10KSB

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

                     For the fiscal year ended June 30, 2002

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

         For the transition period from ______________ to ______________

                         Commission file number 0-11730

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

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

7001 Seaview Avenue, N.W., Suite 210
Seattle, Washington                                98117
- -------------------                                ------
(Address of principal                              (Zip Code)
executive offices)
Issuer's telephone number:
(206) 297-6151

                      -------------------------------------
         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: $11,075,261

     The aggregate market value of the voting and non-voting  common equity held
by non-affiliates at August 30, 2002, computed by reference to the closing price
of $0.37 per share on the OTC Bulletin Board, was $2,751,117.

     The number of shares  outstanding of each of the issuer's classes of common
equity on August 30, 2002 was 9,054,456.

                       Documents Incorporated by Reference
     The information required by Items 9 through 12 is incorporated by reference
to the issuer's definitive  information  statement that the issuer plans to file
in  connection  with its next  Annual  Meeting  of  Shareholders  involving  the
election  of  directors.  The issuer  plans to file the  definitive  information
statement with the Commission on or before October 28, 2002.

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







                                TABLE OF CONTENTS



PART I

Item 1.  Description of Business
Item 2.  Description of Property
Item 3.  Legal Proceedings
Item 4.  Submission of Matters to a Vote of Security Holders

PART II

Item 5.  Market for Common Equity and Related Stockholders Matters
Item 6.  Management's Discussion and Analysis or Plan of Operations
Item 7.  Financial Statements
Item 8.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

PART III

Item 13.  Exhibits and Reports on Form 8-K
Item 14.  Controls and Procedures


* The information required by Items 9 through 12 is incorporated by reference to
the issuer's definitive  information  statement that the issuer plans to file in
connection with its next Annual Meeting of  Shareholders  involving the election
of directors. The issuer plans to file the definitive information statement with
the Securities and Exchange Commission on or before October 28, 2002.


                                     PART I

Forward Looking Statements.

     The  discussion  in  this  report  contains  forward  looking   statements,
including,  without  limitation,  statements relating to us and our wholly-owned
subsidiary.  Although we believe that the expectations  reflected in the forward
looking  statements  are  reasonable,   we  can  give  no  assurance  that  such
expectations will prove to be correct.  The forward looking  statements  involve
risks and  uncertainties  that  affect our  business,  financial  condition  and
results of operations,  including without limitation,  our possible inability to
obtain  additional  financing,  lack of agent  growth,  the possible loss of key
personnel,  rate  changes,  fee  policy or  application  changes,  technological
changes and increased  competition.  Many of these risks are beyond our control.
We are not entitled to rely on the safe harbor  provisions of Section 27A of the
Securities Act of 1933, as amended,  or Section 21E of the  Securities  Exchange
Act of 1934, as amended, when making forward looking statements.


Item 1.  Description of Business.

                                    BUSINESS


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

     We  currently  operate in two  divisions.  The first  division  consists of
direct  and  indirect  sales  of  telecommunications   and  personal  technology
services.  The second division is our carrier division.  The first division is a
multifaceted  sales and marketing  organization which utilizes the Internet as a
platform   to   provide   customers   and   subscribers   with  a   variety   of
telecommunications and technology based products and services. Through a network
of more than 230,000  independent  agents,  we have sold directly or facilitated
the sale of third party products and services to more than 800,000 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 significant products in our sales mix. We have contractual agreements with
a variety of product  and  service  vendors  that  provide us with a  commission
percentage  of any  sale  made  through  one of our  supported  web  sites.  Our
web-based marketing division sells the products and services of industry leaders
such  as  AT&T  Wireless,  Sprint,  Verizon,   TalkAmerica  and  Speakeasy.  Our
operations 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. The other division is
our wholly owned  subsidiary,  Cognigen  Switching  Technologies,  Inc., or CST,
which is discussed in more detail below.

     In the mid 1990's, operating as Cognigen Communications,  we recognized the
marketing  potential  of the  Internet  and formed what we believe is one of the
first  companies  to  create a  marketing  operation  based  exclusively  on the
Internet.  The initial concept,  which remains the foundation of our growth, was
to expand  marketing  potential by increasing the number of  independent  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  created  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.  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.  Lately, we have been adding 5,000 to 6,000 agents each
month.  Over  the past 24  months,  we have  observed  a  positive  contribution
correlation  between  the number of our agents and our  revenue.  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.

     In addition to the  Internet-based  agent  network and CST's  direct  sales
efforts,  we are  engaged  in an  effort to  develop  and  support a variety  of
affiliate program offerings.  In these programs,  large affiliate  organizations
such as industry  service  providers and a variety of membership or club related
businesses can be utilized for commission  sharing.  We currently have contracts
for these  programs that represent  affiliate/affinity  populations in excess of
7,000,000   potential  buyers.  As  in  any  program  of  this  nature,   actual
participation  and buying rates will be a small  subset of the target  audience,
but higher than non-affiliated web surfers.

     CST is  licensed  by the Federal  Communications  Commission,  or FCC, as a
global   facilities-based/global  resale  services  national  and  international
carrier.  CST provides our  customer  base and other direct  clients with a wide
variety of discount  international,  phone card and private switching telephonic
services.  CST, through its multi-mode enhanced services platform,  provides its
customers with discounted domestic and international long distance voice and fax
service,  international  direct  dialing,  domestic  and  international  prepaid
calling cards and international toll-free access. CST provides these services to
our proprietary customer base of approximately  34,000 individual accounts.  CST
has three fully programmable Cisco-VCO-4K  multi-protocol circuit switches, with
a combined  capability of more than 60 million  minutes of traffic per month, at
its  headquarters  in  San  Luis  Obispo,  California.  With  additional  modest
enhancement  and CST's incumbent  technology,  we are well positioned to deliver
the next  generation of enhanced  packet  telephony  services to both individual
subscribers  and  enterprise  clients.  Targeted  functionalities  would include
services such as: VOIP,  unified  messaging,  voice, video and data conferencing
and integrated wireless applications.

     During the year ended June 30, 2002,  two  customers  accounted for 12% and
11%, respectively, of our total revenue.

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,   with  switching   companies  and  with  all  providers  who  retail
telecommunications and personal communications products 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
higher 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.

Regulation

     We are not currently subject to any governmental regulations as an Internet
marketer of telecommunications  and technology based products and services.  CST
is regulated by the Federal Communications  Commission ("FCC") as a Section 214,
domestic  and  international  facilities  based  carrier.  In  addition,  we are
regulated by some state commissions as a "Competitive  Local Exchange  Carrier."
Presently, that list includes 12 states.

     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, 2002, we had 21 full time employees based in our offices and
facilities in Seattle, Washington and San Luis Obispo, California.


Item 2.  Description of Property

     We lease  approximately  3,457  square feet of office space at 7001 Seaview
Avenue, N.W., Suite 210, Seattle, Washington 98117, pursuant to a month-to-month
lease that currently  requires monthly rental payments of approximately  $4,795.
CST leases approximately 3,218 square feet of office space at 3220 South Higuera
Street, Suite 103, San Luis Obispo,  California 93401,  pursuant to a lease that
will terminate in April 2003 and that currently requires monthly rental payments
of $6,231.


Item 3.  Legal Proceedings.

     We were joined as a defendant along with several other telecom companies in
a patent infringement case filed by Cygnus Telecommunications Technology, LLC in
February  2001.  The  plaintiff  alleged  that we and others  used its  patented
technology  to operate a callback  system for long  distance  calls and  claimed
damages in an unspecified amount. The original case was filed in the US District
Court,  Central  District of  California,  West Los Angeles  Division under case
number 01-05943-DT-AIJX (C.D. CA). Then the case was subsequently transferred to
the Northern  District of California under case number  MDL-1423RMW.  We settled
the case on March 20, 2002, for less than 10% of our current assets.

     In August 2001,  we filed a civil  action in the US District  Court for the
Western  District  of  Washington  against  Pharmaceutical   Outcomes  Research,
claiming unfair  trademark  competition and trademark  dilution.  The action was
dismissed for lack of jurisdiction on December 3, 2001. Concurrently, a Petition
for Dispute  Resolution No. WIPO D-2001-1094,  was filed by us against this same
defendant  with  the  World  Intellectual   Property   Organization  in  Geneva,
Switzerland. That petition alleged a disputed domain registration.  Our petition
was denied on December 18, 2001.


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, 2002.

                                     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,   mark-downs  or  commissions  and  may  not
necessarily  represent actual  transactions.  On October 15, 2001, each share of
our outstanding common stock was reverse split on a one for eight basis.

                                 High Closing Bid       Low Closing Bid
                                -------------------  ----------------------
Quarter ended June 30, 2002           $0.40                   $0.40
Quarter ended March 31, 2002           0.62                    0.62
Quarter ended December 31, 2001        0.91                   0.755
Quarter ended September 30,            0.15                    0.09
2001
Quarter ended June 30, 2001           $0.30                   $0.15
Quarter ended March 31, 2001           0.52                  0.0782
Quarter ended December 31, 2000      0.2812                  0.1875
Quarter ended September 30,            1.00                   0.625
2000

     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.

     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 August 30, 2002, there were approximately  1,326 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, 2002:


                                                                 Number of
                                                                 securities
                                                                 remaining
                                                                available for
                       Number of                               future issuance
                   securities to be                             under equity
                      issued upon        Weighted-average       compensation
                      exercise of        exercise price of    plans (excluding)
                      outstanding           outstanding          securities
                    options, warrants    options, warrants      reflected in
Plan category         and rights            and rights           column (a)
                          (a)                  (b)                  (c)
- ------------------ ------------------- ---------------------- ------------------

Equity compensation
plans approved by
security holders            -0-           Not Applicable         625,000

Equity compensation
plans not approved
by security holders      1,080,000             $3.44               -0-

Total                    1,080,000             $3.44             625,000



     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 the  common  stock  owned by the
Anderson Family Trust.

     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 is limited by various caps
for  the  first  12  months.  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
canceled,  and Kevin E. Anderson was retained for 24 months from January 1, 2002
at the rate of  $1,000.00  per  month to  provide  up to 20 hours  telecommuting
consulting services to us per month.

     In April 2002,  Troy Carl  resigned as our Vice  President of Marketing and
from our board of  directors.  In  consideration  for his  resignation  from the
position of Vice President of Marketing,  Mr. Carl received a severance  package
consisting  of cash,  100,000  shares of our  common  stock  and a  nonqualified
five-year option to purchase 50,000  additional shares of our common stock at an
exercise  price of $0.55 per  share,  which was the  market  value of our common
stock on the grant date of April 19, 2002.

     The shares and option  were  issued in  reliance  upon the  exemption  from
registration  contained  in Section  4(2) of the  Securities  Act.  Mr. Carl had
available  to  him  full   information   concerning  us  and  the   certificates
representing the shares and option have a legend prohibiting transfer unless the
shares or option are  registered  under the  Securities  Act or the  transfer is
exempt from the registration requirements thereof. No underwriters were involved
in this transaction.

     In June 2002 we also  granted  options to six of our  employees to purchase
30,000 shares of our common stock at an exercise price of $0.41 per share, which
was the market value of our common  stock on the grant date.  We do not consider
the grants of these options to constitute sales.


