containing
54,034 individual,  comma-delimited records of residential and business accounts
of long distance telephone  subscribers using the callback or call-reorigination
system. The domiciles of these accounts are located primarily outside the United
States, including Japan, Italy, France, Argentina, Brazil, Spain, Israel, Russia
and CIS  countries,  Guatemala,  Venezuela and  Singapore.  The customers in the
database use  primarily  U.S.  origination - foreign  termination  callback long
distance services.

Also on November 4, 1998, ITHC acquired a customer database of 41,415 individual
subscribers from Combined Telecommunications Consultancy, Ltd. (CTC) in exchange
for  5,688,570,  as  adjusted,  shares  of ITHC  common  stock  and an  $800,000
promissory  note payable due November 4, 1999 (and  subsequently  extended until
July 1, 2001 as to $310,000 of the  remaining  balance  due).  CTC is  partially
owned by a former  officer  and  director  of  ITHC.  This is an  electronically
archived  database  containing  41,415  individual,  comma-delimited  records of
residential and business accounts of long distance  telephone  subscribers.  The
domiciles  of  these   accounts  are  all  located  within  the  United  States.
Approximately  90% of these accounts have an affinity to a foreign country,  and
the  accounts  are held by  persons  of  Russian,  Romanian,  Czech,  Slovakian,
Slovenian, Polish, Bulgarian, German, Japanese and Filipino national origin.


<PAGE>




Note 7 - Business Acquisitions (continued)

Acquisition of customer databases (continued)

Migration of customers will commence when the solicitation  process is complete.
The lists were  originally  purchased  by CTC and  TelKiosk  in an arm's  length
transaction  from  an  independent  international  long  distance  reseller  and
customer  base  consolidator.  The purchase  price to ITHC was  determined  with
respect to  amounts  paid or payable  to the  original  seller of the lists.  In
October 2000, the Company  entered into a sale back agreement  relating to these
customer databases (Note 12).

Cognigen Acquisition

On July 1, 1999, ITHC entered into an agreement with Cognigen to purchase all of
Cognigen's  net assets.  The  purchase  price  included  31,286,894  shares,  as
adjusted,  of ITHC  common  stock  valued at $55 and a  $300,000  note  payable.
Additionally, ITHC entered into a four-year employment contract with the founder
of  Cognigen,  which  provides  for an  annual  base  salary  of  $175,000.  The
transaction was accounted for as a purchase. ITHC acquired net assets of $86,285
and recorded  goodwill of $213,770.  The goodwill is being amortized over a life
of 5 years.

Reverse Acquisition

On August 20, 1999,  the Company  completed  the  acquisition  of all of the net
assets of ITHC in exchange for up to 49,041,397  shares of the Company's  common
stock. For financial statement purposes, this business combination was accounted
for as an additional capitalization of ITHC (a reverse acquisition in which ITHC
was the accounting  acquirer).  ITHC is considered the surviving  entity and the
historical  financial statements prior to the acquisition are those of ITHC. The
15,757,047  shares  reflected in the statement of  stockholders'  equity reflect
those shares of  Company's  common stock  outstanding  immediately  prior to the
reverse  acquisition.  The Company's net book value prior to the transaction was
$0. The  issuance  of the stock must be  completed  in two  closings  due to the
limited  amount of authorized  stock  available for issuance under the Company's
articles  of  incorporation.  The first  closing  resulted  in the  issuance  of
11,742,953 shares while the remaining 37,298,444 shares will be issued after the
authorized  number of  shares is  increased  or after a reverse  stock  split is
effected.  The Company issued  5,000,000 shares of the Company's common stock as
finders' fees in connection with the transaction to unrelated  individuals.  The
shares were valued at $1,900,000, or $.38 per share, and reported on a net basis
in additional paid-in-capital.

Additionally  on  August  20,  1999,  ITHC  purchased  12,602,431  shares of the
Company's   common  stock  for  a  price  of  $190,000  from  certain   existing
shareholders of the Company. This was recorded as a charge to paid-in capital in
the amount of $190,000.

The Company is the legal  survivor  and  changed its name to Cognigen  Networks,
Inc. in July 2000.


