U.S.
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM
10-KSB/A

|[X] |  | ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- |  | ------------------------------------------------------------------------------------

For the
fiscal year ended June 30, 2004

|[   ] |  | 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                                   |  | 
|(State or other jurisdiction of            |  | 
|incorporation or organization)             |  | 
|6405 - 218th Street, S.W., Suite 305       | 
|Mountlake Terrace, Washington              |  | 
|(Address of principal executive offices)   |  | 
|Issuers telephone number:  (425) 329-2300 | 

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    [   ]

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: $10,735,099

The
aggregate market value of the voting and non-voting common equity held by
non-affiliates at September 2, 2004, computed by reference to the last sale
price of $0.17 per share on the OTC Bulletin Board, was $332,747.

The
number of shares outstanding of each of the issuers classes of common
equity on September 2, 2004, was 8,753,972.

Documents
Incorporated by Reference

The
information required by Items 9 through 12 and Item 14 is incorporated by
reference to our definitive proxy statement or definitive information statement
that we plan to file in connection with our next Annual Meeting of Shareholders
involving the election of directors. We plan to file the definitive proxy or
definitive information statement with the Commission on or before October 28,
2004.

Transitional
Small Business Disclosure Format     Yes    [   ]     No  [X]

---

TABLE OF
CONTENTS

|PART I   |  |                                                            |  | 3  | 
|-------- |  | ---------------------------------------------------------- |  | -- | 
|Item 1   |  | Description of Business                                    |  | 3  | 
|Item 2   |  | Description of Property                                    |  | 7  | 
|Item 3   |  | Legal Proceedings                                          |  | 8  | 
|Item 4   |  | Submission of Matters to a Vote of Security Holders        |  | 8  | 
|PART II  |  |                                                            |  | 8  | 
|Item 5   |  | Market for Common Equity and Related Stockholder Matters   |  | 8  | 
|Item 6   |  | Managements Discussion and Analysis or Plan of Operation  |  | 10 | 
|Item 7   |  | Financial Statements                                       |  | 17 | 
|Item 8   |  | Changes In and Disagreements with Accountants on           | 
|         |  | Accounting and Financial Disclosure                        |  | 18 | 
|Item 8A  |  | Controls and Procedures                                    | 
|Item 8B  |  | Other Information                                          |  | 18 | 
|PART III |  |                                                            |  | 19 | 
|Item 9   |  | Directors, Executive Officers, Promoters and Control       | 
|         |  | Persons; Compliance with Section 16(a) of the Exchange Act |  | 19 | 
|Item 10  |  | Executive Compensation                                     |  | 21 | 
|Item 11  |  | Security Ownership of Certain Beneficial Owners and        | 
|         |  | Management and Related Stockholder Matters                 |  | 24 | 
|Item 12  |  | Certain Relationships and Related Transactions             |  | 27 | 
|Item 13  |  | Exhibits and Reports on Form 8-K                           |  | 31 | 
|Item 14  |  | Principal Accountant Fees and Services                     |  | 33 | 

2

---

PART I

Forward-Looking
Statements.

The
discussion in this report contains forward-looking statements, including,
without limitation, statements relating to our wholly owned subsidiary and us.
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 become
certified as a reseller in all jurisdictions in which we apply, the possibility
that our proprietary customer base will not grow as we expect, our possible
inability to obtain additional financing, the possible lack of producing agent
growth, our possible lack of revenue growth, our possible inability to add new
products and services that generate increased sales, our possible lack of cash
flows, our possible loss of key personnel, the possibility of telecommunication
rate changes and technological changes and the possibility of increased
competition. Many of these risks are beyond our control. We are not entitled to
rely on the safe harbor provisions of Section 27A of the Securities Act of 1933,
as amended, or Section 21E of the Securities Exchange Act of 1934, as amended,
when making forward looking statements.

Item 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 changed our name to
Cognigen Networks, Inc. on July 12, 2000.

We
currently sell telecommunications and personal technology services through
multifaceted sales and marketing organizations that utilize 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 independent agents, we have sold our own proprietary products and services or
sold as agent third party or outside vendor products and services to customers
and subscribers worldwide. Domestic and international long distance services
make up a major portion of our sales with prepaid calling cards and paging,
wireless communications, computers and Internet-based telecommunications
products and other products in our sales mix. We sell our own proprietary
products and services and , as agent, have contractual agreements with a variety
of product and service vendors that provide us with a commission percentage of
any sales made through one of our supported web sites. As agent, our web-based
marketing division sells the products and services of industry leaders such as
AT&T Wireless, Broadvox, CNM Network, Nextel, PowerNetGlobal, Sprint, Talk
America, T-Mobil, Verizon and Z-tel. Our operations partially are dependent on
our affiliations with third party providers of the products and services that
our agents sell. These third party providers own the rights to sell these
products and services. Our ability to offer these products and services is
dependent on our agreements with providers being renewed and not terminated. The
non-renewal or termination of a substantial number of these agreements would
have a material adverse effect on our financial condition and results of
operations. Our marketing engine is fueled by distribution channels through an
Internet presence and through our corps of independent agents and affiliate
groups each with their own customized Web site.

3

---

In
the mid 1990s, our predecessor recognized the marketing potential of the
Internet and formed what we believe was one of the first companies to create a
marketing operation based exclusively on the Internet. The initial concept was
to expand marketing potential by increasing the number of independent agents
working within our corporate network while at the same time continuing to
increase the number of products and services that these agents could provide to
our worldwide customer base. To facilitate the manageable growth of this network
and to be able to provide the agents with the support and marketing edge
necessary for success, we developed and deployed the self
replicating web page. This proprietary technology automatically creates a
high content, personalized set of e-commerce web pages for each new agent, at
the time the agent becomes a member of our network. Additionally, an Internet
accessible private site is instantly created for the new agent. Each
agent can view the agents records, activity and account status on which
the agent is working. The private site also contains customer detail status,
recommended training sources, frequently asked questions and agent benefits. We
also adopted a strategy of enabling each agent to sell telecommunications
services and to recruit new agents. Generally, the original agent receives a
sales commission override on sales generated by the agents thus recruited. Our
commission structure and plan enables our agents to earn money without the
necessity of developing a subordinate agent base. Our revenue is dependent on
sales by our independent agents. The failure of these agents to achieve
sustained sales will materially adversely affect our financial condition and
results of operations.

We
use self-replicating web page technology to run our web-based operations. If
another technology becomes the preferred industry standard, we may be at a
competitive disadvantage which, in turn, may require us to make changes at
substantially increased costs. If our technology becomes obsolete at some time
in the future and we are unable to change to an alternate technology in a cost
effective manner, it could materially adversely affect our financial conditions
and results of operations.

As
of June 30, 2004, we had made advances of $454,149 to Intandem Communications
Corp. (Intandem). On April 1, 2003, we and certain principals of Intandem
entered into an agreement (Funding Agreement) pursuant to which we agreed to
provide up to $448,093 in a series of loans to Intandem. Effective February 1,
2004, by mutual agreement of the principals of Intandem and us, the Funding
Agreement was terminated and a separate agreement, the Termination of Funding
Agreement and Settlement Agreement (Termination Agreement), was entered into.

The
Termination Agreement provided that we would convert the notes receivable of
$387,399 into 100% of the outstanding stock of Intandem in exchange for payments
of $10,000 per month for eight months, assumption of up to approximately $45,000
in liabilities, cancellation of all employment contracts of the Intandem
principals and cancellation of options to purchase our common stock. As of the
date of the Termination Agreement, $414,149 had been funded under the Funding
Agreement. Due to questions of recoverability of this amount and the remaining
commitments under the Termination Agreement, a provision of $494,149 has been
taken in the statement of operations. This provision represents the $414,149
funding through the date of the Termination Agreement plus an estimate of
remaining commitments under the Termination Agreement which approximated $80,000
at the time. Approximately $60,000 remains in accrued liabilities as of June 30,
2004, related to estimated futures expenses relating to the Termination
Agreement.

4

---

In
conjunction with the Funding Agreement, a consultant was to be paid, under his
consulting agreement with us, a commission that was being negotiated with us.
The commission amount had not yet been determined when questions of
recoverability arose and a provision to write off funded amounts was included in
the statement of operations. It is anticipated that the majority of any
commission paid will be from future Intandem cash flows, if any, in a
combination of cash and some of our common stock, but this can not be assured or
estimated at this time.

On
May 12, 2004, after approval by the Board of Directors, we entered into a Stock
for Stock Exchange Agreement with Jimmy L. Boswell, David G. Lucas, Reginald W.
Einkauf and John D. Miller (collectively the Principals) pursuant to which the
Principals agreed to exchange with us a total of 800,000 shares of our common
stock owned by the Principals for all of the outstanding common stock of our
wholly-owned subsidiary, Cognigen Switching Technologies, Inc. (CST), and
warrants to purchase 200,000 shares of our common stock at $.3015 per share
effective February 1, 2004. The closing occurred on May 21, 2004. At the closing
CST entered into a Master Services Agreement (MSA) to provide us with
telecommunications rating, billing, provisioning, customer care, commissioning
and database management for a fee. The MSA is effective February 1, 2004, and
goes for one year periods unless terminated by either party at the end of each
period with a 30 day notice.

As
part of the closing, CST entered into a new note with a then existing lender
representing approximately $223,000 in debt. All options to purchase our common
stock issued to CST employees were terminated except for the option to purchase
200,000 shares of our common stock owned by Jimmy L. Boswell which option
expired in August 2004 and was exercisable at $3.68 per share.

At
the time of the  transaction,  Jimmy L. Boswell was the  president  and a director of
CST.  David G. Lucas was  the former chief  financial  officer and a director of CST.
Reginald W.  Einkauf and John D. Miller were former  officers  and directors of CST. Mr.
Boswell and Mr. Lucas are former  officers and  directors of ours.  We originally
acquired CST  in April 2000 when the Principals and another person sold all of the
outstanding stock of CST to us for our common stock.

In
conjunction with the Stock for Stock Exchange Agreement, goodwill with a net
book value of $2,893,029 has been written off. With consideration of
approximately $26,000, calculated using the Black Scholes method of calculation
for the 200,000 warrants, goodwill of $2,893,029 and $168,448 in negative equity
that was assumed by the Principals, and the 800,000 shares of our common stock
that were repurchased from the Principals valued at $.31 per share or $248,000,
we recorded a non cash loss of $2,502,583 on this transaction that is included
in our statement of operations for the year ended June 30, 2004.

We
had revenue from three customers that generated a total of approximately 25% and
32% of total revenue for the years ended June 30, 2004 and 2003, respectively

5

---

Competition

We
compete with all of the companies for whom we sell products as an agent, with a
number of companies that are network marketing telecommunication companies, and
with all outside vendors who sell telecommunications and personal communications
products directly and over the Internet.

Many
of our current and potential competitors have longer operating histories and
significantly greater selling and marketing, technical, financial, customer
support, professional services and other resources than we do. As a result,
these competitors are able to devote greater resources to the development,
promotion, sale and support of their products. Moreover, our competitors may
foresee the course of market developments more accurately than we do and could
develop new technologies that compete with us or even render our services
obsolete. We may not have sufficient resources to continue to make the
investments or achieve the technological advances necessary to compete
successfully with existing or new competitors. In addition, due to the rapidly
evolving markets in which we compete, additional competitors with significant
market presence and financial resources, including large telecommunications
companies, may enter our markets, thereby further intensifying competition.

The
markets in which we compete are characterized by increasing consolidation. We
cannot predict how industry consolidation will affect our competitors and we may
not be able to compete successfully in an increasingly consolidated industry.
Additionally, because we may be dependent on strategic relationships with third
parties in our industry, any consolidation involving these parties could reduce
the demand for our products and otherwise harm our business prospects. Our
competitors that have large market capitalizations or cash reserves are also
better positioned than we are to acquire other companies, including our
competitors, thereby obtaining new technologies or products that may displace
our product lines. Any of these acquisitions could give our competitors a
strategic advantage that would materially and adversely affect our business,
financial condition and results of operations.

In
addition, many of our competitors have much greater name recognition and have a
more extensive customer base, broader customer relationships, significant
financing programs, and broader product offerings than we do. These companies
can adopt aggressive pricing policies and leverage their customer bases and
broader product offerings to gain market share.

We
expect that competitive pressures could result in price reductions, reduced
margin and loss of market share, which could materially and adversely affect our
business, financial condition and results of operations.

The
industries in which our agents resell have severally experienced a high rate of
customer turnover. The rate of customer turnover is attributable to several
factors including, the non-use of customer contracts, affordability, customer
care concerns and other competitive factors. Our strategy to address customer
turnover may not be successful or the rate of customer turnover may be
unacceptable. Price competition and other competitive factors could also cause
increased customer turnover. A high rate of customer turnover could have a
material adverse affect on our competitive position and results of operations.

6

---

Regulation

We
are not currently subject to any governmental regulations as an Internet
marketer of telecommunications and technology based products and services. We
are authorized pursuant to authority of the Federal Communications Commission
(FCC) to operate as an intrastate and international resale carrier
under Section 214 of the FCC rules. In addition, we are regulated by some state
commissions as a reseller of intrastate long distance telecommunications
services.

The
markets for the products and services that we sell are characterized by a
significant number of laws, regulations and standards, including those
promulgated by the FCC. While we believe that our services comply with all
current governmental laws, regulations and standards, we cannot assure you that
we will be able to continue to do so in the future.

Our
customers may also require, or we may otherwise deem it necessary or advisable,
that we modify our services to address anticipated changes in the regulatory
environment. Failure of our services to comply, or if we experience delays in
compliance, with the various existing, anticipated, and evolving industry
regulations and standards could adversely affect sales of our existing and
future products. Moreover, the enactment of new laws or regulations, changes in
the interpretation of existing laws or regulations or a reversal of the trend
toward deregulation in the telecommunications industry, could have a material
adverse affect on our business, financial condition and results of operations.

Employees

As
of June 30, 2004, we had 12 employees, all of whom are full-time, based in our
offices and facilities in Denver, Colorado and Seattle, Washington.