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

Overview

     We are a marketer of long distance  telephone  and personal  communications
services and a licensed,  facilities  based  interstate and  international  long
distance  carrier.  We receive  commissions from sales of these services through
agents and affinity  groups,  from  telecommunications  sales of prepaid calling
cards and from the sale of call switching services.

Results of Operations

Year Ended June 30, 2002 Compared to Year Ended June 30, 2001

     Total revenue for the fiscal year ended June 30, 2002 was up 63.8% over the
previous year, to $11,075,261 compared to $6,759,918 for the year ended June 30,
2001,  an  increase  of  $4,315,343.   Commission  revenue  increased  54.8%  to
$7,089,784  for the 2002 year compared to $4,580,651  for the 2001 year. A major
portion of this  increase  resulted from an increase in our  registered  agents.
Telecommunications revenue increased 86.1% to $3,984,973 for the year ended June
30,  2002  as  compared  to  $2,141,322  for  the  year  ended  June  30,  2001.
Contributors to this increase included new products such as  Cogniconference,  a
new conferencing  system that functions in the  international  market as well as
the  domestic  market,  and an  increase in the number of CST's  customers  from
18,810 as of June 30,  2001 to 33,988 as of June 30,  2002,  an increase of 80%.
Other  revenue  decreased  to $504 for the year ended June 30, 2002  compared to
$37,945 for the year ended June 30, 2002.

     Commission  expense  paid  to our  agents  related  to  commission  revenue
increased  from  $2,704,894  for the year ended June 30, 2001 to $ 4,570,835 for
the year ended June 30, 2002,  an increase of 69% that was  directly  related to
the  increase in  commission  revenue.  Telecommunications  operating  expenses,
primarily carrier costs,  increased  $783,935 during the 2002 year over the 2001
year in a direct  relation  to the  increase in  revenue.  Selling,  general and
administrative  expenses  increased  only $634,610 for the 2002 year compared to
the 2001 year,  or 17%  compared  to an  increase in revenue of 64% for the same
period.  Depreciation and  amortization  decreased to $145,905 for the 2002 year
compared to $1,220,539  for the 2001 year because of our decision to adopt early
the provisions of Statement of Financial  Accounting  Standards Nos. 141 and 142
which no longer allows for the amortization of goodwill. Goodwill was tested for
impairment at year-end and no adjustments were required.

     Losses from operations decreased for the year ended June 30, 2002 to a loss
of  $392,044  from a loss of  $2,497,535  for the year  ended June 30,  2001,  a
reduction of $2,105,491.  This reduction resulted from a substantial increase in
revenue  compared  to the  2001  year  coupled  with a  lower  increase  in most
corresponding costs, but not commission   expenses.  The results from operations
for the fourth quarter ended June 30, 2002 was a net profit of $74,481  compared
to a net loss of $681,837 for the quarter ended June 30, 2001.

     Interest expense decreased for the year ended June 30, 2002 to $33,757 from
$67,847 for the year ended June 30, 2001. The reduction of $34,090 resulted from
the payoff of a portion of long-term debt.

     The loss before interest,  taxes, depreciation and amortization improved in
the year ended June 30, 2002 to a loss of $246,139  from a loss of $1,276,996 in
the year ended June 30, 2001.  The reduction is primarily due to better  overall
performance and limited cost increases.

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, 2002 or 2001.

Liquidity and Capital Resources

     We  historically  funded our  operations  primarily  from  stock  sales and
operations.  At June 30, 2002 we had cash and cash  equivalents  of $482,717 and
negative  working capital of $1,177,802.  There was an increase in cash and cash
equivalents of $185,770 for the year ended June 30, 2002 as compared to the year
ended June 30, 2001 in which we realized a decrease of $420,397 in cash and cash
equivalents.  Our negative  working capital  increased to $1,177,802 at June 30,
2002 as compared to $405,115 at June 30, 2001. This increase is due primarily to
the recognition of the current  portion of deferred  commissions of $511,200 and
an increase in commissions  payable of $524,879 offset in part by an increase in
commissions receivable of $233,437.

     Cash  provided  by  operations  during  the year  ended  June 30,  2002 was
$414,565. The major contributor to this was the reduced net loss for the year of
$388,776  (including the net profit for the fourth  quarter of $74,481),  before
adjustments for non-cash items of depreciation and  amortization of $145,905,  a
decrease in employee receivables of $37,005, a reduction of inventory of $7,903,
a reduction  of other  current  assets of $183,329,  an increase in  commissions
payable of $524,879, an increase in other accrued liabilities of $88,011,  stock
options  and stock  issued of  $139,450,  provision  for  doubtful  accounts  of
$61,208,  a decrease in accounts  receivable  of $66,283 and a decrease in notes
receivable of $35,803.

     Additional  uses of  cash  included  increased  commissions  receivable  of
$294,645,  decreased  deferred  income taxes of $37,025,  increased  deposits of
$52,383,  and decreased  accounts  payable and deferred  revenue.  Cash used for
investing  activities  was  $63,436  for  capital  expenditures.  Cash  used  in
financing  activities  included  proceeds  from sale of common stock of $299,985
less payment of notes payable of $175,000,  payments on deferred  commissions of
$278,030, and payments on capital leases of $12,314.

     We have a note payable of $126,499 at June 30, 2002. We have  maturities of
this note of $126,499 required during the next twelve months.

     As of June 30, 2002, we had an accumulated deficit of $11,307,652.  We have
only operated  profitability during the quarter ended June 30, 2002. There is no
assurance that we will operate profitably in the future.

     As of June 30, 2002, we had available cash of $482,717.  We anticipate that
we will need  additional  financing  in the  future to expand  unless we realize
sufficient cash flow from our current operations. We have suffered losses in the
past and there are no  assurances  that we will realize a  sufficient  amount of
cash flow from our current  operations to expand.  If we do not, we will have to
reduce or discontinue our plans for expansion.

     Cash generated from  operations and financing  activities was sufficient to
meet our working capital  requirements for the year ended June 30, 2002, but may
not be sufficient to meet our working capital  requirements  for the foreseeable
future.  We are looking at various  financing and equity  opportunities  to meet
current  operating  and capital  requirements  until we can be sustained by cash
flow from our operations. As a result of this search, during the year ended June
30,  2002,  we sold  750,000  shares of common  stock and  warrants  to purchase
600,000 shares of common stock to two current  investors for $299,985 and issued
42,660  shares to our officers for agreeing to temporary  salary  reductions  of
$27,257.  The  warrants  have an  excercise  price of $1.00 and  100,000  of the
warrants  expire in two years and 500,000 expire in four years. We are currently
negotiating a transaction to secure additional equity financing. There can be no
assurance we will be able to secure  additional debt or equity financing or that
operations  will  produce  adequate  cash  flow to  enable us to meet all of our
future obligations.  However, we believe that we will be successful in producing
sufficient  cash flow 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.

     Our critical accounting policies are as follows:

        o     commissions receivable;
        o     goodwill;
        o     valuation of long-lived assets;
        o     commissions payable; and
        o     reserve recognition.

Commissions Receivable

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

     An allowance  for  doubtful  accounts of $118,208 at June 30, 2002 has been
established by us to provide for potential  uncollectible accounts and is deemed
to be adequate by management based on historical results.

     We have  commissions  from two vendors that  generated 12% and 11% of total
revenue and made up 15% and 19% of  commissions  receivable at June 30, 2002. We
have two vendors that generated 25% of total revenue for the year ended June 30,
2001.

Goodwill

     The  excess of the  purchase  price  over net  assets  acquired  by us 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 Nos. 141 and 142,
"Business  Combinations" and "Goodwill and Other Intangible  Assets."  Statement
141  requires  all  business  combinations  initiated  after June 30, 2001 to be
accounted for using the purchase  method.  Under the guidance of Statement  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.  We adopted  these  statements as of July 1,
2001.  Further,  we recorded no  amortization  expense on goodwill  for the year
ended June 30, 2002.  Goodwill was tested for impairment at the time of adoption
and in the fourth  quarter.  No impairment was recorded as the fair value of the
reporting  unit exceeded its carrying  value.  As a result of Statement  142, we
will no longer be  recognizing  approximately  $986,000  in annual  amortization
expense  related to goodwill.  The effect of adopting  Statement 142 on reported
net income exclusive of amortization expense (including any related tax effects)
for the year ended June 30, 2001, is shown in the Statement of Operations.

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.

Commissions Payable

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

Revenue Recognition

Marketing Commissions

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

Telecommunications

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

     Long  distance  phone  services  revenue  is  recorded  when  services  are
rendered.

     Prepaid  long  distance  phone  service is  initially  recorded as deferred
revenue and is recognized as the prepaid minutes are used by the customer.

Recently Issued Accounting Pronouncements

     In  August  2001,  the FASB  issued  SFAS No.  143,  "Accounting  for Asset
Retirement Obligations." SFAS No. 143 requires the fair value of a liability for
an asset  retirement  obligation  to be  recognized in the period in which it is
incurred  if a  reasonable  estimate of fair value can be made.  The  associated
asset  retirement  costs are  capitalized as part of the carrying  amount of the
long-lived  asset.  SFAS No. 143 is effective for us for fiscal years  beginning
after June 15,  2002.  We believe the  adoption of this  statement  will have no
material impact on its consolidated financial statements.

     In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment or Disposal of  Long-Lived  Assets." SFAS No. 144 requires that those
long-lived  assets be measured  at the lower of  carrying  amount or fair value,
less cost to sell,  whether  reported in continuing  operations or  discontinued
operations. Therefore, discontinued operations will no longer be measured at net
realizable  value or include  amounts  for  operating  losses  that have not yet
occurred.  SFAS No. 144 is effective for financial  statements issued for fiscal
years  beginning  after  December  15,  2001 and,  generally,  is to be  applied
prospectively.

Forward Looking Statements

     Certain of the  information  discussed  herein,  and in  particular in this
section  entitled  "Management's  Discussion  and  Analysis,"  contains  forward
looking  statements  that involve risks and  uncertainties  that might adversely
affect the  operating  results of the  Company in the future in a material  way.
Such risks and uncertainties include, without limitation, the Company's possible
inability  to become  certified as a reseller in all  jurisdictions  in which it
applies,  the possibility that the Company's  proprietary customer base will not
grow  as the  Company  expects,  the  Company's  ability  to  obtain  additional
financing,  lack of agent growth, loss of key personnel,  telecommunication rate
changes, fee policy or application changes,  technological changes and increased
competition.  Many of these  risks are beyond the  control of the  Company.  The
Company is 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 7.  Financial Statements.

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











                             COGNIGEN NETWORKS, INC.

                        Consolidated Financial Statements
                                       and
                          Independent Auditors' Report
                             June 30, 2002 and 2001






                             COGNIGEN NETWORKS, INC.