<PAGE>




Note 7 - Business Acquisitions (continued)

Cognigen Switching Acquisition

On April 15,  2000,  the Company  purchased  the  outstanding  stock of Cognigen
Switching (f.k.a. Aquila International  Telecommunications,  Inc.) for 2,041,445
shares  valued at $1.32 and  $590,000  in  previous  cash  advances  to Cognigen
Switching  for a total  purchase  price  of  $3,287,397.  This  transaction  was
accounted for as a purchase.  Intangible assets acquired are amortized over five
years. The results of operations have been included from the date of acquisition
forward in the accompanying financial statements.

The combined aggregate  purchase price of the Company's  acquisition of Cognigen
Switching  and  Cognigen  have  been  allocated  to  the  assets   acquired  and
liabilities  assumed based on the fair market values on the date of acquisition,
as follows:

     Cash                                             $        34,900
     Accounts receivable                                      318,521
     Property and equipment                                   205,777
     Intangible assets                                      3,809,934
     Deposits and other                                       103,719
     Accounts payable                                         (41,910)
     Accrued expenses                                        (408,872)
     Debt                                                    (434,617)
                                                      ---------------

                                                      $     3,587,452

The  following  table  depicts the  unaudited  pro forma  results of the Company
giving  effect to the  Company's  two  acquisitions  in 1999 and 2000 as if they
occurred on July 1, 1998. The unaudited pro forma information is not necessarily
indicative of the results of  operations  of the Company had these  acquisitions
occurred  at  the  beginning  of the  years  presented,  nor  is it  necessarily
indicative of future results.

                                                   Years Ended
                                                    June 30,
                                   ------------------------------------------
                                        1999                      2000
                                   ----------------          ----------------
                                                   (unaudited)

Revenue                            $      1,808,939          $      4,033,864
                                   ================          ================

Net loss                           $     (1,600,073)         $     (9,017,938)
                                   ================          ================

Loss per share                     $           (.05)         $           (.11)
                                   ================          ================



<PAGE>




Note 8 - Stockholders' Equity

Stock Issuances

In connection with certain ITHC executive  employment  agreements  11,377,366 as
adjusted  shares of ITHC stock  valued at $30,000  were  issued in July 1999 for
services provided by those key employees. In addition, 31,286,894 shares of ITHC
stock were issued in connection  with the  acquisition of the assets of Cognigen
(Note 7).

During the year ended June 30, 2000, the Company sold  12,489,102  shares of the
Company's  common  stock at prices of $0.38 per share  (11,562,302  shares)  and
$1.60 per share (926,800 shares) from various persons. The Company agreed to pay
a fee of 12% of the total proceeds received from the sale of the common stock to
a distributor and issue warrants to purchase up to a maximum of 1,500,000 shares
of the Company's  common stock to various  persons in connection with the sales.
These  warrants  were valued at $347,400  based on a value of $.23 per  warrant.
This fee was  accounted  for as a cost of the sale of those common  shares.  The
Company paid a total of $727,474 related to the total fee due and other expenses
associated with the offering.

Stock Options

In August 1999, the Company issued  32,400,000  options entitling the holders to
purchase  the  Company's  common  stock at $0.46 per share.  The options  vested
immediately  and expire five years from the date issued.  Most of these  options
cannot be exercised  until the Company  amends it articles of  incorporation  or
affects a reverse  split of its common  stock so that it has  sufficient  shares
available for issuance upon the exercise of these  options.  26,000,000 of these
options were issued to non-employees for various professional  services provided
(of  which  12,000,000  were  issued  to a  trust  of  which  the  founder  is a
beneficiary) while the remaining options were issued to employees and directors.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting  Standards  No.  123,  "Accounting  for  Stock-Based   Compensation."
Accordingly,  no  compensation  cost has been  recognized  for the stock options
issued to  employees  and  directors.  $6,022,004  of  compensation  expense was
recorded in  connection  with the options  granted to  non-employees  based on a
value of $.23 per option.

Assumptions  used  in the  valuation  of  stock  options  and  warrants  include
volatility of 109%,  3-year lives,  dividend yield of 0% and a risk-free rate of
5.5%. The weighted average  remaining lives are 2.17 years with weighted average
exercise prices of $.46.