Item 2.
Description of Property

We
lease approximately 3,353 square feet of office space at 6405 218th
Street, S.W., Suite 305, Mountlake Terrace, Washington 98043, pursuant to a
lease that will terminate on July 31, 2007 (unless extended), and that currently
requires monthly rental payments of $5,100. We also lease approximately 1,287
square feet of office space at 3495 Winton Place, Building E, Suite 270,
Rochester, New York 14623, pursuant to a lease that will terminate on June 30,
2005, and that currently requires monthly payments of approximately $1,180, and
lease Unit 506B at 301 Oxford Valley Road, Yardley, Pennsylvania pursuant to a
lease that will terminate on April 30, 2005 and that requires monthly rental
payments of approximately $2,317 per month and a final payment of $4,774. We
will pay $6,478 by December 2004 to buyout the remaining term of the Rochester,
New York facility and are attempting to sublet the Yardley, Pennsylvania
facility, both of which we previously closed to operations.

7

---

Item 3.
Legal Proceedings.

In
September 2004, we filed a lawsuit against American Communications LLC (American
Communications), David Stone (Stone) and Harry Gorlovesky (Gorlovesky) in the
Circuit Court of the Twentieth Judicial Circuit in and for Dade County, Florida.
In our complaint, we allege (1) that American Communications breached a
settlement agreement by not making all of the $100,000 of payments required
thereunder to payoff a promissory note and agreement for $300,000 that was
assigned to and is owed to us and we demanded judgment of $334,119 on the
promissory note and agreement plus interest from May 10, 2004: (2) that we are
owed $81,000 for a dishonored check of $20,000 written as the last payment due
under the settlement agreement and (3) that Stone and Gorlovesky guaranteed the
promissory note and agreement and must pay the amount due under the promissory
note and agreement plus our attorneys fees, cost and expenses in collecting on
the promissory note and agreement.

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

No
matter was submitted to a vote of our security holders during our fourth fiscal
quarter ended June 30, 2004.

PART II

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

Our
common stock is quoted on the NASD OTC Bulletin Board under the symbol
CGNW. 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, markdowns or commissions and may not
necessarily represent actual transactions.

|                                 | High Bid | Low Bid
|-------------------------------- | -------- | -------
|Quarter ended June 30, 2004      |          | $0     
|Quarter ended March 31, 2004     |          | 0      
|Quarter ended December 31, 2003  |          | 0      
|Quarter ended September 30, 2003 |          | 0      
|Quarter ended June 30, 2003      |          | 0      
|Quarter ended March 31, 2003     |          | 0      
|Quarter ended December 31, 2002  |          | 0      
|Quarter ended September 30, 2002 |          | 0      

As
a result of our common stock not being quoted on a national 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.

8

---

Historically,
our common stock has not traded in high volumes. An active or liquid trading
market in our common stock may not develop or, if it does develop, it may not
continue.

The
market price for our common stock could be subject to significant fluctuations
in response to variations in quarterly operating results, announcements of
technological innovations or new products and services by us or our competitors,
and our failure to achieve operating results consistent with securities
analysts projections of our performance.

The
stock markets have experienced extreme price and volume fluctuations and
volatility that have particularly affected the market price of many emerging
growth and development stage companies. Such fluctuations and volatility have
often been unrelated or disproportionate to the operating performance of such
companies. Factors such as announcements of the introduction of new or enhanced
services or related products by us or our competition, announcements of joint
development efforts or corporate partnerships in the telecommunications market,
market conditions in the technology, telecommunications and other emerging
growth sectors, and rumors relating to us or our competitors may have a
significant impact on the market price of our common stock.

As
of September 2, 2004, there were approximately 1,320 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.

The
following is a table with information regarding our equity compensation plans as
of June 30, 2004:

|                            
|----------------------------
|
|
|                            
|Equity compensation plans   
|approved by security holders
|                            
|Equity compensation plans   
|not approved by security    
|holders                     
|                            
|Total                       
|                            

9

---

In
May 2004, we granted warrants to purchase 200,000 shares of our common stock at
an exercise price of $0.3015 per share to four people in connection with the
Stock for Stock Exchange Agreement. The warrants vested immediately.

The
warrants were issued in reliance upon the exemption from registration contained
in Section 4(2) of the Securities Act. The holders of these warrants had
available to them full information concerning us and the certificates
representing the warrants have a legend prohibiting the transfer of the shares
of common stock underlying the warrants unless the transfers are registered
under the Securities Act or the transfers are exempt from the registration
requirements thereof. No underwriters were involved in this transaction.

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

Overview

We
are an Internet and relationship enabled marketer of long distance telephone and
personal communications services. We earn revenue in two ways. First, we earn
commissions revenue from a number of outside vendors whom we represent on our
agent web sites and sell their products and services via contractual agreements.
Second, we earn telecommunications revenue through sales of our own proprietary
products and services through our agent web sites.

We
made a major strategic transition in our business profile and delivery of
products and services over the past fifteen months. In addition to being
historically successful at representing and selling the services and products of
outside vendors, we are now selling multiple branded products and services
whereby the customer and account are owned by us. We refer to these products and
services as our proprietary products and services. The most significant impact
of this strategic transition is that by billing our owned customer accounts, we
generated approximately five to seven times as much revenue compared to
commission revenue we receive from vendors.

Through
the acquisition of multiple state licenses, billing capability, and new
distribution channels, we can grow revenue, maintain closer contact to our
customers, and control bottom line retention and contribution to a greater
degree.

See
additional discussion of liquidity and capital resources below.

Results of
Operations

Summary Key
Financial Data

|                                                        | Fourthquarter2004 | Fiscal2004 | Fiscal2003
|------------------------------------------------------- | ----------------- | ---------- | ----------
|Cash Flows From Operations Data:                        |                   |            |           
|Cash flows from operating activities                    |                   | 142,249    |           
|Summary Statement of Operations Data:                   |                  
|Income (loss) before taxes                              |                   | 66,646     |           
|Less: Provision for sale of CST                         |                   | --         |           
|Provision for termination of Intandem Funding Agreement |                   | --         |           
|                                                        |                   |            |           
|Income before provisions                                |                   | 66,646     |           
|                                                        |                   |            |           
|                                                        |                   |            |           

10

---

We
had cash flows from operations for fiscal 2004 of $227,938 compared to $113,085
for fiscal 2003. This improvement began to be realized in our fourth fiscal
quarter of 2004, during which cash flows from operations was $142,249, as many
of our recent cost and expense reductions began to be reflected in our operating
results. The cost and expense reductions were centered on improving our cash
flows and included reducing personnel, reducing or eliminating unwarranted
expenses and the sale of our subsidiary, CST, among other things. We have added
over $50,000 per month to our ongoing cash flows from operations as a result of
these cost and expense reductions.

Detailed
Statement of Operations Data:

|                                                   |  |           
|-------------------------------------------------- |  | ----------
|Revenue                                            |  |           
|Marketing commissions                              |  | 5,080,650 
|Telecommunications                                 |  | 5,636,291 
|Other                                              |  | 18,158    
|                                                   |  |           
|Total revenue                                      |  | 10,735,099
|Operating expenses                                 | 
|Commissions:                                       | 
|Marketing                                          |  | 2,512,429 
|Telecommunications                                 |  | 729,312   
|Telecommunications                                 |  | 3,103,394 
|Selling, general and administrative                |  | 4,169,123 
|Depreciation and amortization                      |  | 55,898    
|                                                   |  |           
|                                                   |  | 10,570,156
|Loss provision for sale of CST                     |  | 2,502,583 
|Loss provision for termination of Intandem Funding |  | 494,149   
|                                                   |  |           
|Total operating expenses                           |  | 13,566,888
|Income (loss) from operations                      |  | (2,831,789
|Interest expense                                   |  | (46,849   
|                                                   |  |           
|Income (loss) before income taxes                  |  | (2,878,638
|                                                   |  |           
|                                                   |  |           

11

---

Year Ended
June 30, 2004 Compared to Year Ended June 30, 2003

Total
revenue for fiscal 2004 was $10,735,099 compared to $10,916,272 for 2003.
Marketing commissions revenue was $5,080,650 for 2004 compared to $6,918,479 for
the prior year. Telecommunications revenue was $5,636,291 for 2004 as compared
to $3,988,343 for the prior year.

Marketing
commissions revenue for 2004 decreased $1,837,829 from that of 2003 or 27%. This
decrease reflects a trend that began in our first fiscal quarter of 2003 and
continued through part of the fourth fiscal quarter of 2004. We believe this
trend was in large part a result of the lack of new product opportunities for
our agents, inadequate customer service and partly from our strategic transition
previously explained. During the second half of fiscal 2004, we entered into
agreements to market additional and new products that were and remain very
consumer desirable such as voice over internet protocol (VoIP) telephone
services, cell phones, satellite television and bundled services for local and
long distance service. We have also emphasized customer service this year
reducing our response time to customer inquiries and order verification.
Marketing additional and new products and better customer service has helped
stabilize marketing commissions revenue.

Telecommunications
revenue increased $1,647,948 for 2004 compared to 2003, or 41%. This increase
resulted from approximately $2,500,000 of telecommunications revenue from new
proprietary products and services being sold offset by a decrease of
approximately $900,000 of telecommunications revenue from proprietary products
and services that were being sold in the prior year. Our proprietary customer
base increased approximately 15,000 to approximately 26,000 proprietary
customers currently. A bigger portion of those proprietary customers are small
business or dedicated customers who have entered into service contracts with us
for usually one to two year periods and who represent higher months usage than
most residential customers. Part of the decrease in proprietary products and
services resulted from our sale of CST to its principals effective February 1,
2004. As part of the sale, CST maintained approximately $70,000 in monthly
telecommunications revenue, approximately 50% from a conferencing product it
switches through its facilities based switch and another 50% from a customer
base which receives no new customers but is primarily a billing service based
customer.

Marketing
commissions expense decreased from $3,494,038 for 2003 to $2,512,429 for 2004, a
decrease of 28%. This decrease correlates to the decrease in marketing
commissions revenue explained above. Had the payments to a shareholder described
in Note 8 (Stockholders Redemption Agreement) to the Consolidated Financial
Statements been recorded as marketing commissions expense instead of a reduction
of deferred commissions payable on the balance sheet, marketing commissions
expense would have been higher by $526,644. We do not anticipate recording these
payments as marketing commissions expense until sometime in 2006.

Telecommunications
expense increased from $409,055 for 2003 to $729,312 for 2004 or 78%. This
increase is primarily a result of our strategic transition to sell more
proprietary products and services. These products and services include those
generated through our Intandem created relations which are paid at higher
commission rates than those paid on marketing commissions revenue.

12

---

Telecommunications
operating expenses, primarily carrier costs, increased $971,359 for 2004
compared to 2003 or 46%, from $2,132,035 to $3,103,394. This increase is
consistent with the increase in corresponding revenue which increased 41% for
the same time period. Telecommunications operating expenses as a percentage of
telecommunications revenue increased from 54% in 2003 to 55% in 2004.

Selling,
general and administrative expenses decreased $124,094 for 2004 compared to
2003, or 3%. This decrease is largely attributed to decreases in consulting,
legal and accounting fees of $383,409, travel expenses of $93,915, server and
state taxes of $109,668, offset in part by increases to expenses related to the
increase in proprietary revenues such as credit card, credit check and licensing
fees of $210,207. Other increases included fees paid to CST for customer service
and switching services, among other things, since February 1, 2003 of $219,718.
Another decrease included salaries which decreased approximately $265,000 for
the sale of CST but increased $158,535 for personnel who were working in our
Rochester facility but which facility was shut down during 2004. We have
benefited from decreases to selling, general and administrative from the CST
transaction of approximately $25,000 to $30,000 per month and from other cost
and expense reductions such as reducing unwarranted expenses and salaries, among
other things, of in excess of $30,000 per month on an ongoing basis.

The
provision for sale of CST of $2,502,583 relates to the Stock for Stock Exchange
Agreement or sale of CST to its principals. Goodwill with a net book value of
$2,893,029 was written off. The goodwill was recorded in 2000 when we acquired
CST. With consideration of approximately $26,000, calculated using the Black
Scholes method of calculation for the 200,000 warrants awarded, goodwill of
$2,893,029 and $168,448 in negative equity that was assumed by the principals,
and the 800,000 shares of our common stock that was repurchased from the
principals valued at $.31 per share, we recorded a loss of $2,502,583 on this
transaction.

The
provision for termination of Intandem Funding of $494,149 results from a funded
amount of $414,149 funding through the date of the Termination Agreement plus an
estimate of remaining commitments under the Termination Agreement which
approximated $80,000 at the time.

Depreciation
and amortization decreased $78,689 from $134,587 for 2003 to $55,898 for 2004.
This decrease was a result of the CST sale as previously described and to assets
becoming fully depreciated.

Interest
expense for 2004 of $46,849 was lower by $5,084 from that of 2003. This resulted
from lower average outstanding debt or receivables financing arrangement levels.

Seasonality
and Economic Conditions

Our
revenue and sales are not affected by seasons of the year.

Inflation

We
do not believe that inflation had a material impact on our results of operations
for the fiscal years ended June 30, 2004 or 2003.

13

---

Liquidity
and Capital Resources

We
have historically funded our operations primarily from sales of securities and
operations. At June 30, 2004 we had cash and cash equivalents of $213,611 and
negative working capital of $1,211,557. Cash provided by operations during the
year ended June 30, 2004 was $227,938.

Cash
used in investing activities of $177,942 included advances of $241,397 under the
terms of the Funding Agreement with Intandem. Cash used in financing activities
of $249,377 primarily included net proceeds from the receivables financing
agreement of $308,100 offset by the payment of deferred commissions of $526,644
and payment on a note payable of $50,000.

We
have a balance outstanding under a receivables financing arrangement as of June
30, 2004 of $308,100. This represents the amount of marketing commissions
receivables that have been sold under an Accounts Receivable Purchase Agreement
(Receivables Purchase Agreement) with a bank. The Receivables Purchase Agreement
provides for up to $1,250,000 in marketing commissions receivable to be used as
collateral for advances under the Receivables Purchase Agreement of which 65% of
the marketing commissions receivable balances are available in cash advances to
the Company. Interest charges are 1.3% per month on the marketing commissions
receivable balances used as collateral. After one year, the Receivables Purchase
Agreement is from year to year unless terminated in writing by either party. The
Company is in compliance with the terms and conditions of the Receivables
Purchase Agreement.