                                Table of Contents


Independent Auditors' Report

Consolidated Financial Statements

Consolidated Balance Sheet

Consolidated Statements of Operations

Consolidated Statement of Changes in Stockholders' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements








                          INDEPENDENT AUDITORS' REPORT


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


We  have  audited  the  accompanying  consolidated  balance  sheet  of  Cognigen
Networks,  Inc. and subsidiary as of June 30, 2002, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years ended June 30, 2002 and 2001. 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 auditing standards  generally accepted
in the  United  States of  America.  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, 2002, and the results of their operations and
their cash flows for the years ended June 30, 2002 and 2001 in  conformity  with
accounting principles generally accepted in the United States of America.


                                           /s/Ehrhardt Keefe Steiner & Hottman PC
                                              Ehrhardt Keefe Steiner & Hottman PC
July 30, 2002
Denver, Colorado










                             COGNIGEN NETWORKS, INC.

                           Consolidated Balance Sheet
                                  June 30, 2002


                                     Assets

Current assets
   Cash .......................................................   $    482,717
   Accounts receivable ........................................        211,826
   Commissions receivable, net of allowance for
    doubtful accounts of $118,208 .............................      1,080,349
   Employee receivable ........................................          1,865
   Inventory ..................................................         35,960
   Other current assets .......................................         23,713
                                                                  ------------
     Total current assets .....................................      1,836,430
                                                                  ------------

Non-current assets
   Property and equipment, net ................................        237,811
   Deposits and other assets ..................................         94,839
   Goodwill ...................................................      2,893,029
                                                                  ------------
     Total non-current assets .................................      3,225,679
                                                                  ------------

Total assets ..................................................   $  5,062,109
                                                                  ============

                       Liabilities and Stockholders' Equity

Current liabilities
   Accounts payable ...........................................   $    610,585
   Accrued liabilities ........................................        283,101
   Commissions payable ........................................      1,462,802
   Deferred revenue ...........................................         17,790
   Current portion of deferred commissions ....................        511,200
   Current portion of capital lease obligation ................          2,255
   Note payable ...............................................        126,499
                                                                  ------------
     Total current liabilities ................................      3,014,232
                                                                  ------------

Non-current liabilities
   Deferred commissions .......................................      1,299,392
   Capital lease obligation, less current portion .............          4,995
                                                                  ------------
     Total non-current liabilities ............................      1,304,387
                                                                  ------------
     Total liabilities ........................................      4,318,619
                                                                  ------------

Commitments and contingencies

Stockholders' equity
   Common stock $.001 par value, 300,000,000 shares authorized;
    9,054,456 shares issued and outstanding ...................          9,054
   Additional paid-in capital .................................     12,042,088
   Accumulated deficit ........................................    (11,307,652)
                                                                  ------------
     Total stockholders' equity ...............................        743,490
                                                                  ------------

Total liabilities and stockholders' equity ....................   $  5,062,109
                                                                  ============



                 See notes to consolidated financial statements.










                             COGNIGEN NETWORKS, INC.

                      Consolidated Statements of Operations


                                              For the Years Ended
                                                   June 30,
                                         ----------------------------
                                             2002            2001
                                         ------------    ------------
Revenue
   Marketing commissions .............   $  7,089,784    $  4,580,651
   Telecommunications ................      3,984,973       2,141,322
   Other .............................            504          37,945
                                         ------------    ------------
     Total revenue ...................     11,075,261       6,759,918
                                         ------------    ------------

Operating expenses
   Marketing commissions .............      4,570,835       2,704,894
   Telecommunications ................      2,323,748       1,539,813
   Selling, general and administrative      4,426,817       3,792,207
   Depreciation and amortization .....        145,905       1,220,539
                                         ------------    ------------
     Total operating expenses ........     11,467,305       9,257,453
                                         ------------    ------------

Loss from operations .................       (392,044)     (2,497,535)

Interest expense .....................         33,757          67,847
                                         ------------    ------------

Loss before income taxes .............       (425,801)     (2,565,382)

Deferred income tax benefit (expense)          37,025         (37,025)
                                         ------------    ------------

Net loss .............................   $   (388,776)   $ (2,602,407)
                                         ============    ============

Reported net loss ....................   $   (388,776)   $ (2,602,407)
Add back:  Goodwill amortization .....           --           986,433
                                         ------------    ------------

Adjusted net loss ....................   $   (388,776)   $ (1,615,974)
                                         ============    ============

Basic and diluted loss per common share:
   Reported net loss..................   $      (0.04)   $      (0.25)
   Goodwill amortization..............           --              0.10
                                         ------------    ------------
Adjusted basic and diluted loss
 per common share.....................           --              0.15)
                                         ============    ============

Basic and diluted weighted average
 common shares outstanding............      9,778,940      10,617,489
                                         ============    ============




                 See notes to consolidated financial statements.



                             COGNIGEN NETWORKS, INC.

            Consolidated Statement of Changes in Stockholders' Equity
                   For the Years Ended June 30, 2002 and 2001


                                    Common Stock              Additional                        Total
                            ----------------------------        Paid-in       Accumulated    Stockholders'
                               Shares          Amount           Capital         Deficit         Equity
                            ------------    ------------     ------------    ------------    ------------

Balance - June 30, 2000 .     10,535,609    $     10,535     $ 13,667,794    $ (8,316,469)   $  5,361,860

Common stock issued to
  employee ..............          2,750               3           21,997            --            22,000

Stock issued for finders'
 fee related to work
 completed on the reverse
 acquisition ............        275,000             275             (275)           --              --

Net loss ................           --              --               --        (2,602,407)     (2,602,407)
                            ------------    ------------     ------------    ------------    ------------

Balance - June 30, 2001 .     10,813,359          10,813       13,689,516     (10,918,876)      2,781,453

Common stock issued for
 cash ...................        750,000             750          299,235            --           299,985

Common stock issued for
  services ..............        203,598             203          122,598            --           122,801

Common stock repurchased
 pursuant to Stock
 Redemption Agreement ...     (2,712,501)         (2,712)      (2,085,910)           --        (2,088,622)

Options to purchase
 Company stock issued to
 consultant .............           --              --             16,649            --            16,649

Net loss ................           --              --               --          (388,776)       (388,776)
                            ------------    ------------     ------------    ------------    ------------

Balance - June 30, 2002 .      9,054,456    $      9,054     $ 12,042,088    $(11,307,652)   $    743,490
                            ============    ============     ============    ============    ============

                 See notes to consolidated financial statements.





                             COGNIGEN NETWORKS, INC.

                      Consolidated Statements of Cash Flows


                                                         For the Years Ended
                                                               June 30,
                                                      --------------------------
                                                          2002          2001
                                                      -----------    -----------
Cash flows from operating activities
  Net loss ........................................   $  (388,776)   $(2,602,407)
                                                      -----------    -----------
  Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities
   Depreciation and amortization ..................       145,905      1,220,539
   Provision for doubtful accounts ................        61,208         32,000
   Stock options granted to non-employees and stock
     issued for services ..........................       139,450         22,000
   Deferred income taxes ..........................       (37,025)        37,025
   Changes in assets and liabilities
     Accounts receivable ..........................        66,283       (238,308)
     Commissions receivable .......................      (294,645)      (340,749)
     Employee receivable ..........................        37,005        (37,209)
     Note receivable - related party ..............        35,803         50,000
     Inventory ....................................         7,903         89,623
     Other current assets .........................       183,329        209,986
     Deposits and other assets ....................       (52,383)        46,096
     Accounts payable .............................       (54,343)       567,508
     Accrued liabilities ..........................        88,011         92,172
     Commissions payable ..........................       524,879        611,242
     Deferred revenue .............................       (48,039)        60,519
                                                      -----------    -----------
                                                          803,341      2,422,444
                                                      -----------    -----------
      Net cash provided by (used in) operating
      activities ..................................       414,565       (179,963)
                                                      -----------    -----------

Cash flows from investing activities
  Purchases of property and equipment .............       (63,436)       (38,563)
                                                      -----------    -----------
      Net cash used in investing activities .......       (63,436)       (38,563)
                                                      -----------    -----------

Cash flows from financing activities
  Payments on notes payable .......................      (175,000)       (95,000)
  Payments on deferred commissions ................      (278,030)          --
  Payments on capital leases ......................       (12,314)      (106,871)
  Proceeds from the sale of common stock ..........       299,985           --
                                                      -----------    -----------
      Net cash used in financing activities .......      (165,359)      (201,871)
                                                      -----------    -----------

Net increase (decrease) in cash ...................       185,770       (420,397)

Cash - beginning of year ..........................       296,947        717,344
                                                      -----------    -----------

Cash - end of year ................................   $   482,717    $   296,947
                                                      ===========    ===========


(Continued on following page.)

                 See notes to consolidated financial statements.






                             COGNIGEN NETWORKS, INC.

                      Consolidated Statements of Cash Flows


(Continued from previous page.)

Supplemental disclosure of cash flow information:

      Cash paid for interest was $10,093 (2002) and $116,024 (2001).

Supplemental disclosure of non-cash activity:

      During the year ended June 30, 2002:

          The Company  obtained  fixed assets valued at $7,732 through a capital
          lease.

          The  Company  accepted  a piece of  equipment  as full  payment  on an
          outstanding accounts receivable balance of $21,245.

          The Company re-purchased  2,712,501 shares of common stock in exchange
          for future commissions valued at $2,088,622 (Note 7).

      During the year ended June 30, 2001:

          The Company  returned  customer lists with a net value of $775,000 and
          received in  consideration  the  cancellation  of debt of $510,000 and
          accrued interest of $179,197  associated with the lists and received a
          note receivable of $85,803.

          The Company  converted  $81,499 of accrued  interest into a promissory
          note payable.




                 See notes to consolidated financial statements.










                             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. Since 1989,  Silverthorne had 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.

Cognigen  Networks,  Inc.  is an  Internet  enabled  marketer  of  long-distance
telephone and personal communications services and a licensed,  facilities based
interstate  and  international   long-distance  carrier.  The  Company  receives
commissions  from sales of these services  through  agents and affinity  groups,
from telecommunications sales of prepaid calling cards and from the sale of call
switching services.

Principles of Consolidation

The  accompanying  consolidated  financial  statements  include the  accounts of
Cognigen Networks,  Inc. and its subsidiary,  Cognigen  Switching  Technologies,
Inc. (Cognigen Switching).  All intercompany accounts and transactions have been
eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid  instruments  purchased with an original
maturity of three months or less to be cash equivalents. The Company continually
monitors  its  positions   with,  and  the  credit  quality  of,  the  financial
institutions it invests with. As of the balance sheet date, balances of cash and
cash equivalents exceeded the federally insured limit by approximately $325,000.

Commissions Receivable

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

An  allowance  for  doubtful  accounts  of  $118,208  at June 30,  2002 has been
established by the Company to provide for potential  uncollectible  accounts and
is deemed to be adequate by management based on historical results.

The Company had commissions from two vendors that generated 12% and 11% of total
revenue and made up 15% and 19% of commissions  receivable at June 30, 2002. The
Company had two vendors that  generated  25% of total revenue for the year ended
June 30, 2001.

