form_schedule14c-111204

DEF 14C 1 form_def14c-111204.htm form_schedule14c-111204

SCHEDULE 14C

Information Statement Pursuant to Section 14(c) of the Securities Exchange Act of 1934

Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|

Check the appropriate box:
|_| Preliminary Information Statement
|_| Confidential for use of the Commission Only (as permitted by Rule 14c-5(d)(2))
|X| Definitive Information Statement

COGNIGEN NETWORKS, INC.
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(Name of Registrant as Specified in its Charter)

Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which the transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
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|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.

(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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COGNIGEN NETWORKS, INC.
6405 218th Street, S.W.
Suite 305
Mountlake Terrace, Washington 98043

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on December 6, 2004

NOTICE IS HEREBY GIVEN that an Annual Meeting of Shareholders of Cognigen
Networks, Inc., a Colorado corporation, will be held at the Luxor Hotel, 3900
Las Vegas Boulevard South, Las Vegas, Nevada 89119-1000 on Monday, December 6,
2004, at 1:00 p.m., Pacific Standard Time, for the purpose of considering and
voting upon proposals to:

(1) elect directors to serve until the next Annual Meeting of Shareholders
or until their successors are elected and qualify; and

(2) transact such other business as may lawfully come before the meeting
or at any adjournment(s) of the meeting.

Only shareholders of record at the close of business on November 9, 2004,
are entitled to notice of and to vote at the meeting and at any adjournment(s)
of the Meeting.

The enclosed Information Statement is submitted by and on behalf of our
Board of Directors. All shareholders are cordially invited to attend the meeting
in person.

We are not asking you for a proxy and you are requested not to send us a proxy

BY ORDER OF THE BOARD OF DIRECTORS

Mountlake Terrace, Washington
November 11, 2004 GARY L. COOK, SECRETARY

COGNIGEN NETWORKS, INC.
6405 218th Street, S.W.
Suite 305
Mountlake Terrace, Washington 98043

INFORMATION STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 6, 2004

This Information Statement is being furnished by the Board of Directors of
Cognigen Networks, Inc., a Colorado corporation, in connection with our Annual
Meeting of Shareholders to be held at the Luxor Hotel, 3900 Las Vegas Boulevard
South, Las Vegas, Nevada 89119-1000 on Monday, December 6, 2004, at 1:00 p.m.,
Pacific Standard Time, and at any adjournment(s) of the meeting.

This Information Statement will be mailed to the Company's shareholders on
or about November 12, 2004.

We Are Not Asking You For A Proxy
And You Are Requested Not To Send Us A Proxy.

VOTING SECURITIES

Voting rights are vested in the holders of our $0.001 par value common
stock, with each share entitled to one vote. Cumulative voting in the election
of directors is not permitted. Only shareholders of record at the close of
business on November 9, 2004, are entitled to notice of and to vote at the
meeting or any adjournments thereof. On November 9, 2004, we had 8,753,972
shares of common stock outstanding.

ACTIONS TO BE TAKEN AT MEETING

The meeting has been called by our directors to consider and act upon the
following matters:

(1) elect directors, to be nominated at the meeting, to serve until the
next Annual Meeting of Shareholders or until their successors are
elected and qualify;

(2) transact such other business as may lawfully come before the meeting
or at any adjournment(s) of the meeting.

The holders of one-third of our outstanding shares of common stock present
at the meeting shall constitute a quorum. If a quorum is present, directors are
elected by a plurality of the vote, i.e., the number of candidates nominated
from the floor at the meeting that corresponds with the number of directors to
be elected and that receive the highest number of votes cast in favor of their
election will be elected to the Board of Directors. As to all other actions
voted on at the meeting, if a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders. Where brokers have not
received any instruction from their clients on how to vote on a particular
proposal, brokers are permitted to vote on routine proposals but not on
nonroutine matters. The absence of votes on nonroutine matters are "broker
nonvotes." Abstentions and broker nonvotes will be counted as present for
purposes of establishing a quorum, but will have no effect on the election of
directors. Abstentions and broker nonvotes on proposals other than the election
of directors, if any, will be counted as present for purposes of the other
proposals and will count as votes against all other proposals.

PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS

The number of directors on our Board of Directors has been established by
resolution of the Board of Directors as seven directors. There currently are two
vacancies on the Board of Directors created by the resignation of one director
and the inability of the Board of Directors to find a suitable replacement and
another director to fill the vacancies. The terms of all the current directors
expire at the meeting.

During the meeting, nominations for director will be accepted from the
shareholders attending the meeting. The shareholders present will vote their
shares for the election of the persons for director nominated from the floor.
Unless the number is changed by resolution of the shareholders adopted at the
meeting, no more than seven of the persons nominated can be elected. The persons
elected will be the number of nominees that corresponds to the number of
directors to be elected who receive the highest number of votes. The elected
nominees will hold office until the annual meeting of shareholders to be held in
2005, until their successors are duly elected or appointed or until their
earlier death, resignation or removal.

CURRENT DIRECTORS

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

Name and Position Age Director Since
----------------- --- --------------
Gary L. Cook 46 2003
Senior Vice President, Chief
Financial Officer, Treasurer and
Director

David L. Jackson 66 1995
Director

Christopher R. Seelbach (1)(2) 65 2001
Director

James H. Shapiro (1) 66 2002
Director

Thomas S. Smith 62 2004
President, Chief Executive Officer
and Director

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

David L. Jackson has been one of our directors since February 1995, and was
our Senior Vice President of Corporate and Public Affairs or our Vice President
from August 1999 to April 2004, our Secretary from August 1999 to April 2004,
our Treasurer from August 1999 to July 2000, our President and Chairman of the
Board from 1996 to August 1999, our Vice President from 1995 to 1996 and our
President and the Chairman of the Board from 1990 to 1992. From August 1999 to
March 2002, Mr. Jackson was a director and the Secretary of Inter-American
Telecommunications Holding Corporation, the net assets of which we acquired in
August 1999. Mr. Jackson has been a licensed real estate broker in California
since 1991. Mr. Jackson graduated from Northwest Nazarene University and from
the University of Denver, College of Law. Mr. Jackson is an arbitrator in
dispute resolution of commercial and labor law. He was on the roster of
arbitrators of the Federal Mediation and Conciliation Service of the United
States Government from March 1994 to October 2002.

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

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

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

(1) Member of our Audit Committee and member of our Compensation Committee.

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

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

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

During the fiscal year ended June 30, 2004, the Board of Directors held 20
meetings. All of our current directors attended more than 75% of the aggregate
of all meetings of the Board of Directors held while they were directors. The
Board of Directors acts from time to time by unanimous written consent in lieu
of meetings. During the fiscal year ended June 30, 2004, the Board of Directors
conducted two meetings by unanimous written consent. The Board of Directors had
an Audit and Compensation Committee during the fiscal year ended June 30, 2004.
The current members of both committees are Christopher R. Seelbach and James H.
Shapiro. The Audit Committee held four meetings and the Compensation Committee
held four meetings during our fiscal year ended June 30, 2004. The current
directors who are members of each committee attended more than 75% of the
aggregate meetings of both committees. We have no requirement that current
members of our Board of Directors attend annual meetings of shareholders. At our
last annual meeting of shareholders held in October 2002, three of our
directors, who were then serving as directors, were present at the meeting.

Audit Committee

The Audit Committee of the Board of Directors is responsible for our
internal controls and the financial reports process. Messrs. Seelbach and
Shapiro are members of our Audit Committee. Both are independent directors as
defined by rules adopted by The NASDAQ Stock Market. Our independent accountants
are responsible for performing an independent audit of our consolidated
financial statements in accordance with auditing standards generally accepted in
the United States of America and issuing an independent accountants' report on
such financial statements. The Audit Committee reviews with our management our
consolidated financial statements, reviews with the independent accountants
their independent accountants' report, and reviews the activities of the
independent accountants. Our Audit Committee selects our independent accountants
each year. Our Audit Committee also considers the adequacy of our internal
controls and accounting policies.