Cash
flows generated from operations and from our receivables financing arrangement
were sufficient to meet our working capital requirements for the year ended June
30, 2004, but may not be sufficient to meet our working capital requirements for
the foreseeable future or provide for expansion opportunities. Currently, we are
slowly reducing our average balances outstanding under our receivables financing
arrangement. We have reduced costs and expenses by reducing personnel, reducing
or eliminating unwarranted expenses and have sold CST, our former subsidiary,
which all combined have increased our cash flows in excess of $50,000 per month.
We are looking at various financing and equity opportunities to provide
additional working capital or for expansion opportunities and continue to
identify costs and expenses that can be reduced or eliminated. There can be no
assurance we will be able to secure additional debt or equity financing, that we
will be able to reduce or eliminate more costs and expenses or that cash flows
from operations will produce adequate cash flow to enable us to meet all of our
future obligations or to be able to expand. However, we believe that we will be
successful in producing sufficient cash flows from all collective sources to
continue for at least the next twelve months.

Critical
Accounting Policies

We
have identified the policies below as critical to our business operations and
the understanding of our results of operations. In the ordinary course of
business, we have made a number of estimates and assumptions relating to the
reporting of results of operations and financial condition in the preparation of
our financial statements in conformity with accounting principles generally
accepted in the United States. Actual results could differ significantly from
those estimates under different assumptions and conditions. We believe that the
following discussion addresses our most critical accounting policies, which are
those that are most important to the portrayal of our financial condition and
results of operations and require our most difficult, subjective, and complex
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain.

14

---

Our
critical accounting policies are as follows:

|o |  | marketing commissions receivable;
|- |  | ---------------------------------

|o |  | goodwill;
|- |  | ---------

|o |  | valuation
of long-lived assets;
|- |  | -------------------------------

|o |  | commissions payable; and
|- |  | ------------------------

|o |  | revenue
recognition.
|- |  | --------------------

Marketing
Commissions Receivable

Marketing
commissions receivable represent amounts due from outside vendors for
telecommunication services used by subscribers. Typically outside vendors pay
commissions due to us forty five to sixty days after the usage month-end.

An
allowance for doubtful accounts of $154,357 as of June 30, 2004, has been
established by us to provide for potential uncollectible accounts and is deemed
to be adequate by management based on historical results.

Goodwill

The
excess of the purchase price over net assets acquired by the Company from
unrelated third parties is recorded as goodwill. Goodwill resulted from the
acquisition of CST in 2000. In July 2001, the FASB issued Statement of Financial
Accounting Standards (SFAS) Nos. 141 and 142, Business Combinations
and Goodwill and Other Intangible Assets. SFAS No. 141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method. Under the guidance of SFAS No. 142, goodwill is no longer
subject to amortization over its estimated useful life. Rather, goodwill will be
subject to at least an annual assessment for impairment by applying a fair value
base test. There was no goodwill recorded as of June 30, 2004 as it was written
off in the transaction related to the sale of CST. See Note 7 to the
Consolidated Financial Statements.

Valuation of
Long-Lived Assets

We
assess valuation of long-lived assets in accordance with Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. We periodically
evaluate 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.

15

---

Commissions
Payable

Commissions
payable represent amounts due to agents for commissions related to the usage for
which we are due marketing commissions revenue from our outside vendors and
commissions payable on sales of telecommunications revenue. It is our policy to
pay commissions to our agents only after receiving commissions revenue due from
our outside vendors. This policy results in approximately two months commission
payable on outside vendor commission revenue at any point in time. Commissions
are paid on telecommunications revenue usually within one to two months of
generating the telecommunications revenue.

Revenue
Recognition

Marketing
Commissions

Marketing
commissions revenue from the sale of long-distance telephone, personal
communication devices and marketing products is recognized at the time of sale.

Telecommunications

Telecommunications
pin revenue is recorded when the pins are
shipped. Our policy is to delay shipment of pins for a short
period of time after receipt of cash to allow for processing. This delay
results in deferred revenue, which is recorded as a liability until the pins
are shipped. Pin revenue includes amounts paid for the cost of
the telecommunications services provided by third-party carriers.

Telecommunications
long distance phone services revenue is recorded when services are rendered.

Recently
Issued Accounting Pronouncements

In
December 2003, the Financial Accounting Standards Board (FASB) issued revised
SFAS No. 132, Employers Disclosures about Pensions and Other
Postretirement Benefits. The revision requires additional annual
disclosures related to information describing the types of plan assets,
investment strategy, measurement dates, plan obligations and cash flows. The
revision also required new quarterly disclosures detailing the components of net
periodic benefit cost recognized during the interim period. The adoption of this
Standard has not had a material effect on our financial statements.

In
March 2004, the FASB approved the consensus reached on the Emerging Issues Task
Force (EITF) Issue No. 03-1, The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments. The objective of
this Issue is to provide guidance for identifying impaired investments. EITF
03-1 also provides new disclosure requirements for investments that are deemed
to be temporarily impaired. The accounting provisions of EITF 03-1 are effective
for all reporting periods beginning after June 15, 2004, while the disclosure
requirements are effective only for annual periods ending after June 15, 2004.
We have evaluated the impact of the adoption of EITF 03-1 and do not believe the
impact will be significant to our overall results of operations or financial
position.

16

---

Forward
Looking Statements

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

We
are an Internet and relationship enabled marketer of long distance telephone and
personal communications services. We earn revenue in two ways. First, we earn
commissions revenue from a number of outside vendors whom we represent on our
agent web sites and sell their products and services via contractual agreements.
Second, we earn telecommunications revenue through sales of our own proprietary
products and services through our agent web sites..

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/A, which financial
statements, reports and notes are incorporated herein by reference.

17

---

COGNIGEN
NETWORKS, INC.

Consolidated
Financial StatementsandIndependent Auditors ReportJune 30, 2004 and 2003

---

COGNIGEN
NETWORKS, INC.

Table
of Contents

|                                                                    | Page
|------------------------------------------------------------------- | ----
|Independent Auditors Report                                        |     
|Consolidated Financial Statements                                   |     
|Consolidated Balance Sheet                                          |     
|Consolidated Statements of Operations                               |     
|Consolidated Statement of Changes in Stockholders Equity (Deficit) |     
|Consolidated Statements of Cash Flows                               |     
|Notes to Consolidated Financial Statements                          |     

---

# INDEPENDENT
AUDITORS REPORT

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

We
have audited the accompanying consolidated balance sheet of Cognigen Networks,
Inc. and subsidiary as of June 30, 2004, and the related consolidated statements
of operations, changes in stockholders equity (deficit) and cash flows for
the years ended June 30, 2004 and 2003. 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 the standards of the Public Accounting
Oversight Board (United States). 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
subsidiary as of June 30, 2004, and the results of their operations and their
cash flows for the years ended June 30, 2004 and 2003 in conformity with U.S.
generally accepted accounting principles.

/s/Ehrhardt
Keefe Steiner & Hottman PC Ehrhardt Keefe Steiner & Hottman PC

September 2,
2004
Denver, Colorado

F-1

---

COGNIGEN
NETWORKS, INC.

Consolidated
Balance SheetJune 30, 2004

Assets

|                                                                                     | 
|------------------------------------------------------------------------------------ | 
|Current assets                                                                       | 
|Cash                                                                                 | 
|Accounts receivable, net of allowance of $258,107                                    | 
|Marketing commissions receivable, net of allowance of $154,357                       | 
|Inventory                                                                            | 
|Other current assets                                                                 | 
|                                                                                     | 
|Total current assets                                                                 | 
|                                                                                     | 
|Non-current assets                                                                   | 
|Property and equipment, net                                                          | 
|Notes receivable, net of allowance of $20,000                                        | 
|Deposits and other assets                                                            | 
|                                                                                     | 
|Total non-current assets                                                             | 
|                                                                                     | 
|Total assets                                                                         | 
|                                                                                     | 
|                                                                                     | 
|Liabilities and Stockholders Equity (Deficit)                                       | 
|Current liabilities                                                                  | 
|Accounts payable                                                                     | 
|Accrued liabilities                                                                  | 
|Commissions payable                                                                  | 
|Current portion of deferred commissions                                              | 
|Receivables financing arrangement                                                    | 
|Other current liabilities                                                            | 
|                                                                                     | 
|Total current liabilities                                                            | 
|                                                                                     | 
|Non-current liabilities                                                              | 
|Deferred commissions                                                                 | 
|Accrued dividends and other                                                          | 
|                                                                                     | 
|Total non-current liabilities                                                        | 
|                                                                                     | 
|Total liabilities                                                                    | 
|                                                                                     | 
|Commitments and contingencies                                                        | 
|Stockholders equity (deficit)                                                       | 
|8% Convertible Series A preferred stock, no par value, 20,000,000 shares authorized, | 
|500,000 shares issued and outstanding, $1.00 per share liquidation preference        | 
|Common stock $.001 par value, 300,000,000 shares authorized; 8,753,972 shares        | 
|issued and outstanding                                                               | 
|Additional paid-in capital                                                           | 
|Accumulated deficit                                                                  | 
|                                                                                     | 
|Total stockholders equity (deficit)                                                 | 
|                                                                                     | 
|Total liabilities and stockholders equity (deficit)                                 | 
|                                                                                     | 
|                                                                                     | 

See  notes to
consolidated financial statements.

F-2

---

COGNIGEN
NETWORKS, INC.

Consolidated
Statements of Operations

|                                                               | For the Years EndedJune 30, |                
|-------------------------------------------------------------- | --------------------------- | ---------------
|
|Revenue                                                        |                             |                
|Marketing commissions                                          |                             | $   5,080,650  
|Telecommunications                                             |                             | 5,636,291      
|Other                                                          |                             | 18,158         
|                                                               |                             |                
|Total revenue                                                  |                             | 10,735,099     
|                                                               |                             |                
|Operating expenses                                             |                            
|Commissions:                                                   |                            
|Marketing                                                      |                             | 2,512,429      
|Telecommunications                                             |                             | 729,312        
|Telecommunications                                             |                             | 3,103,394      
|Selling, general and administrative                            |                             | 4,169,123      
|Depreciation and amortization                                  |                             | 55,898         
|                                                               |                             |                
|                                                               |                             | 10,570,156     
|Loss provision for sale of CST                                 |                             | 2,502,583      
|Loss provision for termination of Intandem Funding Agreement   |                             | 494,149        
|                                                               |                             |                
|Total operating expenses                                       |                             | 13,566,888     
|                                                               |                             |                
|Income (loss) from operations                                  |                             | (2,831,789     
|Interest expense                                               |                             | (46,849        
|                                                               |                             |                
|Income (loss) before income taxes                              |                             | (2,878,638     
|Income taxes                                                   |                             | --             
|                                                               |                             |                
|Net income (loss)                                              |                             | (2,878,638     
|Preferred dividends                                            |                             | (40,000        
|                                                               |                             |                
|Net income (loss) attributable to common shareholders          |                             | $(2,918,638    
|                                                               |                             |                
|                                                               |                             |                
|Income (loss) per common share - basic                         |                             | $         (0.32
|                                                               |                             |                
|                                                               |                             |                
|Weighted average number of common shares outstanding - basic   |                             | 9,223,917      
|                                                               |                             |                
|                                                               |                             |                
|Income (loss) per common share - diluted                       |                             | $         (0.32
|                                                               |                             |                
|                                                               |                             |                
|Weighted average number of common shares outstanding - diluted |                             | 9,223,917      
|                                                               |                             |                
|                                                               |                             |                

See  notes to
consolidated financial statements.

F-3

---

COGNIGEN
NETWORKS, INC.

Consolidated
Statement of Changes in Stockholders Equity (Deficit)For
the Years Ended June 30, 2004 and 2003

|                                          | Preferred Stock | Common Stock | AdditionalPaid-in | Accumulated  | TotalStockholders |           |  
|----------------------------------------- | --------------- | ------------ | ----------------- | ------------ | ------------------ | --------- | -
|
|Balance - June 30, 2002                   |                 | --           |                   | $         -- |                    | 9,054,456 |  
|Issuance of preferred stock, net of       |                
|expenses                                  |                 | 500,000      |                   | 450,000      |                    | 64,516    |  
|Cash received for share rounding          |                 | --           |                   | --           |                    | --        |  
|Issuance of common shares and options for |                
|note (Note 7)                             |                 | --           |                   | --           |                    | 400,000   |  
|Issuance of common shares to director     |                 | --           |                   | --           |                    | 35,000    |  
|Dividends on preferred stock              |                 | --           |                   | --           |                    | --        |  
|Net income                                |                 | --           |                   | --           |                    | --        |  
|                                          |                 |              |                   |              |                    |           |  
|Balance - June 30, 2003                   |                 | 500,000      |                   | 450,000      |                    | 9,553,972 |  
|Common stock repurchased in connection    |                
|with the CST transaction (Note 7)         |                 | --           |                   | --           |                    | (800,000  | )
|Issuance of warrants to purchase common   |                
|stock in connection with the CST          |                
|transaction (Note 7)                      |                 | --           |                   | --           |                    | --        |  
|Dividends on preferred stock              |                 | --           |                   | --           |                    | --        |  
|Net loss                                  |                 | --           |                   | --           |                    | --        |  
|                                          |                 |              |                   |              |                    |           |  
|Balance - June 30, 2004                   |                 | 500,000      |                   | $450,000     |                    | 8,753,972 |  
|                                          |                 |              |                   |              |                    |           |  
|                                          |                 |              |                   |              |                    |           |  

See  notes to
consolidated financial statements.

F-4

---

COGNIGEN
NETWORKS, INC.