Inventory

Inventory  consists of advertising  supplies and 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 Cognigen  Switching.  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 141  requires all business
combinations  initiated  after  June 30,  2001 to be  accounted  for  using  the
purchase method.  Under the guidance of SFAS 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.  The Company  adopted these  statements as of July 1, 2001.  Further,  the
Company recorded no amortization expense on goodwill for the year ended June 30,
2002.  Goodwill  was tested for  impairment  at the time of adoption  and in the
fourth  quarter.  No impairment  was recorded as the fair value of the reporting
unit exceeded its carrying  value.  As a result of SFAS 142, the Company will no
longer be  recognizing  approximately  $986,000 in annual  amortization  expense
related to  goodwill.  The effect of adopting  SFAS 142 on  reported  net income
exclusive of  amortization  expense  (including any related tax effects) for the
year ended June 30, 2001, is shown in the Statement of Operations.

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.

Commissions Payable

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

Income Taxes

The  Company  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 commission income from the sale of long-distance  telephone,  personal
communication devices and marketing products is recognized at the time of sale.

Telecommunications

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

Long distance phone service revenue is recorded when services are rendered.

Prepaid long distance  phone service is initially  recorded as deferred  revenue
and is recognized as the prepaid minutes are used by the customer.

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" (FAS
128).  All  dilutive  potential  common  shares have an  antidilutive  effect on
diluted per share amounts and, therefore,  have been excluded in determining net
loss per share.  The Company's  basic and diluted loss per share are  equivalent
and accordingly  only basic loss per share has been presented.  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, 2002 and 2001 were $148,455 and $119,198, respectively.

Recently Issued Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 143,  "Accounting for Asset  Retirement
Obligations."  SFAS No. 143 requires the fair value of a liability  for an asset
retirement  obligation to be recognized in the period in which it is incurred if
a reasonable estimate of fair value can be made. The associated asset retirement
costs are  capitalized as part of the carrying  amount of the long-lived  asset.
SFAS No. 143 is effective for the Company for fiscal years  beginning after June
15,  2002.  The Company  believes the  adoption of this  statement  will have no
material impact on its consolidated financial statements.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of  Long-Lived  Assets."  SFAS No. 144 requires  that those  long-lived
assets be measured at the lower of carrying  amount or fair value,  less cost to
sell,  whether  reported in continuing  operations or  discontinued  operations.
Therefore,  discontinued operations will no longer be measured at net realizable
value or include amounts for operating  losses that have not yet occurred.  SFAS
No. 144 is effective for financial  statements issued for fiscal years beginning
after December 15, 2001 and, generally, is to be applied prospectively.

Reclassifications

Certain  amounts  in  the  2001  consolidated  financial  statements  have  been
reclassified to conform to the 2002 presentation.


Note 2 - Basis of Presentation

On March 15,  2001,  the  stockholders  adopted an  Amendment to the Articles of
Incorporation  that  increased  the number of shares of common stock  authorized
from 50,000,000 to 300,000,000.

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:

                                                      June 30,
                                                        2002
                                                    -----------

Furniture and fixtures ...................          $    20,025
Computer equipment .......................              144,117
Equipment ................................              229,217
Leasehold improvements ...................              191,268
Software .................................              138,166
                                                    -----------
                                                        722,793
Less accumulated depreciation.............             (484,982)
                                                    -----------

                                                    $   237,811
                                                    ===========


Note 4 - Related Party Transactions

The Company  received an $85,803 note from a related party in  conjunction  with
the return of customer lists to the related party.  The note was paid in full in
2002.


Note 5 - Note Payable

Note payable consists of the following:

                                                                       June 30,
                                                                         2002
                                                                     -----------
12% secured  promissory  note  payable,  principal  and interest
 were due  February  12,  2001.  The  Company  is  currently  in
 default  on this  note  but is  making  monthly  principal  and
 interest payments in varying amounts.                               $   126,499
                                                                     ===========


Note 6 - 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  liabilities  and assets 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.

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  $4,036,000 of net operating loss  carryforwards,  which expire in
varying amounts through 2022, if unused.

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

                                                      June 30,
                                                        2002
                                                    -----------

Current deferred tax asset ...............          $    62,000
Current deferred tax liability ...........                  --
Valuation allowance ......................              (62,000)
                                                    -----------

  Net current deferred tax asset .........          $       --
                                                    ===========

Long-term deferred tax asset .............          $ 1,591,000
Long-term deferred tax liability .........           (1,079,000)
Valuation allowance ......................             (512,000)
                                                    -----------

  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:

                                                      June 30,
                                                        2002
                                                    -----------
Current
      Allowance for doubtful accounts.....          $    62,000
Long-term
      Net operating loss carryforwards....            1,506,000
      Property and equipment .............               85,000
      Goodwill ...........................           (1,079,000)
      Less valuation allowance ...........             (574,000)
                                                    -----------

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

The  components of the provision for income tax benefit  (expense)  reflected in
the consolidated statements of operations are as follows:

                                                        For the Years Ended
                                                              June 30,
                                                    ----------------------------
                                                        2002             2001
                                                    -----------      -----------

Current...................................          $       --       $       --
Deferred..................................               37,025          (37,025)
                                                    -----------      -----------

                                                    $    37,025      $   (37,025)
                                                    ===========      ===========

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 Ended
                                                              June 30,
                                                    ----------------------------
                                                        2002             2001
                                                    -----------      -----------

Income tax benefit at the statutory rate .          $  (144,772)     $  (872,230)
State and local income taxes, net of
 federal income tax ......................              (14,051)         (84,658)
Change in valuation allowance ............              517,000           56,778
Nondeductible expenses ...................               50,000          864,534
Other timing differences, net ............             (370,972)          (1,449)
                                                    -----------      -----------

Deferred income tax benefit (expense) ....          $    37,205      $   (37,025)
                                                    ===========      ===========


Note 7 - Stockholders' Equity

Preferred Stock

On March 15, 2001, the Company authorized  20,000,000 shares of preferred stock.
As of June 30, 2002, no preferred shares were issued or outstanding.

Common Stock Issuances

In December  2000,  the Company issued 2,750 shares of common stock to employees
valued at $22,000 as stock-based compensation.

In March  2001,  the  Company  issued  275,000  of  common  stock  as the  final
installment  of finders' fees related to work performed on the completion of the
reverse acquisition.  These shares were valued at $286,000,  or $0.13 per share,
and reported on a net basis in additional paid-in capital.

In September  2001 and April 2002,  the Company issued a total of 150,000 shares
of common stock to a consultant valued at $87,001 as stock-based compensation.

On September 24, 2001, the Board of Directors  authorized the issuance of 42,660
shares of common stock to several  officers of the Company  valued at $27,300 as
stock-based compensation.

In October and November  2001,  the Company sold 750,000  shares of common stock
and  warrants  to  purchase  600,000  shares  of  common  stock at $1.00 for net
proceeds of $299,985 in cash.

In September and October  2001,  the Company  authorized  the issuance of 10,938
shares in  exchange  for  services  valued at $8,500.  The shares were issued in
November 2001.

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
approximates  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, 2002, the
remaining balance of deferred  commissions  payable was $1,810,592.  The Company
has classified  $511,200 as an estimate of the current portion of this agreement
based on historical commissions of the customers.

Stock Options

The Company has  established  the 2001 Incentive and  Nonstatutory  Stock Option
Plan,  which  authorizes the issuance of up to 5,000,000 shares of the Company's
common  stock.  The Plan will  remain in effect  until  2011  unless  terminated
earlier by an action of the Board. All employees,  board members and consultants
of the Company are eligible to receive  options under the Plan at the discretion
of the Board.  Options  issued under the Plan vest  according to the  individual
option agreement for each grantee.

In September  2001,  various  individual  and  corporate  option  holders of the
Company  voluntarily  surrendered  to the  Company,  stock  options to  purchase
3,050,000 million shares of the Company's common stock. The surrendered  options
had an  exercise  price of $3.68 per  share,  and would not have  expired  until
August 24, 2004. The Company  originally  granted options to purchase a total of
4,050,000  million  of the  Company's  common  stock in  August  1999.  With the
surrender by these option holders,  there remain outstanding options to purchase
1,000,000  million shares at $3.68 per share that can be exercised  until August
2004.

During  the year ended June 30,  2002,  the  Company  issued  30,000  options to
purchase the Company's  common stock to employees.  The options have an exercise
price of $.41 and expire 5 years  from  issuance.  The  options  were  valued at
$21,227 using the below Black-Scholes assumptions.

During  the year ended June 30,  2002,  the  Company  issued  50,000  options to
purchase the Company's common stock to an outside  consultant.  The options have
an exercise  price of $.55 and expire 5 years from  issuance.  The options  were
valued at $16,649 using the Black-Scholes assumptions below.

The following table presents the activity for options outstanding:

                                                                       Weighted
                                                                        Average
                                                       Stock           Exercise
                                                      Options            Price
                                                    -----------      -----------

Outstanding - June 30, 2000...............            4,050,000      $      3.68
      Granted.............................                  --               --
      Forfeited/canceled..................                  --               --
      Exercised...........................                  --               --
                                                    -----------      -----------

Outstanding - June 30, 2001...............            4,050,000             3.68
      Granted.............................               80,000             0.50
      Forfeited/canceled..................           (3,050,000)            3.68
      Exercised...........................                   --              --
                                                    -----------      -----------

Outstanding - June 30, 2002...............            1,080,000      $      3.44
                                                    ===========      ===========

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

                           Options Outstanding                 Options   Exercisable
Range of Exercise Prices   Number      Price*       Life*       Number     Price*
- ------------------------  ---------- ----------- ----------- ----------- -----------
         $ 0.55               50,000                    5.00      50,000
         $ 0.46            1,000,000                    2.16   1,000,000
         $ 0.41               30,000                    5.00      30,000
                          ----------             ----------- -----------

Total - June 30, 2002      1,080,000 $      3.44          -    1,080,000 $      3.44
                          ========== =========== =========== =========== ===========


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

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  option 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 Ended
                                                              June 30,
                                                    ----------------------------
                                                        2002             2001
                                                    -----------      -----------

Net loss - as reported ...................         $   (388,776)     $(2,602,407)
Net loss - pro forma .....................         $   (426,652)     $(2,602,407)

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 ...............                   4.00%
Average expected life ....................                  5 years
Dividend yield ...........................                    0%
Volatility ...............................                   113%
Estimated fair value of total options
 granted .................................                  $37,876

Warrants

During the year ended June 30,  2002,  the  Company  granted  outside  investors
600,000  warrants to purchase the Company's common stock in conjunction with the
purchase of 750,000 shares of common stock.  The warrants have an exercise price
of $1 and  100,000 of the  warrants  expire in 2 years and  500,000  expire in 4
years.

The following table presents the activity for warrants outstanding:

                                                                       Weighted
                                                                       Average
                                                     Number of         Exercise
                                                      Warrants          Price
                                                    -----------      -----------

Outstanding - June 30, 2000 ..............                  --       $       --
      Issued .............................                  --               --
      Forfeited/canceled .................                  --               --
      Exercised ..........................                  --               --
                                                    -----------      -----------

Outstanding - June 30, 2001 ..............                  --               --
      Issued .............................              600,000             1.00
      Forfeited/canceled .................                  --               --
      Exercised ..........................                  --               --
                                                    -----------      -----------

Outstanding - June 30, 2002 ..............              600,000      $      1.00
                                                    ===========      ===========

All of the  outstanding  warrants are  exercisable  and have a weighted  average
remaining contractual life of 3.66


Note 8 - Commitments and Contingencies

Operating Leases

The Company leases office space under operating lease  agreements.  Rent expense
for these leases was approximately $197,000.