The Audit Committee has a written Audit Committee Charter that has been
adopted by our Board of Directors and is attached hereto as Exhibit A.

Compensation Committee

The Compensation Committee of the Board of Directors reviews and approves
for recommendation to our Board of Directors the compensation for our executive
officers.

Nominating Committee

Our Board of Directors has not yet established a standing nominating
committee or committee performing similar functions. Our Board of Directors has
not considered it necessary to establish such a committee at this time due to
the fact the Board of Directors is not nominating any persons for election as
director. Our directors may consider establishing a nominating committee in the
future. At the present time, if we were to solicit proxies for the election of
directors, all of our directors would participate in the consideration of
persons nominated for election as director at an annual meeting of shareholders.

There is no charter for a nominating committee at this time and our Board
of Directors has no policy with regard to the consideration of director
candidates recommended by our shareholders. Our Board of Directors believes that
it is appropriate to consider all director candidates recommended by our
shareholders without establishing a policy that governs the recommendations.

Shareholder Communications to Directors

All communications by our shareholders to an individual director or to the
Board of Directors should be in writing and sent to us and our Board of
Directors will discuss the communication at the next meeting of the Board of
Directors.

EXECUTIVE OFFICERS

Our executive officers are Thomas S. Smith and Gary L. Cook, information
pertaining to whom is set forth under Current Directors above. Our executive
officers are elected annually at the first meeting of the Board of Directors
held after each annual meeting of shareholders. Each executive officer will hold
office until his or her successor duly is elected and qualified, until his or
her death or resignation or until he or she shall be removed in the manner
provided by our bylaws.

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

CONSULTANT

Kevin E. Anderson is not one of our executive officers but makes and is
expected to make a significant contribution to our business. Mr. Anderson, who
is 53, has been a consultant to us and our Board of Directors since August 1999
and the founder and President of Cognigen Corporation and Kevin E. Anderson
Consulting, Inc. Mr. Anderson graduated from the University of California at Los
Angeles.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

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

Based solely on a review of the Forms 3, 4 and 5 and amendments thereto
furnished to us during our fiscal year ended June 30, 2004, the persons who were
either one of our directors or officers or who beneficially owned more than 10%
of our common stock who failed to file on a timely basis reports required by
Section 16(a) of the Securities Exchange Act of 1934 were Kevin E. Anderson, the
Anderson Family Trust and Peter Tilyou, as trustee of the Anderson Family Trust,
all of whom may have failed to file their respective Forms 4 or Forms 5 during
our fiscal year ended June 30, 2004, and Stanford Venture Capital Holdings, Inc.
and Stanford Financial Group Company, Inc., which may have failed to file their
respective Forms 3, Forms 4, or Forms 5 during our fiscal year ended June 30,
2004.

EXECUTIVE COMPENSATION

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

Summary Compensation Table
--------------------------

Long Term
Compensation
Annual Compensation Awards
------------------- ------
Fiscal
Name and Year Other Securities All Other
Principal Ended Annual Underlying Compensation
Position June 30 Salary ($) Bonus ($) Comp ($) Options (#) ($)
--------------- ------- ---------- --------- -------- ----------- ------------
Thomas S. Smith 2004 $100,000 -- -- -- -- (a) 200,000 -- --
President and 2003 -- -- -- -- -- -- (a) -- -- -- --
Chief Executive 2002 -- -- -- -- -- -- (a) -- -- -- --
Officer since
December 2003

Gary L. Cook 2004 $155,785 -- -- -- -- -- -- -- --
Senior Vice 2003 $ 41,000 -- -- -- -- (e) $ 130,000 -- --
President, Chief 2002 -- -- -- -- -- -- -- -- -- --
Financial
Officer,
Secretary and
Treasurer

Darrell H. Hughes 2004 $ 36,944 -- -- $ 4,050(c) -- -- -- --
President from 2003 $153,880 -- -- $ 10,635(c) -- -- -- --
July 2000 to 2002 $125,000(b) -- -- $ 24,638(c) -- -- -- --
October 2003 and
Chief Executive
Officer from
October 1999 to
October 2003

David L. Jackson 2004 $104,576 -- -- $ 3,000(d) -- -- -- --
President and 2003 $132,096 -- -- -- -- -- -- -- --
Treasurer until 2002 $120,000(b) -- -- -- -- -- -- -- --
August 20, 1999
and Senior Vice
President of
Corporate and
Public Affairs
and Secretary
from August 20,
1997 to April 7,
2004.