Consolidated
Statements of Cash Flows

|                                                                             | For the Years EndedJune 30, |             
|---------------------------------------------------------------------------- | --------------------------- | ------------
|
|Cash flows from operating activities                                         |                             |             
|Net income (loss)                                                            |                             | $(2,878,638 
|                                                                             |                             |             
|Adjustments to reconcile net income (loss) to net cash provided by operating |                            
|activities                                                                   |                            
|Depreciation and amortization                                                |                             | 55,898      
|Provision for doubtful accounts                                              |                             | 210,149     
|Loss provision for sale of CST, net of cash                                  |                             | 2,472,798   
|Loss provision for termination of Intandem Funding Agreement                 |                             | 494,149     
|Stock options issued for services                                            |                             | --          
|Changes in assets and liabilities                                            |                            
|Accounts receivable                                                          |                             | (459,417    
|Commissions receivable                                                       |                             | 139,932     
|Employee receivable                                                          |                             | --          
|Inventory                                                                    |                             | 9,358       
|Other current assets                                                         |                             | 5,901       
|Deposits and other assets                                                    |                             | 20,192      
|Accounts payable                                                             |                             | 79,502      
|Accrued liabilities                                                          |                             | 235,929     
|Commissions payable                                                          |                             | (81,119     
|Other current liabilities                                                    |                             | (64,121     
|Other liabilities                                                            |                             | (12,575     
|                                                                             |                             |             
|                                                                             |                             | 3,106,576   
|                                                                             |                             |             
|Net cash provided by operating activities                                    |                             | 227,938     
|                                                                             |                             |             
|Cash flows from investing activities                                         |                            
|Advances to Intandem                                                         |                             | (241,397    
|Payments received on notes receivable                                        |                             | 80,000      
|Increase in notes receivable                                                 |                             | (22,500     
|Purchases of property and equipment                                          |                             | --          
|Other                                                                        |                             | 5,955       
|                                                                             |                             |             
|Net cash used in investing activities                                        |                             | (177,942    
|                                                                             |                             |             
|Cash flows from financing activities                                         |                            
|Principal payments on note payable                                           |                             | (50,000     
|Increase in receivables financing arrangement/note payable                   |                             | 308,100     
|Payments on deferred commissions                                             |                             | (526,644    
|Proceeds from the issuance of preferred stock                                |                             | --          
|Other                                                                        |                             | 19,167      
|                                                                             |                             |             
|Net cash provided by (used in) financing activities                          |                             | (249,377    
|                                                                             |                             |             
|Net decrease in cash                                                         |                             | (199,381    
|Cash - beginning of year                                                     |                             | 412,992     
|                                                                             |                             |             
|Cash - end of year                                                           |                             | $    213,611
|                                                                             |                             |             
|                                                                             |                             |             

(Continued on
following page.)

See  notes to
consolidated financial statements.

F-5

---

Consolidated Statements
of Cash Flows

(Continued
from previous page.)

Supplemental
disclosure of cash flow information:

Cash
paid for interest was $46,849 and $25,514 for 2004 and 2003, respectively.

Supplemental
disclosure of non-cash activity:

During
the year ended June 30, 2004:

| | The
Company issued 200,000 warrants to the principals of CST and received 800,000 shares of
common stock in the Stock for Stock Exchange Agreement.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company accrued dividends on preferred stock totaling $40,000.
| | ------------------------------------------------------------------

During
the year ended June 30, 2003:

| | The
Company issued 400,000 shares of common stock and 500,000 options to purchase common stock
in exchange for an approximate 32% interest in AIC and a $300,000 Promissory Note and
Agreement.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company issued 35,000 shares of common stock to a new independent director of the Company.
These shares were valued at $13,647.
| | -----------------------------------------------------------------------------------------------------------------------------------

| | The
Company accrued dividends on preferred stock totaling $28,225.
| | ------------------------------------------------------------------

See  notes to
consolidated financial statements.

F-6

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

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

Cognigen
Networks, Inc. (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. Between 1989 and 1999, Silverthorne attempted to locate
acquisition prospects and negotiate an acquisition. Silverthornes pursuit
of an acquisition did not materialize until August 20, 1999, with the
acquisition 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. on July 12, 2000.

The
Company is an Internet and relationship enabled marketer of long distance
telephone and personal communications services. Revenue is generated in two
ways. First, marketing commissions revenue is generated from a number of vendors
who are represented on the Companys agent web sites and for whom the
Company sells their products and services via contractual agreements. Second,
telecommunications revenue is generated through sales of the Companys
proprietary products and services through the Companys agent web sites.

Principles
of Consolidation

The
accompanying consolidated financial statements include the accounts of Cognigen
Networks, Inc. and its subsidiaries, Cognigen Switching Technologies, Inc. (CST)
through January 31, 2004 and Intandem Communications Corp. (Intandem) since
February 1, 2004 See Note 5 regarding information regarding the sale of CST and
Note 7 for information on Intandem. All intercompany accounts and transactions
have been eliminated in consolidation.

Cash

The
Company considers all highly liquid instruments purchased with an original
maturity of three months or less to be cash. The Company continually monitors
its positions with, and the credit quality of, the financial institutions with
which it invests. As of the balance sheet date, balances of cash and cash
equivalents exceeded the federally insured limit by approximately $328,550.

Marketing
Commissions Receivable

Marketing
commissions receivable represent amounts due from outside vendors of
telecommunication products and services used by subscribers. Typically outside
vendors pay commissions due to the Company forty five to sixty days after the
usage month-end.

An
allowance for doubtful accounts of $154,357 at June 30, 2004 has been
established by the Company to provide for potential uncollectible accounts and
is deemed to be adequate by management based on historical results.

F-7

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

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

Marketing
Commissions Receivable (continued)

The
Company had marketing commissions revenue from three customers that generated
25% and 32% of total revenue for the years ended June 30, 2004 and 2003
respectively

Inventory

Inventory
consists of prepaid calling cards held for resale and is stated at the lower of
cost or market, determined using the first-in, first-out method (FIFO). 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 cards are sold, the excise tax is collected and offset against the
prepaid excise tax.

Property and
Equipment

Property
and equipment is stated at cost. Depreciation is provided utilizing the
straight-line method over the estimated useful lives for owned assets, ranging
from 3 to 7 years.

Goodwill

The
excess of the purchase price over net assets acquired by the Company from
unrelated third parties is recorded as goodwill. Goodwill resulted from the
acquisition of CST. In July 2001, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) Nos. 141 and
142, Business Combinations and Goodwill and Other Intangible
Assets. SFAS No. 141 requires all business combinations initiated after
June 30, 2001 to be accounted for using the purchase method. Under the guidance
of SFAS No. 142, goodwill is no longer subject to amortization over its
estimated useful life. Rather, goodwill will be subject to at least an annual
assessment for impairment by applying a fair value base test. There was no
goodwill recorded as of June 30, 2004 as it was written off in the transaction
related to the sale of CST. See Note 7.

Valuation of
Long-Lived Assets

The
Company assesses valuation of long-lived assets in accordance with 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.

F-8

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

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

Accounts
Receivable

At the
time the accounts receivable are originated, the Company considers a reserve for
doubtful accounts based on the creditworthiness of the customer. The provision
for uncollectible amounts is continually reviewed and adjusted to maintain the
allowance at a level considered adequate to cover future losses. The allowance
is managements best estimate of uncollectible amounts and is determined
based on historical performance that is tracked by the Company on an ongoing
basis. The losses ultimately incurred could differ materially in the near term
from the amounts estimated in determining the allowance. The allowance was
$258,107 as of June 30, 2004.

Commissions
Payable

Commissions
payable represent amounts due to agents for commissions related to the usage for
which the Company is due marketing commissions revenue from its outside vendors
and commissions payable on sales of telecommunications revenue. It is the
Companys policy to pay commissions to its agents only after receiving
commissions due from its outside vendors. This policy results in approximately
two months commission payable at any point in time. Commissions are paid on
telecommunications revenue usually within one to two months of generating the
telecommunications revenue.

Income Taxes

The
Company recognizes deferred tax liabilities and assets based on the differences
between the tax basis of assets and liabilities and their reported amounts in
the financial statements that will result in taxable or deductible amounts in
future years. 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

Marketing
Commissions

Marketing
commissions revenue from the sale of long-distance telephone, personal
communication devices and marketing products is recognized at the time of sale.

Telecommunications

Telecommunications
pin revenue is recorded when the pins are
shipped. The Companys policy is to delay shipment of pins for a short
period of time after receipt of cash to allow for processing. This delay
results in deferred revenue, which is recorded as a liability until the pins
are shipped. Pin revenue includes amounts paid for the cost of
the telecommunications services provided by third-party carriers.

Telecommunications
long distance phone service revenue is recorded when services are rendered.

F-9

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

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

Use of
Estimates

The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

Basic Loss
Per Share

The
Company applies the provisions of SFAS No. 128, Earnings Per Share.
All dilutive potential common shares that have an anti-dilutive effect on
diluted per share amounts have been excluded in determining net income (loss)
per share. Shares issued in the initial capitalization of the Company have been
treated as outstanding since inception.

Advertising
Costs

The
Company expenses advertising costs as incurred. Total advertising costs for the
years ended June 30, 2004 and 2003 were $106,634 and $151,951,
respectively.

Recently
Issued Accounting Pronouncements

In
December 2003, the FASB issued revised SFAS No. 132, Employers
Disclosures about Pensions and Other Postretirement Benefits. The revision
requires additional annual disclosures related to information describing the
types of plan assets, investment strategy, measurement dates, plan obligations
and cash flows. The revision also required new quarterly disclosures detailing
the components of net periodic benefit cost recognized during the interim
period. The adoption of this Standard has not had a material effect on the
Companys financial statements.

In
March 2004, the FASB approved the consensus reached on the Emerging Issues Task
Force (EITF) Issue No. 03-1, The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments. The objective of
this Issue is to provide guidance for identifying impaired investments. EITF
03-1 also provides new disclosure requirements for investments that are deemed
to be temporarily impaired. The accounting provisions of EITF 03-1 are effective
for all reporting periods beginning after June 15, 2004, while the disclosure
requirements are effective only for annual periods ending after June 15, 2004.
The Company has evaluated the impact of the adoption of EITF 03-1 and does not
believe the impact will be significant to the Companys overall results of
operations or financial position.

Reclassifications

Certain
amounts in the 2003 consolidated financial statements have been reclassified to
conform to the 2004 presentation.

F-10

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

Note 2 - Basis
of Presentation

On
October 15, 2001, a one-for-eight (1:8) reverse stock split took place and has
been reflected retroactively in these financial statements.

Note 3
 Property and Equipment

Property
and equipment consist of the following at June 30, 2004:

|                              | 
|----------------------------- | 
|Furniture and fixtures        | 
|Computer equipment            | 
|Equipment                     | 
|Leasehold improvements        | 
|Software                      | 
|                              | 
|                              | 
|Less accumulated depreciation | 
|                              | 
|                              | 
|                              | 
|                              | 

Note 4
 Notes Receivable

American
Communications , LLC

As of
June 30, 2004, the Company had a recorded note receivable outstanding of $20,000
from American Communications, LLC (American Communications) in accordance with a
$300,000 Promissory Note and Agreement due in October 2004. As of June 30, 2004,
an allowance for doubtful accounts of $20,000 had been established on this
balance due to the uncertainty of collection. This note bears interest at 12%
payable annually, is secured by the personal guaranty of the principals of
American Communications, and is in default. This note was acquired by the
Company in October 2002 as part of the agreement dated October 17, 2002 with
Stanford Venture Capital Holdings, Inc. described in more detail in Note 7
Stockholders Equity.

Note 5
 Acquisition of Intandem

As of
June 30, 2004, the Company had made advances of $454,149 to Intandem. On April
1, 2003, the Company and certain principals of Intandem entered into an
agreement (Funding Agreement) pursuant to which the Company agreed to provide up
to $448,093 in a series of loans to Intandem. Effective February 1, 2004, by
mutual agreement of the principals of Intandem and the Company, the Funding
Agreement was terminated and a separate agreement, the Termination of Funding
Agreement and Settlement Agreement (Termination Agreement), was entered into.

F-11

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

Note 5
 Acquisition of Intandem (continued)

The
Termination Agreement provided that the Company would convert the notes
receivable of $387,399 into 100% of the outstanding stock of Intandem in
exchange for payments of $10,000 per month for eight months, assumption of up to
approximately $45,000 in liabilities, cancellation of all employment contracts
of the Intandem principals and cancellation of options to purchase common stock
of the Company. As of the date of the Termination Agreement, $414,149 had been
funded under the Funding Agreement and Termination Agreement. Due to questions
of recoverability of this amount and the remaining commitments under the
Termination Agreement, a provision of $494,149 has been taken in the statement
of operations. This provision represents the $414,149 funding through the date
of the Termination Agreement plus an estimate of remaining commitments under the
Termination Agreement which approximated $80,000 at the time. Approximately
$60,000 remains in accrued liabilities as of June 30, 2004 related to estimated
futures expenses relating to the Termination Agreement.

In
conjunction with the Funding Agreement, a consultant was to be paid, under his
consulting agreement with the Company, a commission that was being negotiated
with the Company. The commission amount had not yet been determined when
questions of recoverability arose and a provision to write off funded amounts
was included in the statement of operations. It is anticipated that the majority
of any commission paid will be from future Intandem cash flows, if any, in a
combination of cash and some common stock of the Company, but this can not be
assured or estimated at this time.

Note 6
 Receivables Financing Arrangement

The
balance of receivables financing arrangement as of June 30, 2004 is $308,100.
This represents the amount of marketing commissions receivables that have been
sold under an Accounts Receivable Purchase Agreement (Receivables Purchase
Agreement) with a bank. The Receivables Purchase Agreement provides for up to
$1,250,000 in marketing commissions receivable to be used as collateral for
advances under the Receivables Purchase Agreement of which 65% of the marketing
commissions receivable balances are available in cash advances to the Company.
Interest charges are 1.3% per month on the marketing commissions receivable
balances used as collateral. The bank was given a Security Agreement in the
assets of the Company including any of the Companys copyrights,
trademarks, patents and mask works as a condition to the Receivables Purchase
Agreement. Facility, audit and due diligence fees were paid to the bank of
$15,976. In addition, finders fees were paid to a party who may be deemed
to be a related party of $19,337. Both of these amounts are being amortized into
interest expense over the term of the Receivables Purchase Agreement which is
one year. After one year, the Receivables Purchase Agreement is from year to
year unless terminated in writing by either party.

Note 7
 Income Taxes

The
Company recognizes deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using the enacted tax rates in effect for the year in which the
differences are expected to reverse. The measurement of deferred tax assets is
reduced, if necessary, by the amount of any tax benefits that are not expected
to be realized based on available evidence.

F-12

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

Note 7
 Income Taxes (continued)

The
Companys temporary differences result primarily from differing
depreciation and amortization periods of certain assets, provision for doubtful
accounts, net operating loss carryforwards and the recognition of certain
expenses for financial statement purposes and not for tax purposes. The Company
has approximately $3,700,000 of net operating loss carryforwards, which expire
in varying amounts through 2024, if unused.