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

Year Ending June 30,
- --------------------
      2003 ...............................          $   129,000
      2004 ...............................                3,000
      2005 ...............................                1,000
                                                    -----------

                                                    $   133,000
                                                    ===========
























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

      None.

                                    PART III

     The information required by Items 9 through 12 is incorporated by reference
to our 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  information  statement  with the  Securities  and
Exchange Commission on or before October 28, 2002.


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

                         Exhibits and Index of Exhibits.

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

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

      10.1                    Employment Agreement dated August 1, 2000, between
                              Cognigen Networks, Inc. and Jimmy L. Boswell.
                              (incorporated by reference to Exhibit 10.1 to our
                              Annual Report on Form 10-KSB for the year ended
                              June 30, 2000).

      10.2                    Employment Agreement dated August 1, 2000, between
                              Cognigen Networks, Inc. and David G. Lucas.
                              (incorporated by reference to Exhibit 10.2 to our
                              Annual Report on Form 10-KSB for the year ended
                              June 30, 2000).

      10.3                    Employment Agreement dated October 5, 1999, between
                              Cognigen Networks, Inc. and Darrell H. Hughes.
                              (incorporated by reference to Exhibit 10.3 to our
                              Annual Report on Form 10-KSB for the year ended
                              June 30, 2000).

      10.4                    Option to Sell Accounts Agreement dated October 6,
                              2000, between Cognigen Networks, Inc. and JVTEL.
                              (incorporated by reference to Exhibit 10.4 to our
                              Annual Report on Form 10-KSB for the year ended
                              June 30, 2000).

      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                    Promissory Note dated March 31, 2001 in the amount
                              of $85,803.00 from JVTEL to Cognigen Networks, Inc.
                              (incorporated by reference to Exhibit 10.9 to our
                              Annual Report on Form 10-KSB for the year ended
                              June 30, 2001).

      10.8                    Stock Redemption Agreement dated November 30, 2001
                              between Cognigen Networks, Inc., 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).

      10.9                    Training Services Framework Agreement dated May 17,
                              2002, between Cognigen Networks, Inc. and e-Max
                              Direct LLC (incorporated by reference to Exhibit
                              10.1 to our Current Report on Form 8-K dated August
                              20, 2002).

      10.10                   Transitional  Supplemental  Consulting  Engagement
                              letter dated July  11,  2002,   between   Cognigen
                              Networks,  Inc. and Kevin E. Anderson  Consulting,
                              Inc.

      10.11                   Letter  Agreement dated April 19,  2002,   between
                              Cognigen Networks, Inc. and Troy D. Carl.

      10.12                   Amendment   dated   July  29,  2002 to  Employment
                              Agreement  dated  August 1, 2000, between Cognigen
                              Networks, Inc. and Jimmy L. Boswell.

      10.13                   Amendment   dated   July  29, 2002  to  Employment
                              Agreement  dated August 1,  2000, between Cognigen
                              Networks, Inc. and David G. Lucas.

      10.14                   Amendment dated  July  29,   2002  to   Employment
                              Agreement  dated August 1,  2000, between Cognigen
                              Networks, Inc. and Darrell H. Hughes.

      10.15                   Employment Agreement dated August 1, 2002, between
                              Cognigen Networks, Inc. and David L. Jackson

      21                      Subsidiaries (incorporated by reference to Exhibit
                              21 to our Annual Report on Form10-KSB for the year
                              ended June 30, 2001).

      99.1                    Certification required  by  Section   906  of  the
                              Sarbanes-Oxley Act of 2002.

      99.2                    Certification  required by  Section   906  of  the
                              Sarbanes-Oxley Act of 2002.

                              Reports on Form 8-K.

     There  were no  Current  Reports  on Form 8-K filed by us  during  the last
quarter of the period covered by this report.


Item 14. Controls and Procedures

     There have been no changes in our  internal  controls  or in other  factors
that could  significantly  affect these controls subsequent to the date of their
evaluation,   including  any  corrective  actions  with  regard  to  significant
deficiencies and material weaknesses.




                                   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 17, 2002

                                    COGNIGEN NETWORKS, INC.


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


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

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


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


/s/   Jimmy L. Boswell              Director         September 17, 2002
- ----------------------------
Jimmy L. Boswell

/s/   Darrell H. Hughes             Director         September 17, 2002
- ----------------------------
Darrell H. Hughes

/s/ David L. Jackson                Director         September 17, 2002
- ----------------------------
David L. Jackson

/s/   David G. Lucas                Director         September 17, 2002
- ----------------------------
David G. Lucas

                                    Director
- ----------------------------
Christopher R. Seelbach







                                  CERTIFICATION



      I, Darrell H. Hughes, certify that:

     1. I have reviewed this annual report on Form 10-KSB of Cognigen  Networks,
Inc.;

     2. Based on my  knowledge,  this annual  report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report; and

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report.

Date: September 17, 2002.


/s/ Darrell H. Hughes
- ------------------------------------
Darrell H. Hughes
Chief Executive Officer







                                  CERTIFICATION



      I, David G. Lucas, certify that:

     1. I have reviewed this annual report on Form 10-KSB of Cognigen  Networks,
Inc.;

     2. Based on my  knowledge,  this annual  report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report; and

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report.

Date: September 17, 2002.


/s/ David G. Lucas
- ------------------------------------
David G. Lucas
Chief Financial Officer


                            Exhibit Index

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

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

      10.1                    Employment Agreement dated August 1, 2000, between
                              Cognigen Networks, Inc. and Jimmy L. Boswell.
                              (incorporated by reference to Exhibit 10.1 to our
                              Annual Report on Form 10-KSB for the year ended
                              June 30, 2000).

      10.2                    Employment Agreement dated August 1, 2000, between
                              Cognigen Networks, Inc. and David G. Lucas.
                              (incorporated by reference to Exhibit 10.2 to our
                              Annual Report on Form 10-KSB for the year ended
                              June 30, 2000).

      10.3                    Employment Agreement dated October 5, 1999, between
                              Cognigen Networks, Inc. and Darrell H. Hughes.
                              (incorporated by reference to Exhibit 10.3 to our
                              Annual Report on Form 10-KSB for the year ended
                              June 30, 2000).

      10.4                    Option to Sell Accounts Agreement dated October 6,
                              2000, between Cognigen Networks, Inc. and JVTEL.
                              (incorporated by reference to Exhibit 10.4 to our
                              Annual Report on Form 10-KSB for the year ended
                              June 30, 2000).

      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                    Promissory Note dated March 31, 2001 in the amount
                              of $85,803.00 from JVTEL to Cognigen Networks, Inc.
                              (incorporated by reference to Exhibit 10.9 to our
                              Annual Report on Form 10-KSB for the year ended
                              June 30, 2001).

      10.8                    Stock Redemption Agreement dated November 30, 2001
                              between Cognigen Networks, Inc., 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).

      10.9                    Training Services Framework Agreement dated May 17,
                              2002, between Cognigen Networks, Inc. and e-Max
                              Direct LLC (incorporated by reference to Exhibit
                              10.1 to our Current Report on Form 8-K dated August
                              20, 2002).

      10.10                   Transitional  Supplemental  Consulting  Engagement
                              letter dated July  11,  2002,   between   Cognigen
                              Networks,  Inc. and Kevin E. Anderson  Consulting,
                              Inc.

      10.11                   Letter  Agreement dated April 19,  2002,   between
                              Cognigen Networks, Inc. and Troy D. Carl.

      10.12                   Amendment   dated   July  29,  2002 to  Employment
                              Agreement  dated  August 1, 2000, between Cognigen
                              Networks, Inc. and Jimmy L. Boswell.

      10.13                   Amendment   dated   July  29, 2002  to  Employment
                              Agreement  dated August 1,  2000, between Cognigen
                              Networks, Inc. and David G. Lucas.

      10.14                   Amendment dated  July  29,   2002  to   Employment
                              Agreement  dated August 1,  2000, between Cognigen
                              Networks, Inc. and Darrell H. Hughes.

      10.15                   Employment Agreement dated August 1, 2002, between
                              Cognigen Networks, Inc. and David L. Jackson

      21                      Subsidiaries (incorporated by reference to Exhibit
                              21 to our Annual Report on Form10-KSB for the year
                              ended June 30, 2001).

      99.1                    Certification required  by  Section   906  of  the
                              Sarbanes-Oxley Act of 2002.

      99.2                    Certification  required by  Section   906  of  the
                              Sarbanes-Oxley Act of 2002.

EX-10.10

                                                                   Exhibit 10.10


                                                Cognigen Networks Inc.
                                                7001 Seaview Avenue N.W.
                                                Suite #210
                                                Seattle, Washington 98117


                  Transition Supplemental Consulting Engagement

To:         Kevin Anderson
From:       Darrell Hughes
Ref:        Expanded Support
Date:       July 11, 2002
cc:         David G. Lucas

Dear Kevin:

Based on our  conversation  of  today,  Cognigen  acknowledges  the need for and
requests  your  support  between  today and  December  31,  2002 in the areas of
expanded consulting and  technical/administrative  services.  The services to be
performed and supported by you include but may not be specifically limited to:

1)   Dealing with spam-related issues.

2)   Administrating  other  agent   termination/resignation   and  reinstatement
     issues.

3)   Authoring, sending and administrating Agent Support Newsletters.

4)   Participating  in website issues  relating to server  performance,  product
     launch, truth in advertising, spelling, grammar, etc.

5)   Dealing with web competitive/copyright infringement issues.

6)   Ameliorating server related emergencies (7x24)

7)   Advising Bill Beason on commission related issues.

8)   Answering calls and emails from Ned, Keith and DJ on tactical issues.

9)   Participating in company and product development conference calls

10)  Directly  correcting  website  problems  reported to me by agents (rate and
     other discrepancies).

For your support in these areas, Cognigen will pay you a fee of $40,000 covering
your time through December 31, 2002.  Cognigen  acknowledges that this agreement
represents a substantial discount from the hourly rate specified in the existing
and  ongoing  consulting   agreement  between  Cognigen  and  Kevin  E  Anderson
Consulting; which agreement remains in effect and covers the first 20 consulting
hours of each month and that all accounts owed to Kevin  Anderson are current as
of the date of this  agreement.  It is  understood  that  Cognigen's  expense is
limited to $40,000 for these  additional  hours  beyond 20 per month,  with your
assurance and agreement that these services are performed on a best effort basis
to satisfy the needs of Cognigen

An up-front  payment of $12,000 will be made with the  remaining  payments  made
over the remainder of the agreement period.

Schedule of payments of $5,600 on the 15th of each month  commencing  August and
continuing through December, 2002 for a total payout of $40,000.

Existing and continued workload transition activity is intended to bring the need
for your additional support to a close by December 31, 2002.  Your support in
identifying areas that require attention so as to reach that result are required
and will be reviewed by Darrell Hughes with you at each months end; with the goal
of reducing your consulting time to 20 hours per month by January 1, 2003; such
20 monthly hours to be covered by the $1000 per month consulting agreement
already in place between Cognigen and Kevin E Anderson Consulting Inc.