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

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

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

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

OPTION INFORMATION PERTAINING TO EXECUTIVE OFFICERS

Option Grants in Last Fiscal Year

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

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

Percent of
Number of Total Options
Securities Granted to
Underlying Employees in Exercise or
Name Options Granted Fiscal Year Base Price Expiration Date
---------------- --------------- ----------- ---------- ---------------
Thomas S. Smith 200,000 95% $.23 01/26/09

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

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

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

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

Thomas S. Smith 100,000 / 0 $ 0 / $ 0 (1)

Gary L. Cook 130,000 / 0 $ 0 / $ 0 (1)

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

COMPENSATION OF DIRECTORS

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

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

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

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

EMPLOYMENT AGREEMENTS

We have no employment agreements with anyone and have no compensation plan
or arrangement for anyone.

CONSULTING AGREEMENT

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

PRINCIPAL SHAREHOLDERS AND
SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth as of November 9, 2004, the number of shares
of our outstanding common stock beneficially owned by each of our current
directors, sets forth the number of shares of our outstanding common stock
beneficially owned by all of our current executive officers and directors as a
group, and sets forth the number of shares of our outstanding common stock owned
by each person who owned of record, or was known to own beneficially, more than
five percent of the outstanding shares of our common stock:

Amount and Nature of
Name and Address Beneficial Ownership(1) Percent of Class
---------------- ----------------------- ----------------

Thomas S. Smith 400,000(2) 3.4%
9800 Mt. Pyramid Court
Suite 400
Englewood, CO 80112

Gary L. Cook 430,000(3) 4.8%
9800 Mt. Pyramid Court
Suite 400
Englewood, CO 80112

David L. Jackson 283,642 3.2%
P.O. Box
Lafayette, CA 94549

Christopher R. Seelbach 40,000(4) Less than 1%
44 Woodcrest Avenue
Short Hills, NJ 07078

James H. Shapiro 25,188(5) Less than 1%
5424 Sand Point Way, N.E.
Seattle, WA 98105

All current executive officers 1,178,830(6) 12.6%
and directors as a group (5
persons)

Cognigen Corporation 25,250(7) Less than 1%
2608 Second Avenue, Suite 555
Seattle, WA 98121

Anderson Family Trust 1,158,505(7)(8) 13.2%
2608 Second Avenue, Suite 555
Seattle, WA 98120

Kevin E. Anderson 1,158,505(7)(8) 13.2%
827 Union Pacific Blvd.
PMB 71-374
Laredo, TX 78045-9452

Peter Tilyou 1,158,505(9)(10) 13.2%
2608 Second Avenue, Suite 555
Seattle, WA 98121

Stanford Venture Capital 1,075,000(11) 11.5%
Holdings, Inc.
5050 Westheimer
Houston, TX 77056

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

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

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

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

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

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

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

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

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

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

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

Stock Option Plan

We adopted an incentive and non-statutory option plan at our Annual Meeting
of Shareholders held on March 15, 2001. The plan authorizes the granting of
options to our officers, directors, employees and consultants to purchase a
maximum of 625,000 shares of our common stock.

TRANSACTIONS WITH MANAGEMENT AND OTHERS
AND CERTAIN BUSINESS RELATIONSHIPS

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

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

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

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

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

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

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

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

Transaction with Intandem Communications Corp.

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

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

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

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

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

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

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

Sale of Cognigen Switching Technologies, Inc.