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

|Current deferred tax asset       |  | $    185,000     |  
|-------------------------------- |  | ---------------- | -
|Current deferred tax liability   |  | --               |  
|Valuation allowance              |  | (185,000         | )
|                                 |  |                 
|Net current deferred tax asset   |  | $             -- |  
|                                 |  |                 
|                                 |  |                 
|Long-term deferred tax asset     |  | $ 1,397,000      |  
|Long-term deferred tax liability |  | --               |  
|Valuation allowance              |  | (1,397,000       | )
|                                 |  |                 
|Net long-term deferred tax asset |  | $             -- |  
|                                 |  |                 
|                                 |  |                 

Temporary
differences and carryforwards giving rise to a significant portion of deferred
tax assets and liabilities are as follows at June 30, 2004:

|Current                          |  |              |  
|-------------------------------- |  | ------------ | -
|Allowance for doubtful accounts  |  | $    185,000 |  
|Long-term                        | 
|Net operating loss carryforwards |  | 1,389,000    |  
|Property and equipment           |  | 8,000        |  
|Less valuation allowance         |  | (1,582,000   | )
|                                 |  |             
|                                 |  |             

The
provision for income taxes reflected in the consolidated statements of
operations is zero, as such there are no separate components.

F-13

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

Note 7
 Income Taxes (continued)

The
following is a reconciliation of the statutory federal income tax rate applied
to pre-tax accounting net loss compared to the income taxes in the consolidated
statements of operations:

|                                                        | For the Years EndedJune 30, |                 
|------------------------------------------------------- | --------------------------- | ----------------
|
|Income tax expense (benefit) at the statutory rate      |                             | $(1,073,739     
|State and local income taxes, net of federal income tax |                             | (105,763        
|Change in valuation allowance                           |                             | 1,202,000       
|Nondeductible expenses                                  |                             | 2,727           
|Other timing differences, net                           |                             | (25,225         
|                                                        |                             |                 
|Deferred income tax benefit                             |                             | $             --
|                                                        |                             |                 
|                                                        |                             |                 

Note 8
 Stockholders Equity (Deficit)

---

Preferred
Stock

As of
June 30, 2004, the Company has authorized 20,000,000 shares of preferred stock.
During fiscal 2003, the Company designated 500,000 shares as 8% Convertible
Series A.

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

Dividends
on the Preferred Stock are cumulative at the rate of 8% per annum of the
liquidation value, $1.00 per share, are payable in cash, when and if declared by
the Board of Directors, and are preferential to any other junior securities, as
defined. The Board has not declared any such dividends. Because of the
cumulative nature of these dividends, the Company has accrued dividends as of
June 30, 2004 of $68,225.

F-14

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

Note 8
 Stockholders Equity (Deficit) (continued)

Common Stock

As
part of the agreement dated October 17, 2002 discussed above, Stanford Financial
Group Company, Inc. agreed to transfer to the Company, an approximate 32%
interest in American Communications, a private company, and a $300,000
Promissory Note and Agreement due in October, 2004 in exchange for 400,000
shares of the Companys common stock, two-year warrants to purchase 150,000
shares of the Companys common stock at an exercise price of $.50 per share
and five-year warrants to purchase 350,000 shares of the Companys common
stock at an exercise price of $.75 per share. This transaction was completed on
February 5, 2003 and the stock and warrants were issued.

On
February 3, 2003, the Company entered into a letter of intent with David Stone
and Harry Gorlovezky, members of American Communications, pursuant to which
Messrs. Stone and Gorlovezky indicated their intent to acquire the approximate
32% interest in American Communications that the Company acquired from Standford
Financial for a cash consideration of $22,500. In addition, Messrs. Stone and
Gorlovezky had a right until June 10, 2003 to acquire the $300,000 Promissory
Note and Agreement due in October 2004 for a price of $77,500 in cash. The
$22,500 was received and the 32% interest in American Communications was
delivered to Messrs. Stone and Gorlovezky. The option to acquire the $300,000
Promissory Note and Agreement for $77,500 was not exercised, however a
subsequent agreement (Subsequent Agreement) was reached with American
Communications and Mr. Stone to acquire the $300,000 Promissory Note and
Agreement for $100,000 payable $20,000 per month through July of 2004. $80,000
of the $100,000 was received. Because of the remaining $20,000 was not received
in accordance with the terms of the Subsequent Agreement, the $80,000 is to be
applied to the principal and interest due under $300,000 Promissory Note and
Agreement. As of June 30, 2004, the Company had a recorded note receivable
outstanding of $20,000 in relation to the Promissory Note and Agreement. Also as
of this date, an allowance for doubtful accounts of $20,000 had been established
on this balance due to the uncertainty of collection.

In
April 2003, 35,000 shares were issued to a new member of the Board of Directors
of the Company. The shares were valued at $13,647, which approximates fair
value, and are included in the 2003 operating results as stock-based
compensation expense.

Stock for
Stock Exchange Agreement

On May
12, 2004, after approval by the Board of Directors, the Company entered into a
Stock for Stock Exchange Agreement with Jimmy L. Boswell, David G. Lucas,
Reginald W. Einkauf and John D. Miller (collectively the Principals) pursuant to
which the Principals agreed to exchange with the Company a total of 800,000
shares of the Companys common stock owned by the Principals for all of the
outstanding common stock of the Companys wholly-owned subsidiary, CST, and
warrants to purchase 200,000 shares of the Companys common stock effective
February 1, 2004. The closing occurred on May 21, 2004. At the closing CST
entered into a Master Services Agreement (MSA) to provide the Company with
telecommunications rating, billing, provisioning, customer care, commissioning
and database management for a fee. The MSA is effective February 1, 2004 and
goes for one year periods unless terminated by either party at the end of each
period with a 30 day notice.

F-15

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

Note 8
 Stockholders Equity (Deficit) (continued)

Common Stock
(continued)

Stock for
Stock Exchange Agreement (continued)

As
part of the closing, CST entered into a new note with a then existing lender
representing approximately $223,000 in debt. All options to purchase common
stock of the Company issued to CST employees were terminated except for the
option to purchase 200,000 shares of the Companys common stock owned by
Jimmy L. Boswell which option expired in August 2004 and was exercisable at
$3.68 per share.

Jimmy L.
Boswell is the  President  and a Director of CST.  David G. Lucas is the former  chief
financial  officer and a  Director of CST.  Reginald W.  Einkauf and John D. Miller are
former  officers and  Directors of CST. Mr.  Boswell and Mr.  Lucas are former  officers
and Directors of the Company.  The Principals  and another  person sold all of the
outstanding  stock of CST to the Company for shares of the Company's common stock in
April 2000.

In
conjunction with the Stock for Stock Exchange Agreement, goodwill with a net
book value of $2,893,029 has been written off. With consideration of
approximately $26,000, calculated using the Black Scholes method of calculation
for the 200,000 warrants, goodwill of $2,893,029 and $168,448 in negative equity
that was assumed by the Principals, and the 800,000 shares of the Companys
common stock that was repurchased from the Principals valued at $.31 per share,
the Company recorded a loss of $2,502,583 on this transaction that is included
in the statement of operations.

Stock
Redemption Agreement

On
November 21, 2001, the Company entered into a Stock Redemption Agreement with a
shareholder, in which the shareholder agreed to sell to the Company 2,712,501
shares of the Companys common stock, at approximately $.77 per share,
which approximated market value, in exchange for potential future commissions of
$2,088,622 on certain customers, as defined in the agreement. The shares were
purchased in December 2001. Deferred commissions payable will be paid out based
upon future commissions earned as defined in the agreement. The agreement does
not guarantee that future commissions will be earned. As of June 30, 2004, the
remaining balance of deferred commissions payable was $748,546. The Company has
classified $511,200 as an estimate of the current portion of this agreement
based on historical commissions. Had the payments to the shareholder for the
year ended June 30, 2004 of $526,644 been recorded as marketing commissions
expense instead of a reduction of deferred commissions payable on the balance
sheet, marketing commissions expense would have been higher by $526,644. We do
not anticipate recording these payments as marketing commissions expense until
sometime in 2006.

F-16

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

Note 8
 Stockholders Equity (Deficit) (continued)

Stock Options

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

During
the year ended June 30, 2004, the Company granted to an employee, options to
purchase 10,000 shares of common stock of the Company. These options vested
5,000 immediately and 5,000 in one year, were exercisable at $.39 per share and
expired in five years. These options terminated during the year ended June 30,
2004.

In
January 2004, the Board of Directors granted 200,000 options to an officer of
the Company. These options vest 100,000 immediately and 25,000 each year for the
ensuing four years, are exercisable at $.23 per share and expire in five years.

During
the year ended June 30, 2004, a total of 606,000 options were cancelled, of
which 450,000 were not issued under the Plan.

During
the year ended June 30, 2003, the Board of Directors granted options to
employees to purchase 281,000 shares of the Companys common stock that
vest at varying times between immediately and three years, are exercisable at
between $.36 to $.44 per share and expire five years from date of grant.

In
April 2003, the Board of Directors granted options to purchase 25,000 shares of
the Companys common stock to a shareholder of the Company for prior
services rendered. These options vest immediately, are exercisable at $.40 per
share, and expire five years from date of grant.

In
April 2003, as part of the Funding Agreement with Intandem, the Board of
Directors granted to the principals of Intandem options to purchase up to
450,000 shares of the Companys common stock. The exercise price of the
options was $.36 per share and the options expired in five years. In conjunction
with the Termination Agreement, these options were cancelled effective February
1, 2004.

In
February 2003, the Board of Directors granted options to purchase 25,000 shares
of the Companys common stock to a consultant of the Company for services
rendered. These options vest over two year, are exercisable at $.48 per share,
and expire five years from date of grant.

In
December 2002, April 2003 and June 2003, the Board of Directors granted options
to purchase a total of 85,000 shares of the Companys common stock to the
four independent directors at that time of the Company as a partial fee for
services rendered as independent directors. The options vested immediately, are
exercisable at between $.38 and $.52 per share and expire in four to five years
from date of grant.

F-17

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

Note 8
 Stockholders Equity (Deficit) (continued)

Stock
Options (continued)

The
following table presents the activity for options outstanding:

|                            | StockOptions | WeightedAverageExercisePrice
|--------------------------- | ------------ | ----------------------------
|Outstanding - June 30, 2002 |              | 1,080,000                   
|Granted                     |              | 866,000                     
|Forfeited/canceled          |              | (50,000                     
|Exercised                   |              | --                          
|                            |              |                             
|Outstanding - June 30, 2003 |              | 1,896,000                   
|Granted                     |              | 210,000                     
|Forfeited/canceled          |              | (606,000                    
|Exercised                   |              | --                          
|                            |              |                             
|Outstanding - June 30, 2004 |              | 1,500,000                   
|                            |              |                             
|                            |              |                             

The following
table presents the composition of options outstanding and exercisable:

|                      | Options Outstanding |           | Options Exercisable |            | 
|--------------------- | ------------------- | --------- | ------------------- | ---------- | 
|
|$ 0.23 - .35          |                     | 200,000   |                     | .23        | 
|$ 0.36 - .39          |                     | 150,000   |                     | .36        | 
|$ 0.40 - .44          |                     | 95,000    |                     | .42        | 
|$ 0.45 - .52          |                     | 55,000    |                     | .51        | 
|$ 3.68                |                     | 1,000,000 |                     | 3.68       | 
|                      |                     |           |                     |            | 
|Total - June 30, 2004 |                     | 1,500,000 |                     | $     2.57 | 
|                      |                     |           |                     |            | 
|                      |                     |           |                     |            | 

*Price
and Life reflect the weighted average exercise price and weighted average
remaining contractual life, respectively.

F-18

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

Note 8
 Stockholders Equity (Deficit) (continued)

Stock
Options (continued)

The
Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation. Accordingly, no
compensation cost has been recognized for the stock option plans. Had
compensation cost for the Companys options 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 basic loss per common share would have
been changed to the pro forma amounts indicated below:

|                                | For the Years EndedJune 30, |            
|------------------------------- | --------------------------- | -----------
|
|Net income (loss) - as reported |                             | $(2,787,638
|Net income (loss) - pro forma   |                             | $(2,808,470

The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used:

|Approximate risk free rate                    |  | 6.00    | % | 6.00     | %
|--------------------------------------------- |  | ------- | - | -------- | -
|Average expected life                         |  | 5 years |   | 5 years  |  
|Dividend yield                                |  | 0       | % | 0        | %
|Volatility                                    |  | 54      | % | 35       | %
|Estimated fair value of total options granted |  | $20,832 |   | $135,864 |  

Warrants

The
following table presents the activity for warrants outstanding:

|                            | Number ofWarrants | WeightedAverageExercisePrice
|--------------------------- | ----------------- | ----------------------------
|Outstanding - June 30, 2002 |                   | 600,000                     
|Issued                      |                   | 500,000                     
|Forfeited/canceled          |                   | --                          
|Exercised                   |                   | --                          
|                            |                   |                             
|Outstanding - June 30, 2003 |                   | 1,100,000                   
|Issued                      |                   | 200,000                     
|Forfeited/canceled          |                   | (100,000                    
|Exercised                   |                   | --                          
|                            |                   |                             
|Outstanding - June 30, 2004 |                   | 1,200,000                   
|                            |                   |                             
|                            |                   |                             

F-19

---

COGNIGEN
NETWORKS, INC.

Notes
to Consolidated Financial Statements

Note 8
 Stockholders Equity (Deficit) (continued)

---

Warrants
(continued)

All of
the outstanding warrants are exercisable and have a weighted average remaining
contractual life of 2.02 years.

Note 9
 Commitments and Contingencies

Operating
Leases

The
Company leases office space under operating lease agreements. Rent expense for
these leases for the years ended June 30, 2004 and 2003 was approximately
$145,000 and $141,000, respectively.

Future
minimum lease payments under these leases are approximately as follows:

|Year Ending June 30, |  |     
|-------------------- |  | ----
|                     |  | 2005
|                     |  | 2006
|                     |  | 2007
|                     |  | 2008
|                     |  |     
|                     |  |     
|                     |  |     
|                     |  |     

F-20

---

COGNIGEN
NETWORKS, INC.

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

None.

Item 8A.
Controls and Procedures.

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

There
have been no changes in our internal controls over financial reporting or in other factors that could
affect our internal controls during our fourth quarter of fiscal 2004.

In
preparing our audit for the year ended June 30, 2004, our auditors identified
potential deficiencies within our internal control framework which have the
potential to result in a material control weakness. These potential control
deficiencies relate to the manner in which we process transactions to record
telecommunications revenue and related accounts receivable as our current
processes and procedures require substantive manual intervention, estimation and
reliance on several sources of information that are not integrated with our
accounting system. After reviewing these potential control deficiencies, we do not believe they
constitute material weaknesses.