By                                        Agreed to by:

Darrell H. Hughes                           Kevin E. Anderson
President & CEO                             For Kevin E Anderson Consulting, Inc.
Cognigen Networks Inc                       Consultant

Darrell H. Hughes                           Kevin E. Anderson
Date: July 11, 2002                         Date: July 11, 2002

EX-10.11

                                                                   Exhibit 10.11

                                                          Cognigen Networks Inc.
                                                          7001 Seaview Avenue NW
                                                                       Suite 210
                                                               Seattle, WA 98117
                                                               206-297-6151 main
                                                                206-297-6161 fax
                                                                WWW.COGNIGEN.COM

April 19, 2002


Mr. Troy D. Carl
7312 Don Diego Street NE
Albuquerque, NM 87109

     Re: Terms of Termination of Employment and Terms of Consulting Arrangement

Dear Troy:

I know I speak for all of us at Cognigen  Networks,  Inc. We appreciate you, all
of your efforts and the results from those  efforts  during your  employment  as
Vice  President of Marketing and as a Director of Cognigen.  We join you in your
excitement about eMaxDirect. I'm sure your contributions through eMaxDirect will
prove to be valuable to Cognigen and its agents.  Even though you have  resigned
your  employment  as  an  officer  and  director  of  Cognigen,  this  is  not a
termination of your  relationship  with Cognigen.  We are grateful that you have
agreed to continue your  association  with Cognigen over the next twelve months.
As we  discussed  and,  if needed,  Cognigen  might  retain  you for  consulting
services and product review after the twelve-month period is up. However,  there
is no commitment by either Cognigen or you in this regard.

These changes of status,  titles, roles and  responsibilities  involve your move
from  a  position  of a  full-time  Cognigen  employee  to  one  of  independent
contractor  to  Cognigen.  In view of this  transition,  the  Cognigen  Board of
Directors has approved of the following elements of our negotiated Agreement.

Agreements of Cognigen Networks Inc:

     $10,000 was  delivered by Cognigen to and accepted by Troy D. Carl on April
     19, 2002. An additional $15,000 will be delivered to you by May 20, 2002.

     Deliver 100,000 shares of Cognigen  restricted stock to Troy D. Carl within
     thirty  (30)  days for  which  you  will be  responsible  to pay any  taxes
     associated  therewith.  Under separate cover you will receive an investment
     letter that you will be required to sign before the 100,000 shares of stock
     will be delivered to you.  (The 50,000  shares of Cognigen  stock that were
     issued to you on September 24, 2001, continue to be "restricted securities"
     as  defined  in Rule  144.  The Rule  144  restriction  explanation  in the
     investment letter applies to the 50,000 shares, also.)

     In addition, the 50,000 shares option that was granted pursuant to the 2001
     Incentive and  Nonstatutory  Stock Option Plan terminates  thirty (30) days
     after your resignation. Therefore, you have thirty (30) days from April 19,
     2002, in which to exercise that option at the price of sixty-four cents per
     share.

     Concurrent  with the delivery of the 100,000 shares stated above,  Cognigen
     will  deliver  to Troy D.  Carl a  nonqualified  five  (5) year  option  to
     purchase 50,000 shares of Cognigen  restricted  common stock at an exercise
     price equal to the current market value of fifty-five cents per share as of
     April 19, 2002, the date of grant.

     For  you  providing   consulting   services,   product  review  and  vendor
     negotiation to Cognigen,  Troy D. Carl will be compensated by a combination
     of (1) your independent agency  commissions from "personal sales,  downline
     overrides and MLM bonuses";  and (2) consultancy fees. The total of (1) and
     (2), of this paragraph, for each 30 days during the period ending April 30,
     2003,  shall not exceed $18,000 for each 30-day period,  but no consultancy
     amount shall exceed  $8,000 per month.  For  example,  as your  independent
     agency  commission  income  increases,  the consultancy fees will decrease,
     proportionately.  Compensation  paid by  Cognigen  shall be reported on IRS
     Form 1099. No  consultancy  fee  compensation  shall be payable by Cognigen
     hereunder upon your death or disability.

     The  health  insurance  coverage  you had as a  Cognigen  employee  will be
     continued and be paid by Cognigen until April 30, 2003, in your capacity as
     a Cognigen consultant.

     Ownership of the desktop and laptop  computers  currently being used by you
     in support of Cognigen agents and programs, is hereby transferred to you.

     The current Albuquerque office and administrative  support will be paid for
     by Cognigen until October 31, 2002. Any extension  beyond that time will be
     at the sole discretion of Cognigen.

Agreements of Troy D. Carl:

     Resignation  tendered as an employee and as Vice President of Marketing and
     as a Director of Cognigen was accepted on April 19, 2002, concurrently with
     the delivery of the initial $10,000 payment.  Under separate cover Cognigen
     has  prepared a formal  resignation  for you to sign to be  attached to the
     minutes of Board of Directors' meeting that approved this Agreement.

     Provide not less than twenty (20) hours per month of consulting and related
     agent sales advisory  services to Cognigen at such times as selected by the
     CEO of Cognigen.

     Provide  consultancy as a  participating  member of product review with the
     CEO of Cognigen and other members of the Cognigen management team.

     Provide the daily administrative review of the Cognigen agent sales support
     activity through the Albuquerque office.

     As an independent  contractor,  be responsible  for all taxes and reporting
     requirements for all income received by you from Cognigen.

     Acknowledge and agree that all prior agreements,  including but not limited
     to the terms set forth in the letter dated  September  4, 1999,  from Kevin
     Anderson  to  you,  relating  to  your  employment  with  Cognigen  or  its
     affiliates are terminated effective April 19, 2002.

ACCEPTED and APPROVED, dated this 19th day of April, 2002, by:

Cognigen Networks, Inc.

/s/Darrell H. Hughes                   /s/ Troy D. Carl
- ------------------------               ---------------------------
Darrell H. Hughes, CEO and President   Troy D. Carl, individually

EX-10.12

                                                                   Exhibit 10.12


                              EMPLOYMENT AGREEMENT
                                    AMENDMENT



     THE EMPLOYMENT  AGREEMENT,  entered into on August 1, 2000, that terminates
on July 31, 2002, by and between Cognigen Networks, Inc., a Colorado corporation
(the  "Company"),  and Jimmy L. Boswell (the  "Employee")  is hereby  amended  and
modified as follows:  (a) the term thereof to extend from August 1, 2002, to and
shall  terminate  on January 31, 2003;  and (b)  effective  August 1, 2002,  the
compensation  thereof  to  increase  to  Sixty  Thousand and Forty-Eight Dollars
($60,048.00) for the six-month term ending January 31, 2003. All other terms and
conditions of the Agreement remain unchanged.

      The parties accept and execute this Agreement, dated July 29, 2002:


                                               COGNIGEN NETWORKS, INC.




                                                By:  /s/ Darrell H. Hughes
                                                --------------------------
                                                Darrell H. Hughes, Chief
                                                 Executive Officer and President

                                                EMPLOYEE:


                                                 /s/ Jimmy L. Boswell
                                                --------------------------
                                                Jimmy L. Boswell





Attested to by:


/s/ David L. Jackson
- --------------------
David L. Jackson, Corporate Secretary

EX-10.13

                                                                   Exhibit 10.13


                              EMPLOYMENT AGREEMENT


                                    AMENDMENT



     THE EMPLOYMENT  AGREEMENT,  entered into on August 1, 2000, that terminates
on July 31, 2002, by and between Cognigen Networks, Inc., a Colorado corporation
(the  "Company"),  and David G. Lucas (the  "Employee")  is hereby  amended  and
modified as follows:  (a) the term thereof to extend from August 1, 2002, to and
shall  terminate  on January 31, 2003;  and (b)  effective  August 1, 2002,  the
compensation  thereof to increase to Sixty Thousand and Six Hundred  Seventy-Two
Dollars  ($60,672.00)  for the six-month term ending January 31, 2003. All other
terms and conditions of the Agreement remain unchanged.

      The parties accept and execute this Agreement, dated July 29, 2002:


      COGNIGEN NETWORKS, INC.                                        EMPLOYEE:


By:  /s/ Darrell H. Hughes                     /s/ David G. Lucas
     ---------------------                     ------------------
Darrell H. Hughes, Chief Executive Officer     David G. Lucas
 and President



Attested to by:


/s/ David L. Jackson
- --------------------
David L. Jackson, Corporate Secretary

EX-10.14

                                                                   Exhibit 10.14





                              EMPLOYMENT AGREEMENT


                                    AMENDMENT



     THE EMPLOYMENT AGREEMENT,  entered into on October 5, 1999, that terminates
on  October  15,  2002,  by and  between  Cognigen  Networks,  Inc.,  a Colorado
corporation  (the  "Company"),  and Darrell H. Hughes (the "Employee") is hereby
amended and modified as follows: (a) the term thereof to extend from October 16,
2002 to and shall  terminate on January 31, 2003;  and (b)  effective  August 1,
2002,  the  compensation  thereof to increase to  Sixty-Eight  Thousand and Four
Hundred Fifty Dollars  ($68,450.00)  for the six-month  term ending  January 31,
2003. All other terms and conditions of the Agreement remain unchanged.

     The parties accept and execute this Agreement, dated July 29, 2002:


COGNIGEN NETWORKS, INC.                   EMPLOYEE:


By:  /s/ Jimmy L. Boswell                 /s/ Darrell H. Hughes
   ---------------------------            --------------------------
Jimmy L. Boswell, Chief Operating Officer  Darrell H. Hughes
 and President


Attested to by:


/s/ David L. Jackson
- ----------------------------------
David L. Jackson, Corporate Secretary

EX-10.15

                                                                   Exhibit 10.15


                              EMPLOYMENT AGREEMENT



     THIS EMPLOYMENT  AGREEMENT (the "Agreement"),  is entered into this 1st day
of August, 2002, by and between Cognigen Networks,  Inc., a Colorado corporation
(the  "Company"),  and David L. Jackson  (the  "Employee").  The Company  hereby
employs the Employee and the Employee hereby accepts employment with the Company
on the terms and conditions hereinafter set forth.

     1. Term. Subject to the provisions for termination as hereinafter  provided
in  Section  4 of this  Agreement,  the term of this  Agreement  shall  commence
effective  on August 1,  2002,  and shall  terminate  on January  31,  2003 (the
"Term").

     2. Nature of Employment.  The Company hereby employs the Employee as stated
in Schedule A, Description of Duties and Compensation, to perform such duties as
stated or as may be directed by the Chief Executive Officer of the Company.  The
Employee accepts such employment,  and agrees to abide by the provisions of this
Agreement and agrees to devote his full time and best efforts to his  employment
under this Agreement as is reasonably  required.  Notwithstanding the foregoing,
the Employee may carry on outside activities so long as those activities neither
conflict nor compete with the  Employee's  job  responsibilities  and  corporate
duties. The Employee shall at all times,  faithfully,  with due diligence and to
the best of the  Employee's  ability,  experience  and  talent,  perform all the
duties hereunder.