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based  Compensation."
Accordingly,  no compensation cost has been recognized for stock options issued.
Had  compensation  cost for the Company's  stock options issued been  determined
based on the fair  value  at the  grant  date  for  awards  consistent  with the
provisions of SFAS No. 123, the Company's net loss and loss per share would have
been increased to the pro forma amounts indicated below:


<PAGE>




Note 8 - Stockholders' Equity (continued)

Stock Options (continued)

                                           1999               2000
                                         ----------        -----------

Net loss - as reported                   $  (51,283)       $(7,965,186)
Net loss - pro forma                        (51,283)        (9,477,529)
Basic loss per share - as reported             (0.0)             (0.10)
Basic loss per share - pro forma               (0.0)             (0.11)


Note 9 - Non-Cash Investing and Financing Activities

During the year ended June 30, 2000:

The Company  acquired net assets of $86,230 and recorded  goodwill in the amount
of  $213,770  by  issuing a note for  $300,000  in  connection  with a  business
acquisition (Note 7).

The  Company  acquired  the  outstanding  common  stock of a business by issuing
2,041,445 shares valued at $2,697,397 and paying cash of $590,000 (Note 7).

During the year ended June 30, 1999:

The  Company  assumed  notes  totaling  $1,300,000  and  issued  11,377,137,  as
adjusted, shares of common stock valued at $20 in exchange for two long-distance
telephone subscriber databases valued at $1,300,000 (Note 7).

Note 10 - Operating Leases

The Company leases office space under operating lease agreements,  which provide
for aggregate monthly payments of $11,274 and expire through March 2003.

                  Year Ending June 30,             Amount
                  --------------------           ----------
                         2001                        87,688
                         2002                        62,049
                         2003                        12,514
                                                 ----------

                                                 $  162,251

Rent expense  under these  operating  leases  totaled  $59,478 and $0 during the
years ended June 30, 2000 and 1999, respectively.


<PAGE>




Note 11 - Commitments and Contingencies

Commitments

Employment Agreements

During the year ended June 30,  2000,  the Company  entered  into an  employment
agreement  with  one  key  employee.  This  employment  agreement  runs  over  a
three-year  period starting in October of 1999 and provides for an annual salary
of $125,000.  If the Company  terminates the agreement without cause it would be
obligated  to pay  all  remaining  amounts  under  the  remaining  terms  of the
contract.

In August of 2000, the Company  entered into  additional  employment  agreements
with other key  employees.  Under these  agreements,  the  employees are paid an
annual  salary  ranging from $100,000 to $120,000,  receive  bonuses of $100,000
each, which have been pre-paid and are earned prorata over the two-year terms of
the agreements  and the  agreements  are subject to  termination  with cause (as
defined).  If the employee terminates the employee's  agreement without cause or
if the Company  terminates  the  agreement  with cause,  the  employee  would be
obligated  to pay all  remaining  amounts due under the  remaining  terms of the
agreement.

Consulting Agreements

The Company also has consulting  agreements with two individuals,  which provide
for annual  compensation  of $175,000  and  $120,000  and have terms of four and
three years, respectively.

Contingencies

The Company has an  obligation  to issue  37,298,444  shares of common  stock in
connection  with the reverse  acquisition  described in Note 7. The Company also
has 32,400,000  stock options and warrants to purchase up to 1,500,000 shares of
the Company's  common stock  outstanding.  Currently,  the Company does not have
sufficient  authorized  capital to legally issue these additional common shares.
The holders of options and  warrants and those  entitled to receive  shares in a
second future closing are aware of the Company's lack of authorized capital. The
Company is using its best efforts to obtain shareholder approval at a meeting of
shareholders to increase the authorized capital of the Company.  Management does
not believe this condition will have a material  adverse effect as the Company's
financial condition.


<PAGE>




Note 12 - Subsequent Events

Investment in Customer Databases

In October 2000,  the Company  entered into a sale back agreement with an entity
formed  by the  sellers  of its  customer  databases  described  in Note 7.  The
agreement  provides  that if the Company has not been able to establish at least
5,000 active telecommunication  subscribers from the combined lists by March 30,
2001,  the entity  will  repurchase  the  customer  lists from the Company in an
amount not below its original  investment in such lists through the  forgiveness
of  any   outstanding   remaining  debt  and  accrued   interest  which  totaled
approximately  $604,000 at October 2000,  with the remainder of the balance made
up by the return of Company shares held by the sellers at the then market value.
This agreement was reached in an effort by management to protect the Company and
its shareholders interests in such customer databases.  If the transformation of
at least 5,000 names into active  customers is not reached by the  Company,  the
Company  will be  able  to  recover  its  original  investment  in  these  lists
collectively.  Management  of the Company  believes it will be successful in the
activation  of at least  5,000  customer  names.  Management  believes  that the
signing of this  agreement was a positive step in protecting  the investment the
Company and its shareholders have made in acquiring these lists.