Item 8B.
Other Information.

On
April 13, 2004, we filed a Current Report on Form 8-K dated April 7, 2004, in
which we described under Item 5 that Gary L. Cook had replaced David L. Jackson
as our Secretary and that David L. Jackson was no longer a Vice President or an
employee of ours.

On
May 19, 2004, we filed a Current Report on Form 8-K dated may 18, 2004, that
included a news release we issued on May 18, 2003, as an Exhibit under Item 7
and describing the news release under Item 12.

On
June 3, 2004, we filed a Current Report on Form 8-K dated May 21, 2004,
describing the Stock for Stock Exchange Agreement between us and the Principals
of CST under Item 5 and filing the Stock for Stock Exchange Agreement as an
Exhibit under Item 7.

F-21

---

COGNIGEN
NETWORKS, INC.

PART
III

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

CURRENT
DIRECTORS

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

|Name and Position                               | Age | Director Since
|----------------------------------------------- | --- | --------------
|Thomas S. Smith                                 |     | 62            
|President, Chief Executive Officer and Director |    
|Gary L. Cook                                    |     | 46            
|Senior Vice President, Chief Financial Officer, |    
|Secretary, Treasurer and Director               |    
|David L. Jackson (2)                            |     | 66            
|Director                                        |    
|Christopher R. Seelbach (1)(3)                  |     | 65            
|Director                                        |    
|James H. Shapiro (2)(3)                         |     | 66            
|Director                                        |    

Thomas
S. Smith has been one of our directors since January 2004 and our President
and Chief Executive Officer since December 2003. From April 2003 until December
31, 2003, Mr. Smith was a shareholder of Jones & Keller, P.C.; from August
2000 until April 2003, he was a partner of and then of counsel to Dorsey &
Whitney, LLP; from September 1996 until August 2000, he was a director of Smith
McCullough, P.C.; from 1972 until August 1996, he was a director of Hopper and
Kanouff, P.C. During all of his law firm experience, he practiced corporate and
securities law. He graduated from Duke University and the University of North
Carolina Law School.

Gary L. Cook has
been one of our  directors  since June  2003,  our  Secretary  since  April  2004,  and
our  Senior  Vice  President,  Chief  Financial  Officer and Treasurer  since March 2003.
Mr. Cook was one of our directors from October 2002  until March 2003.  From June 2002 to
March 2003,  Mr. Cook was an  independent  financial  consultant.  From February 1998  to
June  2002,  Mr.  Cook was the  Secretary  and  Treasurer  of eVision  International,
Inc.,  which has no  significant  operations  and formerly was a holding  company,  and
was Chief  Financial  Officer of eVision  International,  Inc.  from  September 1998 to
June 2002.  From 1998 to June 2002, Mr. Cook was Chief  Financial  Officer,  Treasurer
and a Director of  American  Frontier  Financial  Corporation,  a wholly owned subsidiary
of eVision  International,  Inc.  American Frontier  Financial  Corporation  filed for
Bankruptcy in October 2001.  The  bankruptcy  filing was dismissed in April 2002.  From
1994 to 1996,  Mr. Cook was principal of a small  business  venture in which he had
majority  ownership,  and from 1982 to  1994,  he was an  auditor  with  KPMG,  LLP.  Mr.
Cook also is a  director  of Global Med  Technologies,  Inc.  Mr.  Cook  graduated from
Brigham Young University.

18

---

COGNIGEN
NETWORKS, INC.

David
L. Jackson has been one of our directors since February 1995, and was our
Senior Vice President of Corporate and Public Affairs or our Vice President from
August 1999 to April 2004, our Secretary from August 1999 to April 2004, 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 March 2002,
Mr. Jackson was a director and the Secretary of Inter-American
Telecommunications Holding Corporation, 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 from Northwest Nazarene University
and from the University of Denver, College of Law. Mr. Jackson is an
arbitrator in dispute resolution of commercial and labor law. He was on the
roster of arbitrators of the Federal Mediation and Conciliation Service of the
United States Government from March 1994 to October 2002.

Christopher
R. Seelbach has been one of our directors since August 2001. From 1985 to
the present, Mr. Seelbach has been President of Seelbach Associates LLC, a
management consulting firm. At various times from 1998 through May 2001, Mr.
Seelbach served as a consultant, director, Chief Operating Officer and acting
Chief Financial Officer of CallNOW.com, Inc., a telecommunications company. From
1994 to 1998, he was an independent consultant, and served as President and
Chief Executive Officer of Belcom, Inc., a COMSAT international
telecommunications investment, and President of Skysat Communications
Corporation, a wireless telecommunications systems development company. From
1992 to 1994 Mr. Seelbach was a director and Chief Operating Officer of
Viatel, Inc., an international telecommunications company. Prior to 1992, he was
a venture capitalist with Exxon Enterprises and a consultant with McKinsey &
Company. Mr. Seelbach graduated from the United States Naval Academy and
received an M.B.A. from Columbia University.

James H.
Shapiro has been one of our directors  since October 2002.  Since 1995 Mr.  Shapiro
has been the Chief  Executive  Officer of Windermere  Services  Company,  a company that
provides real estate  services.  Mr. Shapiro  graduated from the  University of
Washington.

|(1) |  | Member
of our Audit Committee.
|--- |  | ------------------------------

|(2) |  | Member
of our Compensation Committee.
|--- |  | -------------------------------------

|(3) |  | Christopher R. Seelbach has been determined by our Board of Directors to be the
financial expert on our Audit Committee. Christopher R. Seelbach and James H.
Shapiro are independent within the meaning of Rules 4200(a)(15) and 4350(d) of
the NASDAQ Stock Market.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

EXECUTIVE
OFFICERS

Our
executive officers are Thomas S. Smith and Gary L. Cook, information pertaining
to them is set forth under Current Directors above. Our executive officers are
elected annually at the first meeting of the Board of Directors held after each
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.

19

---

COGNIGEN
NETWORKS, INC.

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.

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 53, has been
a consultant  to us and our Board of Directors  since  August 1999 and the founder and
President of Cognigen  Corporation  and Kevin E. Anderson  Consulting,  Inc. 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 the Forms 3, 4 and 5 and amendments thereto furnished to
us during our fiscal year ended June 30, 2004, the persons who were either one
of our directors or officers or 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 Kevin E. Anderson, the
Anderson Family Trust and Peter Tilyou, as trustee of the Anderson Family Trust,
all of whom may have failed to file their respective Forms 4 or Forms 5 during
our fiscal year ended June 30, 2004, and Stanford Venture Capital Holdings, Inc.
and Stanford Financial Group Company, Inc., which may have failed to file their
respective Forms 3, Forms 4, or Forms 5 during our fiscal year ended June 30,
2004. Mohammed I. Marafie and Al Nour International Holding Co. may have failed
to file their respective Forms 3, Forms 4, or Forms 5 during our fiscal year
ended June 30, 2004.

Item 10.
Executive Compensation.

EXECUTIVE
COMPENSATION

The
following table provides certain information pertaining to the compensation paid
by us and our subsidiaries during our last three fiscal years for services
rendered by our Chief Executive Officer and the persons who were our most highly
compensated executive officers and who received annual salary and bonus in
excess of $100,000 from us during the fiscal year ended June 30, 2004.

20

---

COGNIGEN
NETWORKS, INC.

Summary
Compensation Table

|                         |  | Annual Compensation | Long TermCompensationAwards |           |     |   
|------------------------ |  | ------------------- | --------------------------- | --------- | --- | --
|
|Thomas S. Smith          |  | 2004                |                             | $100,000  |     | --
|President and Chief      |  | 2003                |                             | --        |     | --
|Executive Officer since  | 
|December 2003            | 
|                         |  | 2002                |                             | --        |     | --
|Gary L. Cook             |  | 2004                |                             | $155,785  |     | --
|Senior Vice President,   |  | 2003                |                             | $  41,000 |     | --
|Chief Financial Officer, | 
|Secretary and Treasurer  | 
|                         |  | 2002                |                             | --        |     | --
|Darrell H. Hughes        |  | 2004                |                             | $  36,944 |     | --
|President from July 2000 |  | 2003                |                             | $153,880  |     | --
|to October 2003 and      | 
|Chief Executive Officer  | 
|from October 1999 to     |  | 2002                |                             | $125,000  | (b) | --
|October 2003             | 
|David L. Jackson         |  | 2004                |                             | $104,576  |     | --
|President and Treasurer  |  | 2003                |                             | $132,096  |     | --
|until August 20, 1999    | 
|and Senior Vice          | 
|President of Corporate   |  | 2002                |                             | $120,000  | (b) | --
|and Public Affairs and   | 
|Secretary from August    | 
|20, 1997 to April 7,     | 
|2004                     | 

(a)   
Does not include any amounts  paid to the law firms with which Thomas S. Smith was
affiliated  during our fiscal  years ended June 2004, 2003, and 2002.

(b)   
We issued to Darrell H. Hughes and David L. Jackson  9,376,  and 9,376 shares of our
common stock,  respectively,  in lieu of cash,  for  approximately  20% of their salary
for the periods  ending August 31,  September 15,  September 30,  October 15,  October 31
and  November  15,  2001.  The number of shares of our common stock issued was based on a
value of  $0.64 per share.  The $0.64 per share was the last reported sale price of our
common stock on September 24, 2001.

21

---

COGNIGEN
NETWORKS, INC.

(c)   
The $4,050, $10,635 and $24,638 represent the amounts Darrell H. Hughes was  reimbursed
for items he was entitled to under his original employment agreement  with us. The $4,050
consists of an automatic allowance of $1,800, life insurance  premiums of $450, and
medical insurance of $1,800 after he left us. The $10,635  consists of an automobile
allowance of $7,200, life insurance premiums of $1,560  and a contribution match of
$1,875 for his previous employers 401(k) plan.  The $24,638 represents a
contribution match for his previous employers  401(k) plan of $8,438 and an
automobile allowance of $16,200 for 27 months.

(d)   
Represents $1,000 per month in directors fees that were accrued for David  L.
Jackson for April, May and June 2004 but were not paid to David L. Jackson  until after
June 2004.

OPTION
INFORMATION PERTAINING TO EXECUTIVE OFFICERS

Option
Grants in Last Fiscal Year

No
options to purchase our common stock were granted by us to Gary L. Cook, Darrell
H. Hughes, or David L. Jackson during our last fiscal year ended June 30, 2004.

The
following table sets forth information pertaining to options granted by us to
Thomas S. Smith during our last fiscal year ended June 30, 2004.

|Name            | Number of SecuritiesUnderlying OptionsGranted | Percent of TotalOptions Granted toEmployees in FiscalYear | Exercise or BasePrice | Expiration Date
|--------------- | --------------------------------------------- | --------------------------------------------------------- | --------------------- | ---------------
|
|Thomas S. Smith |                                               | 200,000                                                   |                       | 95             

The
options granted to Thomas S. Smith became immediately exercisable as to 100,000
shares and become exercisable as to 25,000 shares on each of January 26, 2005,
2006, 2007, and 2008.

Aggregate
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

No
options to purchase our common stock were exercised by any of our executive
officers during our fiscal year ended June 30, 2004. The following table
provides information with respect to the unexercised options to purchase our
common stock held by Thomas S. Smith and Gary L. Cook as of June 30, 2004:

|Name            | Number of SecuritiesUnderlying UnexercisedOptions at Fiscal Year EndExercisable/Unexercisable | Value of Unexercised In-the-MoneyOptions at Fiscal Year EndExercisable/Unexercisable(1)
|--------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------
|
|Thomas S. Smith |                                                                                               | 100,000 / 0                                                                            
|Gary L. Cook    |                                                                                               | 130,000 / 0                                                                            

|(1) |  | The
closing price per share on June 30, 2004 was lower than the exercise price.
|--- |  | -------------------------------------------------------------------------------

22

---

COGNIGEN
NETWORKS, INC.

COMPENSATION
OF DIRECTORS

Our
directors were reimbursed for reasonable out of pocket expenses incurred related
to Board duties assigned in connection with attending board meetings. The
non-employee directors are compensated at a rate of $1,000 per month and $500
per day per meeting attended in person and are paid $100 per month for serving
as chairman of one of our committees.

For
the period from April 1, 2004 to June 30, 2004, we accrued for David L. Jackson
$3,000 in directors fees.

For
the period from July 1, 2003 to June 30, 2004, we paid to or accrued for Mr.
Seelbach $14,200 in directors fees and for serving on our committees. We
also paid Mr. Seelbach $211 and $224, respectively, in commissions during our
fiscal years ended June 30, 2004 and 2003.

For
the period of time from July 1, 2003, through June 30, 2004, we paid to or
accrued for James H. Shapiro $13,000 in directors fees and for serving on
our committees.

EMPLOYMENT
AGREEMENTS

We
have no employment agreements with anyone and have no compensation plan or
arrangement required to be reported hereunder for such persons.

CONSULTING
AGREEMENTS

In
March  2003,  we entered  into a  consulting  agreement  with Kevin E.  Anderson
Consulting,  Inc. to provide  expanded  consulting and  technical/administrative
services.  Under the consulting  agreement,  we paid Kevin E. Anderson  Consulting,  Inc.
$4,000  per  month  commencing  in  January  2003 and paid  approximately  $700 per
month of  expenses  associated with his Internet T-1 connection.

Item 11.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.