     3. Compensation, Vacations and Expenses


          a. Salary.  The Company  shall pay to the Employee an annual salary as
     stated in Schedule A,  Description of Duties and  Compensation,  during the
     Term (the "Base  Salary").  The Employee's  Base Salary may be increased as
     determined by the Board of Directors of the Company through an amendment to
     this Agreement.  The Base Salary shall be payable in 24 equal  installments
     and shall have  deducted  therefrom all required  withholdings  and amounts
     requested in writing by the Employee

          b. Bonuses.  Any bonuses to the Employee will be set at the discretion
     of the Board of  Directors  of the  Company.  Nothing  shall  obligate  the
     Company, in the future, to pay any bonus or bonuses to the Employee.

          c. Vacations and Fringe Benefits. The Employee shall be entitled to an
     annual  vacation  of three (3) weeks,  during  which time  Employee's  Base
     Salary shall be paid when due. The  Employee  shall  further be entitled to
     participate in and receive the benefits provided under any employee benefit
     program  which may be adopted and  maintained  by the Company and for which
     the Employee is eligible by virtue of Employee's employment hereunder,  but
     only as and to the extent the  Employee  would  otherwise  be  eligible  as
     provided in any said program.

     4. Termination of Agreement.

          a. Termination by Employee.  The Employee may terminate this Agreement
     with Cause (as  defined in this  Section  4.a.)  immediately  upon  written
     notice of such termination to the Company.  The Employee may also terminate
     this  Agreement  without  Cause upon 120 days prior  written  notice to the
     Company.  (In the event of change of control1 of the Company has transpired
     after the date of execution of this Agreement, in the alternative, Employee
     may  terminate  this  Agreement  without  Cause upon 30 days prior  written
     notice to the  Company.)  In such event,  the  Employee  shall  continue to
     render the services  required under this Agreement and shall be paid on the
     regular  payment  dates the Base  Salary set forth in Section 3.a up to the
     date of  termination.  The Company  shall have the option,  in its complete
     discretion,  to make the termination of the Employee's employment effective
     at any time  prior to the end of the  above  notice  period,  provided  the
     Company pays the Employee all  compensation  due and owing through the last
     day he actually worked and through the balance of the notice period (not to
     exceed 120 days). For purposes of this Section 4.a., the term "Cause" shall
     be  defined  as any  willful  or  permanent  breach by the  Company  of its
     obligations  to the Employee as an employee of the Company,  as provided in
     California Labor Code section 2925; provided,  however, the Cause shall not
     be deemed to exist  unless the  Company  fails to cure any such  willful or
     permanent breach within five (5) days' written notice of such breach by the
     Employee.

          b.  Termination  by  the  Company.  The  Company  may  terminate  this
     Agreement  for Cause (as defined in this  Section  4.b.)  immediately  upon
     written notice of such  termination to the Employee and upon payment by the
     Company to the Employee of all Base Salary and any bonus accrued under this
     Agreement to the date of  termination.  For purposes of this Section  4.b.,
     "Cause" shall be deemed to exist under the following circumstances: (a) the
     Employee  materially  fails or refuses to observe  the  provisions  of this
     Agreement;  (b) the Employee is not  satisfactorily  performing  any of his
     duties  required  under this  Agreement,  as  determined  in the  Company's
     reasonable  discretion;  (c) the  Employee  perpetrates  an act of fraud or
     misappropria-tion, or embezzles funds; or (d) the Employee is convicted of,
     or pleads nolo contendere to, any crime  punishable as a felony.  Provided,
     however, that "Cause" shall not be deemed to exist under either item (a) or
     (b) in the foregoing  sentence  unless the Employee is first given five (5)
     days'  written  notice  by  the  Company  of  such  failure,   refusal,  or
     performance deficiency,  and if the Employee does not correct such failure,
     refusal,  or  performance  deficiency  to the  satisfaction  of the Company
     within  five (5) days  after the giving of such  notice.  In the event of a
     termination of the Employee's  employment for Cause, the Company shall have
     no further  obligation  to the Employee  other than to pay any and all Base
     Salary and any bonus then due the  Employee.  However,  termination  of the
     Employee's  employment  for Cause shall not  terminate  or  extinguish  the
     Employee's  obligation  or  liability  to pay to the  Company or any of its
     affiliates  any amount  owed to them by the  Employee  (including,  but not
     limited to, any amounts misappropriated, embezzled or otherwise obtained by
     the  Employee  by  reason  of any of the  occurrences  referred  to in this
     Section  4.b.),  and shall be  without  prejudice  to any  other  rights or
     remedies of the Company or its affiliates at law or in equity.

          The Company may also  terminate  this  Agreement  immediately  without
     Cause (as defined in this Section 4.b.).  In such event,  the Company shall
     continue to pay the Employee on the regular  payment  dates the Base Salary
     set forth in Section 3.a hereof and shall pay Employee any accrued  bonuses
     as they  become due. In the event the  Company  terminates  this  Agreement
     without Cause, the amount of Base Salary and accrued bonuses payable by the
     Company shall be reduced by the gross amount of any  compensation  that the
     Employee  receives  from any other source  after the date of the  Company's
     termination of this Agreement  without cause. In no event shall the Company
     be  required  to pay  the  Employee  any  Base  Salary,  bonuses  or  other
     compensation after the end of the Term.

          c.   Termination   Upon  Death  of  Employee.   This  Agreement  shall
     automatically terminate in the event of the Employee's death. In such case,
     any accrued Base Salary and bonus shall inure to the estate of the Employee
     and the payment  thereof shall be the only liability the Company shall have
     to the Employee's estate.

     5. Employee Actions.

          a. Employee Shall Not Disclose  Information.  The Employee  recognizes
     and acknowledges that the list of the customers,  as it may exist from time
     to time, of the Company  (which for purposes of this Section 5 includes the
     Company's  subsidiaries  and  affiliates)  and  any  other  proprietary  or
     confidential   information,   including,   but  not  limited  to  financial
     information and information pertaining to the software, marketing and sales
     operations,   product   pricing,   financing   operations   and   potential
     acquisitions (hereinafter "Confidential Information"),  used by the Company
     in its business are valuable and unique assets of the Company. The Employee
     further agrees and acknowledges that the Confidential  Information  derives
     actual or potential  economic value from not being  generally  known to the
     public  or to  other  persons  who  can  obtain  economic  value  from  its
     disclosure and use. Except as permitted by the next sentence,  the Employee
     will  not  during  the  Term or for a  period  of one (1)  year  after  the
     termination of his employment with the Company,  disclose any  Confidential
     Information to any person, firm,  corporation,  association or other entity
     for any reason or purpose  whatsoever  without the prior written consent or
     authorization of the board of directors of the Company. Notwithstanding the
     prohibitions  contained in the foregoing  sentence,  the Employee  shall be
     permitted to disclose such  information  during the term of his  employment
     with the Company to other  persons  employed by the Company who have a need
     to know such  information  for a proper purpose  related to the business of
     the Company.  Upon termination of the Employee's employment by the Company,
     the  Employee  shall  neither take nor retain any papers,  customer  lists,
     manuals,  files or other  documents  or  copies  thereof  belonging  to the
     Company.  To the extent any items of  Confidential  Information  constitute
     trade   secrets   under   California   law,   Employee's   obligations   of
     confidentiality  and  nondisclosure  shall  continue to survive  after said
     one-year period to the greatest  extent  permitted by applicable law. These
     rights of the  Company  are in  addition to those the Company has under the
     common law or applicable statutes for the protection of trade secrets.

          b.  Non-Compete.  The Employee  hereby  covenants  and agrees that the
     Employee  will not,  without  the prior  written  consent  of the  Company,
     directly or indirectly by assisting others, whether individually or through
     any entity controlled by the Employee,  during the Term and for a period of
     one (1) year after the  termination of the Employee's  employment  with the
     Company for any reason (the  "Restrictive  Period"),  occupy a "Competitive
     Position"  with any person,  firm  corporation  or business  engaged in the
     distribution  of products and services using an  Internet-based  medium.  A
     "Competitive  Position" means a position wherein  Employee  performs or has
     responsibility for duties that are the same as or substantially  similar to
     all or part of those duties  actually  performed by Employee while employed
     by the Company.

          c.  Non-Solicitation  of  Company  Employees  or  Agents.  During  the
     Employee's  employment  with the Company  and for one (1) year  thereafter,
     Employee shall not solicit, either directly or indirectly, or in any manner
     encourage  employees  or agents of the  Company  to leave the employ of the
     Company or no longer be agents of the Company.

          d.  Non-Solicitation  of  Company  Customers.  During  the  Employee's
     employment with the Company and for one (1) year immediately  following the
     termination  of  Employee's  employment  with the  Company  for any reason,
     Employee  shall not, on  Employee's  own behalf or on behalf of any person,
     partnership,  association,  corporation or business organization, entity or
     enterprise (except the Company), solicit any customer of the Company or any
     representative of any such customer with a view to selling or providing any
     product,  equipment or service competitive or potentially  competitive with
     any product,  equipment  or service sold or provided by the Company  during
     the one (1) year period  immediately  preceding  termination  of Employee's
     employment with the Company.

          e. Intellectual  Property.  The Employee shall disclose to the Company
     all ideas and business plans  developed by the Employee  during the term of
     the  Employee's  employment  with the Company  which relate to the business
     conducted  by  the  Company.  All  patents,  patent  applications,   patent
     licenses,  formulas,   inventions,   improvements,   designs,  discoveries,
     processes, software, copyrights, know-how, proprietary information, rights,
     trademarks  or trade  names or future  improvements  thereto  developed  or
     conceived  of by the  Employee  during  any period of  employment  with the
     Company shall be promptly disclosed to, and all rights with respect thereto
     shall be assigned by the Employee to, the Company in  consideration  of the
     remuneration  paid or  payable  to the  Employee  hereunder  and  shall  be
     considered  work made for hire for the Company  within the meaning of Title
     17 of the United States Code. The Employee  acknowledges that "software" as
     used in this  Section  5.e shall  include  without  limitation  all  ideas,
     concepts,  know-how,  methods,  techniques,   structures,  information  and
     materials  relating to the software  including source code, object and load
     modules, requirements specifications,  design specifications, design notes,
     flow  charts,   decoding  sheets,   annotations,   documentation   and  the
     structures,  organization, sequence, designs, formulas and algorithms which
     reside in the software and which are not  generally  known to the public or
     within the industries or trades in which the Company competes.  The parties
     understand  and agree that the  provisions  of this Section 5.e.  requiring
     assignment of inventions to the Company do not apply to any invention  that
     qualifies fully under the provisions of California  Labor Code section 2870
     (attached  hereto as Exhibit  B). The  Employee  shall  advise the  Company
     promptly  in writing of any  inventions  that  Employee  believes  meet the
     criteria in California Labor Code section 2870.


          f.  Remedies.  The Employee  acknowledges  and agrees that  Employee's
     obligations  provided in this Section 5 are  necessary  and  reasonable  in
     order to protect the Company and its business  and the  Employee  expressly
     agrees that monetary  damages would be inadequate to compensate the Company
     for any breach by Employee of Employee's covenants and agreements set forth
     herein.  Accordingly,  Employee  agrees  and  acknowledges  that  any  such
     violation or threatened  violation of this Section 5 will cause irreparable
     injury to the Company and that, in addition to any other  remedies that may
     be available,  in law, in equity or otherwise,  the Company may be entitled
     to obtain injunctive relief against the prospective  breach of this Section
     5 or the  continuation  of any such  breach  by the  Employee  without  the
     necessity of proving actual damages.

          g.  Construction.  In the event that any  provision  of this Section 5
     should ever be deemed to exceed the time, geographic,  or other limitations
     permitted by applicable  law, then such provision  shall be reformed to the
     maximum time, geographic, or other limitations permitted by applicable law.
     The  provisions  of this  Section  5 shall  be  applicable  for the  period
     indicated and shall survive the termination of this Agreement.

          h. Relocation. Under no circumstances,  throughout the Term, shall the
     Employee be required  to  relocate  in order to  maintain  his  position of
     employment  with the  Company.  This  covenant of the Company is a material
     element of the Employee's willingness to enter into this Agreement.