PRINCIPAL
SHAREHOLDERS ANDSECURITY
OWNERSHIP OF MANAGEMENT

The
following table sets forth as of October 22, 2004, 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:

23

---

COGNIGEN
NETWORKS, INC.

|Name and Address                   | Amount and Nature ofBeneficial (1) | Percent of Class
|---------------------------------- | ---------------------------------- | ----------------
|Thomas S. Smith                    |                                    | 300,000         
|9800 Mt. Pyramid Court             |                                   
|Suite 400                          |                                   
|Englewood, CO 80112                |                                   
|Gary L. Cook                       |                                    | 430,000         
|9800 Mt. Pyramid Court             |                                   
|Suite 400                          |                                   
|Englewood, CO 80112                |                                   
|David L. Jackson                   |                                    | 283,649         
|P.O. Box 1443                      |                                   
|Lafayette, CA 94549                |                                   
|Christopher R. Seelbach            |                                    | 40,000          
|44 Woodcrest Avenue                |                                   
|Short Hills, NJ 07078              |                                   
|James H. Shapiro                   |                                    | 25,188          
|20223 92nd Avenue West             |                                   
|Edmonds, WA 98026                  |                                   
|All current executive officers and |                                    | 1,078,837       
|directors as a group (5 persons)   |                                   
|Cognigen Corporation               |                                    | 25,250          
|2608 Second Avenue, Suite 555      |                                   
|Seattle, WA 98121                  |                                   
|Anderson Family Trust              |                                    | 1,158,505       
|2608 Second Avenue, Suite 555      |                                   
|Seattle, WA 98120                  |                                   
|Kevin E. Anderson                  |                                    | 1,158,505       
|827 Union Pacific Boulevard        |                                   
|PMB 71-374                         |                                   
|Laredo, TX 78045-9452              |                                   
|Peter Tilyou                       |                                    | 1,158,505       
|2608 Second Avenue, Suite 555      |                                   
|Seattle, WA 98121                  |                                   
|Stanford Venture Capital           |                                    | 1,250,000       
|Holdings, Inc.                     |                                   
|5050 Westheimer                    |                                   
|Houston, TX 77056                  |                                   
|Mohammed I. Marafie                |                                    | 1,550,621       
|P.O. Box 104                       |                                   
|Safat 13002 Kuwait                 |                                   

24

---

COGNIGEN
NETWORKS, INC.

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

|(2) |  | Includes
100,000  shares  underlying  a  presently  exercisable  option.  Does not include
100,000  shares that  underlie an option that is not yet exercisable as to the 100,000
shares.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Includes
130,000 shares underlying two presently exercisable options.
|--- |  | ---------------------------------------------------------------------

|(4) |  | Includes
25,000 shares underlying presently exercisable options.
|--- |  | ----------------------------------------------------------------

|(5) |  | Includes
25,000 shares underlying presently exercisable options.
|--- |  | ----------------------------------------------------------------

|(6) |  | Includes
the 280,000 shares underlying the presently  exercisable  options specified in footnotes
(2) through (5)  above.
|--- |  | -------------------------------------------------------------------------------------------------------------------------

|(7) |  | Kevin E. Anderson and members of his family are the beneficiaries of the
Anderson Family Trust, which owns approximately 98.9% of the outstanding common
stock of Cognigen Corporation. Mr. Anderson may be deemed to beneficially own
the 25,250 shares of the common stock that Cognigen Corporation may be deemed to
beneficially own.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Kevin E. Anderson and members of his family are the beneficiaries of the
Anderson Family Trust. Kevin E. Anderson may be deemed to beneficially own the
shares of the owned by the Anderson Family Trust.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) |  | Includes the shares owned by the Anderson Family Trust and Cognigen Corporation,
all of which may be deemed to be beneficially owned by Peter Tilyou. Mr. Tilyou
is the sole trustee, but not a beneficiary of the Anderson Family Trust.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) |  | The information pertaining to the shares of common stock beneficially owned by
the Anderson Family Trust and Cognigen Corporation is based on our shareholder
records.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) |  | Includes 500,000 shares issuable upon conversion of our 8% Convertible Preferred
Stock. Also, includes 400,000 shares and 175,000 shares underlying presently
exercisable warrants owned by Stanford Financial Group Company, Inc. which has
the same address as Stanford Venture Capital Holdings, Inc. The information
pertaining to these shares is based on a joint Schedule 13G filed by Stanford
Venture Capital Holdings, Inc. and Stanford Financial Group Company, Inc. and
our records.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) |  | Our shareholder records indicate that Mohammed Ibrahim Marafi owns 148,686
shares of our common stock, that Mohammed I. Marafie owns 250,000 shares of our
common stock and that Al Nour International Holding Co. owns 651,935 shares of
our common stock. We are also aware that Mohammed I. Marafie and Al Nour
International Holding Co. each own warrants to purchase 250,000 shares of our
common stock which are exercisable at $1.00 per share until October 29, 2005. We
are also aware that Mohammed I. Marafie is the Chairman and the Managing
Director of Al Nour International Holding Co. However, neither Mohammed Ibrahim
Marafi, Mohammed I. Marafie nor Al Nour International Holding Co. have filed a
Schedule 13D or any Forms 3, 4, or 5 with the United States Securities and
Exchange Commission. Therefore, we are unable to determine what number of our
shares are beneficially owned by such persons. However, if they are all
beneficially owned by Mohammed I. Marafie, he will be deemed to beneficially own
16.8% or our outstanding common stock.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25

---

COGNIGEN
NETWORKS, INC.

Stock Option
Plan

We
adopted an incentive and non-statutory option plan at our Annual Meeting of
Shareholders held on March 15, 2001. The plan authorizes the granting of options
to our officers, directors, employees and consultants to purchase shares of our
common stock.

The
following is a table with information regarding our equity compensation plans as
of June 30, 2004:

Equity
Compensation Plans

|Plan category                      | Number of securitiesto be issued uponexercise ofoutstanding options,warrants and rights(a) | Weighted-average exerciseprice of outstandingoptions, warrants andrights(b) | Number of securitiesremaining available forfuture issuance underequity compensation plans(excluding securitiesreflected in column(a)(c))
|---------------------------------- | ------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------
|
|                                  
|Equity compensation plans approved |                                                                                            |                                                                             |                                                                                                                                         
|by security holders                |                                                                                            | 475,000                                                                     |                                                                                                                                         
|                                  
|Equity compensation plans not      |                                                                                           
|approved by security holders       |                                                                                            | 2,225,000                                                                   |                                                                                                                                         
|                                  
|Total                              |                                                                                            | 2,700,000                                                                   |                                                                                                                                         
|                                  

A
description of the options and warrants issued without shareholder approval is
contained in Note 8  Stockholders Equity (deficit)  Stock
Options and Warrants  contained in our Notes to Consolidated Financial
Statements that were filed as a part of Item 7 of our 10-KSB that was previously
filed.

Item 12.
Certain Relationships and Related Transactions.

TRANSACTIONS WITH MANAGEMENT AND OTHERS
AND CERTAIN BUSINESS RELATIONSHIPS

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

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

26

---

COGNIGEN
NETWORKS, INC.

As
consideration for the share purchase, among other consideration, we transferred
to Cantara Communications Corporation, an affiliate of Kevin E. Anderson, the
rights to become the up-line for our current accounts and thereby be entitled to
commissions, fees and bonuses on our current customer accounts, with a
commission not to exceed 12% which commission was limited by various caps
through December 31, 2002. The amount of commissions, fees and bonuses that
Cantara Communications Corporation is entitled to is totally dependent upon the
commissions that we generate from new and repeat sales of services and products.
In addition, as a part of the transaction, our agreement with Kevin E. Anderson
Consulting, Inc., pursuant to which we paid Kevin E. Anderson Consulting, Inc.
consulting fees of $14,583 per month, was cancelled and Kevin E. Anderson was
retained through March 31, 2003 at the rate of $1,000.00 per month to provide up
to 20 hours telecommuting consulting services to us per month. Also, under a
separate consulting agreement we have paid and will pay Kevin E. Anderson
Consulting, Inc, an additional amount for expanded consulting and
technical/administrative services. For the years ended June 30, 2004 and June
30, 2003 we paid Cantara Communications Corporation $526,644 and $535,402 in
commissions, respectively, and paid Kevin E. Anderson Consulting Inc. $48,000
and $70,000, respectively. For the years ended June 30, 2004 and June 30, 2003,
we also paid members of Kevin E. Andersons family $50,164 and $43,703 in
agent commissions, respectively.

Transactions
with Stanford Venture Capital Holdings, Inc. and Stanford Financial Group Company, Inc.

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

Dividends
on the Preferred Stock are cumulative at the rate of 8% per annum of the
liquidation value, $1.00 per share, are payable in cash, when and if declared by
the Board of Directors, and are preferential to any other junior securities, as
defined. We have accrued dividends of $10,000 per quarter on the Preferred
Stock.

As
part of the agreement dated October 17, 2002, discussed above, Stanford
Financial Group Company, Inc. agreed to transfer to us an approximate 32%
interest in Miami based American Communications, a private company, in exchange
for 400,000 shares of our common stock, two-year warrants to purchase 150,000
shares of our common stock at an exercise price of $.50 per share and five-year
warrants to purchase 350,000 shares of our common stock at an exercise price of
$.75 per share. This transaction was completed on February 5, 2003, and the
warrants were issued. Of the warrants to purchase 150,000 shares, warrants to
purchase 75,000 shares were issued to principals of Stanford Financial Group
Company, Inc. Of the warrants to purchase 400,000 shares, warrants to purchase
175,000 shares were issue to principals of Stanford Financial Group Company,
Inc. The two-year warrants to purchase 150,000 shares expired unexercised in
October 2004.

27

---

COGNIGEN
NETWORKS, INC.

On
February 3, 2003, we entered into a letter of intent with David Stone and Harry
Gorlovezky, members of American Communications, pursuant to which Messrs. Stone
and Gorlovezky indicated their intent to purchase the approximate 32% interest
in American Communications that we acquired from Stanford Financial Group, Inc.
for a cash consideration of $22,500. In addition, Messrs. Stone and Gorlovezky
had the right, until June 10, 2003, to purchase the $300,000 Promissory Note and
Agreement due in October 2004 for a purchase price of $77,500 in cash. The
$22,500 was received and the 32% interest in American Communications was
delivered to Messrs. Stone and Gorlovezky. The option to purchase the $300,000
Promissory Note and Agreement was not exercised and we agreed to accept $100,000
plus $2,000 in attorneys fees for full satisfaction of the Promissory Note
if paid by July 2004. All but $20,000 was paid by the due date which put the
settlement agreement in default and the $80,000 received was applied to interest
on the original note and the remaining balance of approximately $320,000 remains
due and in default. We have filed a lawsuit against American Communications and
the two guarantors of the note to attempt to collect the remaining balance due.

Transaction
with Intandem Communications Corp.

On
April 1, 2003, we, and InTandem Communications Corp. (Intandem),  David B.
Hurwitz (Hurwitz),  Richard G. De  Haven (De Haven) and Anthony
T. Sgroi (Sgroi)  entered into an agreement  (Funding  Agreement)
pursuant to which we  agreed to provide up to $448,093 in a series of loans over a period
of nine months to InTandem.

As
of June 30, 2004, we had made advances of $454,149 to Intandem Communications
Corp. (Intandem). On April 1, 2003, we and certain principals of Intandem
entered into an agreement (Funding Agreement) pursuant to which we agreed to
provide up to $448,093 in a series of loans to Intandem. Effective February 1,
2004, by mutual agreement of the principals of Intandem and us, the Funding
Agreement was terminated and a separate agreement, the Termination of Funding
Agreement and Settlement Agreement (Termination Agreement), was entered into.

The
Termination Agreement provided that we would convert the notes receivable of the
$387,399 into 100% of the outstanding stock of Intandem in exchange for payments
of $10,000 per month for eight months, assumption of up to approximately $45,000
in liabilities, cancellation of all employment contracts of the Intandem
principals, and cancellation of options to purchase our common stock. As of the
date of the Termination Agreement, $414,149 had been funded under the Funding
Agreement. Due to questions of recoverability of this amount and the remaining
commitments under the Termination Agreement, a provision of $494,149 has been
taken in the statement of operations. This provision represents the $414,149
funding through the date of the Termination Agreement plus an estimate of
remaining commitments under the Termination Agreement, which approximated
$80,000 at the time. Approximately $60,000 remains in accrued liabilities as of
June 30, 2004, related to estimated future expenses relating to the Termination
Agreement.

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

We
also have an agreement with Combined Telecommunications Consultancy, Ltd.
(CTC), of which slightly less than 35% is owned by Peter Tilyou,
pursuant to which CTC is to receive a percentage of a transaction if CTC
introduces a transaction to us and is paid a consulting fee of $150 per hour for
providing consulting services to us. During the fiscal years ending June 30,
2004 and June 30, 2003, we paid CTC $64,722 and $19,981 respectively, in
consulting fees and $19,337 and $ -0- ,respectively, in transaction fees. The
foregoing amounts include up to $5,000 that we reimbursed CTC for expenses CTC
incurred in performing services on our behalf.

28

---

COGNIGEN
NETWORKS, INC.

In
conjunction with the transaction with InTandem, CTC was to be paid, under its
consulting agreement with us, a commission that was being negotiated with us. In
October 2004, we agreed with CTC that $20,000 of a combination of stock and cash
was owed by us to CTC in connection with the Intandem transaction. However,
because we bought Intandem, CTC agreed to waive this commission.

Peter
Tilyou also owns Telkiosk, Inc., which was paid $1,244 and $840 in agent
commissions for our fiscal years ended June 30, 2004 and June 30, 2003,
respectively.

Sale of
Cognigen Switching Technologies, Inc.

On
May 12, 2004, after approval by the Board of Directors, we entered into a Stock
for Stock Exchange Agreement with Jimmy L. Boswell, David G. Lucas, Reginald W.
Einkauf and John D. Miller (collectively the Principals) pursuant to which the
Principals agreed to exchange with us a total of 800,000 shares of our common
stock, owned by the Principals, for all of the outstanding common stock of our
wholly-owned subsidiary, Cognigen Switching Technologies, Inc. (CST), and
warrants to purchase 200,000 shares of our common stock at $.3015 per share
effective February 1, 2004. The closing occurred on May 21, 2004. At the closing
CST entered into a Master Services Agreement (MSA) to provide us with
telecommunications rating, billing, provisioning, customer care, commissioning
and database management for a fee. The MSA is effective February 1, 2004, and
goes for one-year periods unless terminated by either party at the end of each
period with a 30-day notice.

As
part of the closing, CST entered into a new note with a then existing lender
representing approximately $223,000 in debt. All options to purchase our common
stock issued to CST employees were terminated except for the option to purchase
200,000 shares of our common stock owned by Jimmy L. Boswell which option
expired in August 2004 and was exercisable at $3.68 per share.

At
the time of the  transaction,  Jimmy L. Boswell was the president and a director of CST.
David G. Lucas was the  former chief  financial  officer and a director of CST.  Reginald
W.  Einkauf and John D. Miller were former  officers and  directors of CST. Mr.  Boswell
and Mr. Lucas are former  officers and  directors of ours.  We  originally  acquired CST
in  April 2000 when the Principals and another person sold all of the outstanding stock
of CST to us for our common stock.

In
conjunction with the Stock for Stock Exchange Agreement, goodwill with a net
book value of $2,893,029 has been written off. With consideration of
approximately $26,000, calculated using the Black Scholes method of calculation
for the 200,000 warrants, goodwill of $2,893,029 and $168,448 in negative equity
that was assumed by the Principals, and the 800,000 shares of our common stock
that were repurchased from the Principals valued at $.31 per share or $248,000,
we recorded a non cash loss of $2,502,583 on this transaction that is included
in our statement of operations for the year ended June 30, 2004.

Payments to
Law Firms with which Thomas S. Smith was Associated

During
our fiscal years ended June 30, 2004 and 2003, we paid the law firms with which
Thomas S. Smith, our President and Chief Executive Officer, was associated
$116,968 and $257,987, respectively, for legal services performed by those firms
for us.

29

---

COGNIGEN
NETWORKS, INC.

Item 13.
Exhibits

Exhibits and
Index of Exhibits.

EXHIBIT NO.DESCRIPTION AND METHOD OF FILING

|2.1 |  | Funding
Agreement  dated  April  1,  2003,  by  and  among  us,  InTandem  Communications  Corp.,
David B.  Hurwitz,  Richard  G. De Haven  and  Anthony  Sgroi  (except for Schedule
B-Financial  Model and Schedule  E-Business  Plan  and Financial  Statements)
(incorporated  by reference to Exhibit 10.1 to our  Current Report on Form 8-K filed on
April 15, 2003).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.2 |  | Stock
for  Stock  Exchange  Agreement  dated  May 12,  2004 by among  Jimmy L.  Boswell,  David
G.  Lucas,  Reginald  W.,  Einkauf  and  John  D.  Miller  (incorporated  by reference
to Exhibit 2.1 to our Current  Report on Form 8-K  filed on June 3, 2004).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

|3.5 |  | Articles
of Amendment to our  Articles of  Incorporation  filed on October 16,  2002
(incorporated  by reference to Exhibit 3.1 to our Current Report on Form  8-K filed on
November 4, 2002).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.6 |  | Bylaws
as amended  through  December  28, 2004  (incorporated  by reference to  Exhibit 3 to our
Current Report on Form 8-K filed on January 3,2005).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

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

|10.2 |  | Letter
dated December 6, 2002,  from us to eMaxDirect,  LLC  (incorporated  by  reference  to
Exhibit 10 to our  Current  Report on Form 8-K filed on December  10, 2002).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

30

---

COGNIGEN
NETWORKS, INC.

|10.3 |  | Securities
Purchase  Agreement dated February 10, 2003,  between us and David  Stone and Harry
Gorlovezsky  (incorporated  by  reference  to Exhibit 10.1 to  our Current Report on Form
8-K filed on April 24, 2003).
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 |  | Option
to purchase  Promissory  Note and Agreement  from us to David Stone and  Harry
Gorlovezsky  (incorporated  by reference to Exhibit 10.2 to our Current  Report on Form
8-K filed on April 24, 2003).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 |  | Form
of Option to Purchase Common Stock  (incorporated  by reference to Exhibit 10.7 to our
Annual Report on Form  10-KSB for the year ended June 30, 2000).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 |  | 2001
Incentive  and  Nonstatutory  Stock Option Plan  (incorporated  by reference to Exhibit
10 to our Quarterly  Report on Form 10-QSB for the quarter ended March 31, 2001).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 |  | Stock
Redemption  Agreement  dated November 30, 2001 between us, the Anderson  Family  Trust,
Cantara  Communications  Corporation,  Kevin  E.  Anderson  Consulting,  Inc.  (without
Exhibits A and B)  (incorporated  by reference to  Exhibit 10.1 to our Current Report on
Form 8-K dated December 18, 2001).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 |  | Training
Services  Framework  Agreement  dated May 17,  2002,  between us and  e-Max  Direct LLC
(incorporated  by  reference to Exhibit 10.1 to our Current  Report on Form 8-K dated
filed on July 2, 2002).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 |  | Transitional
Supplemental  Consulting  Engagement letter dated July 11, 2002,  between us and Kevin E.
Anderson Consulting,  Inc.  (incorporated by reference  to Exhibit  10.10 to our  Annual
Report  Form  10-KSB for the year ended June  30, 2002).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 |  | Letter
Agreement dated April 19, 2002,  between Cognigen  Networks,  Inc. and  Troy D.  Carl
(incorporated  by  reference  to  Exhibit  10.11 to our  Annual  report on Form 10-KSB
for the year ended June 30, 2002).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|10.12 |  | Modified
Supplemental  Consulting  Engagement  letter  dated  March  4,  2003  between us and
Kevin Anderson  (incorporated  by reference to Exhibit 10.12 to  our amended Annual
Report on Form 10-KSB/A for the year ended June 30, 2003).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 |  | Extension
of Modified  Supplemental  Consulting  Engagement  Agreement  dated  February  9,  2004
between  us  and  Kevin  Anderson  Consulting,  Inc.  (incorporated  by  reference  to
Exhibit 2.1 to our  Quarterly  Report on Form  10-QSB for the Quarter ended December 31,
2003).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

31

---

COGNIGEN
NETWORKS, INC.

|10.14 |  | Termination
of Funding  Agreement and Settlement  Agreement  dated February 5,  2004  (incorporated
by reference to Exhibit 10.1 to our  Quarterly  Report on  Form 10-QSB for the Quarter
ended December 31, 2003).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|10.17 |  | Accounts
Receivable Purchase  Modification  Agreement dated November 22, 2004  between us and
Silicon  Valley Bank  (incorporated  by  reference  to Exhibit  10.1 to our current
report on Form 8-K filed on December 10, 2004.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|21 |  | Subsidiaries (incorporated  by  reference  to Exhibit  21 to our
Annual Report on Form 10-KSB for the year ended June 30, 2004).
|-- |  | --------------------------------------------------------------------------------------------------------------------------------

|31.1 |  | Certification
of Chief Executive Officer required by Rule 13a-14(a).
|---- |  | --------------------------------------------------------------------

|31.2 |  | Certification
of Chief Financial Officer required by Rule 13a-14(a).
|---- |  | --------------------------------------------------------------------

|32.1 |  | Certification
of Chief  Executive  Officer  required  by  Section  906 of the  Sarbanes-Oxley Act of
2002.
|---- |  | ----------------------------------------------------------------------------------------------------------

|32.2 |  | Certification
of Chief  Financial  Officer  required  by  Section  906 of the  Sarbanes-Oxley Act of
2002.
|---- |  | ----------------------------------------------------------------------------------------------------------

Item 14.
Principal Accountant Fees and Services

Audit
Fees

| | The
aggregate fees billed for professional services rendered by Ehrhardt Keefe
Steiner & Hottman PC, our independent public accountants, for the audit of
our financial statements for our fiscal years ended June 30, 2004 and 2003 and
the review of the financial statements in our Forms 10-QSB for such fiscal years
were $49,200 and $53,600, respectively.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Audit-Related
Fees

| | The
aggregate fees billed in each of our last two fiscal years ended June 30, 2004
and 2003 by Ehrhardt Keefe Steiner & Hottman PC for assurance and related
services that were reasonably related to the performance of the audit or review
of our financial statements were $13,566 and $19,175, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

32

---

COGNIGEN
NETWORKS, INC.

Tax
Fees

The
aggregate fees billed for tax services rendered by Ehrhardt Keefe Steiner & Hottman
PC for tax compliance, tax advice and tax planning for the two fiscal  years ended June
30, 2004 and 2003, were $9,071 and $1,625, respectively.

All
Other Fees

No
services were rendered by Ehrhardt Keefe Steiner & Hottman PC, other than as  listed
above, for the two fiscal years ended June 30, 2004 and 2003.

The
audit committee is requested to and did approve the retention of Ehrhardt Keefe  Steiner
& Hottman PC and the fees and other significant compensation paid to  it for the
fiscal year ended June 30, 2004.

100%
of the services described above were approved by our audit committee.

33

---

COGNIGEN
NETWORKS, INC.

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:
September 7, 2005

| | COGNIGEN
NETWORKS, INC./s/ Thomas S. Smith
Thomas S. Smith, President and Chief Executive
Officer/s/ Gary L. CookGary L. Cook, Senior Vice President of Finance,Treasurer,
Secretary, Chief Financial Officer andPrincipal 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/ Gary L. Cook               |       | Director
|Gary L. Cook                   |      
|______________________________ |       | Director
|David L. Jackson               |      
|/s/ Christopher R. Seelbach    |       | Director
|Christopher R. Seelbach        |      
|/s/ James H. Shapiro           |       | Director
|James H. Shapiro               |      
|/s/ Thomas S. Smith            |       | Director
|Thomas S. Smith                |      

34

---

COGNIGEN
NETWORKS, INC.

# EXHIBIT INDEX

EXHIBIT NO.DESCRIPTION AND METHOD OF FILING

|2.1 |  | Funding
Agreement  dated  April  1,  2003,  by  and  among  us,  InTandem  Communications  Corp.,
David B.  Hurwitz,  Richard  G. De Haven  and  Anthony  Sgroi  (except for Schedule
B-Financial  Model and Schedule  E-Business  Plan  and Financial  Statements)
(incorporated  by reference to Exhibit 10.1 to our  Current Report on Form 8-K filed on
April 15, 2003).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.2 |  | Stock
for  Stock  Exchange  Agreement  dated  May 12,  2004 by among  Jimmy L.  Boswell,  David
G.  Lucas,  Reginald  W.,  Einkauf  and  John  D.  Miller  (incorporated  by reference
to Exhibit 2.1 to our Current  Report on Form 8-K  filed on June 3, 2004).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

|3.5 |  | Articles
of Amendment to our  Articles of  Incorporation  filed on October 16,  2002
(incorporated  by reference to Exhibit 3.1 to our Current Report on Form  8-K filed on
November 4, 2002).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.6 |  | Bylaws
as amended  through  December  28, 2004  (incorporated  by reference to  Exhibit 3 to our
Current Report on Form 8-K filed on January 3,2005).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

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

|10.2 |  | Letter
dated December 6, 2002,  from us to eMaxDirect,  LLC  (incorporated  by  reference  to
Exhibit 10 to our  Current  Report on Form 8-K filed on December  10, 2002).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

35

---

COGNIGEN
NETWORKS, INC.

|10.3 |  | Securities
Purchase  Agreement dated February 10, 2003,  between us and David  Stone and Harry
Gorlovezsky  (incorporated  by  reference  to Exhibit 10.1 to  our Current Report on Form
8-K filed on April 24, 2003).
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 |  | Option
to purchase  Promissory  Note and Agreement  from us to David Stone and  Harry
Gorlovezsky  (incorporated  by reference to Exhibit 10.2 to our Current  Report on Form
8-K filed on April 24, 2003).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 |  | Form
of Option to Purchase Common Stock  (incorporated  by reference to Exhibit 10.7 to our
Annual Report on Form  10-KSB for the year ended June 30, 2000).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 |  | 2001
Incentive  and  Nonstatutory  Stock Option Plan  (incorporated  by reference to Exhibit
10 to our Quarterly  Report on Form 10-QSB for the quarter ended March 31, 2001).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 |  | Stock
Redemption  Agreement  dated November 30, 2001 between us, the Anderson  Family  Trust,
Cantara  Communications  Corporation,  Kevin  E.  Anderson  Consulting,  Inc.  (without
Exhibits A and B)  (incorporated  by reference to  Exhibit 10.1 to our Current Report on
Form 8-K dated December 18, 2001).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 |  | Training
Services  Framework  Agreement  dated May 17,  2002,  between us and  e-Max  Direct LLC
(incorporated  by  reference to Exhibit 10.1 to our Current  Report on Form 8-K dated
filed on July 2, 2002).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 |  | Transitional
Supplemental  Consulting  Engagement letter dated July 11, 2002,  between us and Kevin E.
Anderson Consulting,  Inc.  (incorporated by reference  to Exhibit  10.10 to our  Annual
Report  Form  10-KSB for the year ended June  30, 2002).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 |  | Letter
Agreement dated April 19, 2002,  between Cognigen  Networks,  Inc. and  Troy D.  Carl
(incorporated  by  reference  to  Exhibit  10.11 to our  Annual  report on Form 10-KSB
for the year ended June 30, 2002).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|10.12 |  | Modified
Supplemental  Consulting  Engagement  letter  dated  March  4,  2003  between us and
Kevin Anderson  (incorporated  by reference to Exhibit 10.12 to  our amended Annual
Report on Form 10-KSB/A for the year ended June 30, 2003).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 |  | Extension
of Modified  Supplemental  Consulting  Engagement  Agreement  dated  February  9,  2004
between  us  and  Kevin  Anderson  Consulting,  Inc.  (incorporated  by  reference  to
Exhibit 2.1 to our  Quarterly  Report on Form  10-QSB for the Quarter ended December 31,
2003).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

36

---

COGNIGEN
NETWORKS, INC.

|10.14 |  | Termination
of Funding  Agreement and Settlement  Agreement  dated February 5,  2004  (incorporated
by reference to Exhibit 10.1 to our  Quarterly  Report on  Form 10-QSB for the Quarter
ended December 31, 2003).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|10.17 |  | Accounts
Receivable Purchase  Modification  Agreement dated November 22, 2004  between us and
Silicon  Valley Bank  (incorporated  by  reference  to Exhibit  10.1 to our current
report on Form 8-K filed on December 10, 2004.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|21 |  | Subsidiaries (incorporated  by  reference  to Exhibit  21 to our
Annual Report on Form 10-KSB for the year ended June 30, 2004).
|-- |  | --------------------------------------------------------------------------------------------------------------------------------

|31.1 |  | Certification
of Chief Executive Officer required by Rule 13a-14(a).
|---- |  | --------------------------------------------------------------------

|31.2 |  | Certification
of Chief Financial Officer required by Rule 13a-14(a).
|---- |  | --------------------------------------------------------------------

|32.1 |  | Certification
of Chief  Executive  Officer  required  by  Section  906 of the  Sarbanes-Oxley Act of
2002.
|---- |  | ----------------------------------------------------------------------------------------------------------

|32.2 |  | Certification
of Chief  Financial  Officer  required  by  Section  906 of the  Sarbanes-Oxley Act of
2002.
|---- |  | ----------------------------------------------------------------------------------------------------------

37

---