     6. General Matters.

          a. Governing Law. This Agreement  shall be governed by the laws of the
     State of California and shall be construed in accordance therewith.

          b. No Waiver.  No provision of this  Agreement may be waived except by
     an Agreement in writing  signed by the waiving  party. A waiver of any term
     or  provision  shall not be  construed  as a waiver  of any  other  term or
     provision.

          c. Amendment.  This Agreement may only be amended or altered, in whole
     or in part, by a written instrument  setting forth such changes,  signed by
     all parties

          d. Binding Effect.  This Agreement shall be binding upon the Employee,
     the Company and their successors and assigns.

          e. Construction.  Throughout this Agreement the singular shall include
     the plural,  the plural shall include the singular and the masculine  shall
     include the feminine wherever the context so requires.

          f. Text to Control.  The headings of Sections are included  solely for
     convenience of reference.  If any conflict between any heading and the text
     of this Agreement exists, the text shall control.

          g. Severability. If any provision of this Agreement is declared by any
     court  of  competent  jurisdiction  to be  invalid  for  any  reason,  such
     invalidity shall not affect the remaining provisions,  which shall be fully
     severable,  and the  Agreement  shall be construed  and enforced as if such
     invalid provision had never been included. .

          h.  Entire  Agreement  of the  Parties.  The  parties  agree that this
     document  contains the entire agreement and  understanding  between them in
     relation to the subject matter hereof and no  representations,  warranties,
     covenants,  understandings  or agreements in relation thereto exist between
     the parties except as expressly set forth herein.

          i. Notices.  Every notice or other communication to be given by either
     party to the other party with respect to this Agreement shall be in writing
     and shall not be effective for any purpose  unless the same shall be served
     personally or by national air courier  service or United  States  certified
     mail,  return receipt  requested,  postage  prepaid,  addressed,  if to the
     Company at 7001 Seaview Avenue,  NW, Suite 210, Seattle,  Washington 98117,
     Attention, Chief Executive Officer and President, and if to the Employee at
     6  Valencia  Road,  Orinda,  California  94563 or,  such  other  address or
     addresses as the Company or the Employee may from time to time designate by
     written notice given as above provided. Every notice or other communication
     hereunder  shall be deemed to have been given as of the third  business day
     following the date of such mailing (or as of any earlier date  evidenced by
     a receipt  from such  national  air  courier  service or the United  States
     Postal Service) or immediately if personally delivered. Notices not sent in
     accordance  with  the  foregoing  shall  be of no force  and  effect  until
     received by the foregoing parties as such addresses specified herein.

          j.  Duplicate  Originals.  This  Agreement  may be executed in several
     counterparts,  each of which shall be an original but all of which together
     shall constitute one and the same instrument. .

          k.  Arbitration  of Any  Dispute.  During  and  after the term of this
     Agreement, any dispute,  controversy or claim arising out of or relating to
     this  Agreement,  or the breach  thereof,  or the  employment  relationship
     between the Company and the Employee  ("Arbitral  Claims") shall be settled
     by binding arbitration in San Diego,  California,  according to the Federal
     Arbitration Act, 9 U.S.C.ss.1, et seq., inasmuch as this Agreement concerns
     transactions  involving interstate commerce.  The arbitration shall be held
     in San Diego, California,  unless otherwise agreed by the parties. Arbitral
     Claims shall include, but are not limited to, contract (express or implied)
     and tort claims of all kinds,  as well as all claims  based on any federal,
     state, or local law,  statute,  or regulation,  excepting only claims under
     applicable workers' compensation law and unemployment insurance claims. THE
     PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO
     ARBITRAL  CLAIMS.  The  arbitrator(s)  shall be selected  as  follows:  The
     parties  shall  jointly  select one  impartial  arbitrator in the event the
     dispute is less than $50,000.  In the event the parties cannot agree on one
     arbitrator within ten days, or the dispute is $50,000 or greater, then each
     party shall  select an impartial  arbitrator  within the  following  twenty
     days, and those two selected  arbitrators shall select the third arbitrator
     who will comprise a three-person  panel for  arbitration.  All  arbitration
     matters shall be held and decided in accordance with the Employment Dispute
     Resolution  Rules of the  American  Arbitration  Association  ("AAA"),  but
     without the  administration or supervision of AAA. In any arbitration,  the
     burden of proof shall be allocated as provided in  applicable  law, and the
     arbitrator shall have the authority to award or grant legal, equitable, and
     declaratory relief only to the same extent as if the case were brought in a
     civil  court.  Confirmation  and  enforcement  of the  decision  and  award
     rendered by the arbitrator or panel of arbitrators shall be binding and may
     be entered in any court having  jurisdiction  thereof for  confirmation and
     enforcement.   Notwithstanding  the  foregoing,  either  party  may  obtain
     provisional remedies to prevent a threatened breach or continued breach of,
     as permitted by California Code of Civil Procedure section 1281.8.  Each of
     the parties  hereby  submits to the  jurisdiction  of the state and federal
     courts in San Diego, California, for these purposes.

          l.  Attorneys'  Fees.  In the event that the  Company or the  Employee
     retains an attorney or attorneys to enforce  performance  of this Agreement
     by the  other  party or to  obtain  damages  or  other  relief  because  of
     violation  of the  terms of this  Agreement  by the other  party,  then all
     reasonable attorneys' fees and costs of arbitration or litigation are to be
     borne and paid by the party  determined  to have  failed  to  perform  this
     Agreement  or to be liable for  damages or against  which  other  relief is
     granted. .

          m. Survivorship.  The respective rights and obligations of the parties
     hereunder shall survive any termination of the Employee's employment to the
     extent   necessary  to  the  intended   preservation  of  such  rights  and
     obligations.

          n. Remedies Cumulative; No Waiver. No remedy conferred upon a party by
     this Agreement is intended to be exclusive of any other remedy and each and
     every such remedy shall be cumulative and shall be in addition to any other
     remedy given hereunder or now or hereafter existing at law or in equity. No
     delay or  omission  by a party in  exercising  any  right,  remedy or power
     hereunder  or existing at law or in equity  shall be  construed as a waiver
     thereof and any such right,  remedy or power may be exercised by such party
     from time to time and as often as may be deemed  expedient  or necessary by
     such party in such party's sole discretion. .

          o. Acknowledgement. Employee acknowledges that he has been represented
     by and has consulted with independent  legal counsel of his own choosing in
     regard to this Agreement,  that he has read and understands this Agreement,
     that he is fully aware of its legal effect, and that he has entered into it
     freely  and  voluntarily  and  based  on his  own  judgment  and not on any
     representations or promises other than those contained in this Agreement.

     The parties  executed  this  Agreement to be effective as of the date first
above written.

EMPLOYEE:


/s/ David L. Jackson
- ---------------------------------
David L. Jackson

COGNIGEN NETWORKS, INC.


By: /s/ Darrell H. Hughes
- ---------------------------------
Darrell H. Hughes, President and Chief Executive Officer

Attested to by:

/s/ Jimmy L. Boswell
- ---------------------------------
Jimmy L. Boswell, Chief Operating Officer





                                   SCHEDULE A

                     DESCRIPTION OF DUTIES AND COMPENSATION


EMPLOYEE:         David L. Jackson

POSITION WITH COMPANY:  Senior Vice-President Corporate and Public Affairs
                              and Corporate Secretary

COMPENSATION:

      Salary:     One Hundred  Thirty-Two  Thousand  and  Ninety-Six  Dollars
                  ($132,096.00) per  year,  payable   twice   monthly  in  equal
                  installments.

BENEFITS:

      Insurance:  health insurance plan made available
                                                      ------


      401(k) Plan:      to be determined, if any


EMPLOYEE:


/s/ David L. Jackson
- ----------------------
David L. Jackson

COGNIGEN NETWORKS, INC.


By:  /s/ Darrell H. Hughes
- ---------------------------------------------------------
Darrell H. Hughes, President and Chief Executive Officer

Attested to by:

/s/ Jimmy L. Boswell
- ------------------------------------------------------
Jimmy L. Boswell, Chief Operating Officer











                                    Exhibit B


                       CALIFORNIA LABOR CODE SECTION 2870
                INVENTION ON OWN TIME - EXEMPTION FROM AGREEMENT


     "(a) Any  provision  in an  employment  agreement  which  provides  that an
employee  shall  assign,  or offer to  assign,  any of his or her  rights  in an
invention  to his or her  employer  shall  not  apply to an  invention  that the
employee  developed entirely on his or her own time without using the employer's
equipment,  supplies,  facilities,  or trade secret information except for those
inventions that either:

          (1) Relate at the time of  conception  or reduction to practice of the
     invention to the employer's business, or actual or demonstrably anticipated
     research or development of the employer; or

          (2) Result from any work performed by the employee for the employer.

     (b) To the  extent a  provision  in an  employment  agreement  purports  to
require  an  employee  to assign an  invention  otherwise  excluded  from  being
required to be assigned  under  subdivision  (a),  the  provision is against the
public policy of this state and is unenforceable."

EX-99.1

                                                                    EXHIBIT 99.1
                            CERTIFICATION PURSUANT TO
                                18 U.S.C.ss.1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



     In  connection  with the Annual  Report of  Cognigen  Networks,  Inc.  (the
"Company")  on Form 10-KSB for the period  ended June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Darrell
H.  Hughes,  Chief  Executive  Officer of the Company,  certify,  pursuant to 18
U.S.C.  ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:

     1.   The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     2.   The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.



                                    /s/   Darrell H. Hughes
                                    -----------------------------------
                                    Darrell H. Hughes
                                    Chief Executive Officer

                                    September 17, 2002

EX-99.2

                                                                    EXHIBIT 99.2

                            CERTIFICATION PURSUANT TO
                                18 U.S.C.ss.1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



     In  connection  with the Annual  Report of  Cognigen  Networks,  Inc.  (the
"Company")  on Form 10-KSB for the period  ended June 30, 2002 as filed with the
Securities and Exchange  Commission on the date hereof (the "Report"),  I, David
G. Lucas, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
ss.1350,  as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002,
that:

     1.   The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     2.   The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.



                                    /s/   David G. Lucas
                                    -----------------------------------
                                    David G. Lucas
                                    Chief Financial Officer

                                    September 17, 2002