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

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

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

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

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

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

Report of the Audit Committee

The Audit Committee is responsible for overseeing the integrity of our
financial statements; our financial reporting process; our compliance with legal
and regulatory requirements; and the independent auditor's qualifications and
independence; and the performance of our internal audit function and independent
auditors. Christopher Seelbach and James H. Shapiro are the members of our Audit
Committee.

Our independent accountants are responsible for performing an independent
audit of our consolidated financial statements in accordance with auditing
standards generally accepted in the United States of America and issuing an
independent accountants' report on such financial statements. The Audit
Committee reviews with management our consolidated financial statements; reviews
with independent accountants their independent accountants' report; and reviews
the activities of the independent accountants. The Audit Committee selects our
independent accountants each year. The Audit Committee also considers the
adequacy of our internal controls and accounting policies The members of the
Audit Committee are all independent directors of our Board of Directors within
the meaning of Rules 4200(a)(15) and 4350(d) of The NASDAQ Stock Market.

The Audit Committee has reviewed and discussed the audited financial
statements with our management. The Audit Committee has discussed with our
independent auditors the matters required to be discussed by SAS 61. In
addition, the Audit Committee has received the written disclosures and letter
from our independent accountants required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), as may be
modified or supplemented, and has discussed with the independent accounts
matters pertaining to their independence. The Audit Committee also considered
whether the additional services unrelated to audit services performed by
Ehrhardt, Keefe, Steiner & Hottman, P.C. were compatible with maintaining their
independence in performing their audit services. Based upon the reviews and
discussions referred to above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in our Annual Report
on Form 10-KSB for our year ended June 30, 2004 for filing with the Securities
and Exchange Commission. The Audit Committee has adopted a written Audit
Committee Charter that has been adopted by our Board of Directors and is
attached hereto as Exhibit A.

Respectfully submitted by the Audit Committee,

Christopher R. Seelbach James H. Shapiro

INDEPENDENT PUBLIC ACCOUNTANTS

The principal accountant selected by our Audit Committee for our fiscal
year ended June 30, 2004, was Ehrhardt, Keefe, Steiner & Hottman. A
representative of Ehrhardt, Keefe, Steiner & Hottman, who were also our auditors
for our fiscal year ended June 30, 2003, is expected to be present at the annual
meeting of shareholders. Therefore, he or she is expected to have an opportunity
to make a statement if he or she desires to do so and is expected to be
available to respond to appropriate questions. Our Audit Committee has not yet
met to select a principal accountant for our fiscal year ending June 30, 2005.

Audit Fees

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

Audit-Related Fees

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

Tax Fees

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

All Other Fees

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

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

100% of the services described above were approved by our Audit Committee.

2004 ANNUAL REPORT TO SHAREHOLDERS

Included with this Information Statement is our 2004 Annual Report on Form
10-KSB for the fiscal year ended June 30, 2004. We will provide, without charge,
an additional copy of our Annual Report on Form 10-KSB for the fiscal year ended
June 30, 2004, as required to be filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended, upon
written request to Gary L. Cook, Secretary, at our principal offices. Each such
request must set forth a good faith representation that, as of November 9, 2004
the person making the request was a beneficial owner of our common stock. The
exhibits to the Annual Report on Form 10-KSB for the fiscal year ended June 30,
2004 may be obtained by any stockholder upon written request to Mr. Cook. Each
person making any such request will be required to pay a fee of $0.25 per page
to cover our expenses in furnishing such exhibits.

SOLICITATION OF PROXIES

We Are Not Asking You For A Proxy And You Are Requested Not To Send Us A Proxy

OTHER BUSINESS

Our Board of Directors does not know of any matters to be presented at the
Meeting other than the matters set forth herein. If any other business should
come before the Meeting, the shareholders in attendance will vote according to
their judgment on such matters.

BY ORDER OF THE BOARD OF DIRECTORS

Mountlake Terrace, Washington
November 11, 2004 GARY L. COOK, SECRETARY

Exhibit A
AUDIT COMMITTEE CHARTER
OF
COGNIGEN NETWORKS, INC.

I. Composition of the Audit Committee. The Audit Committee shall be comprised of
such number of directors as are to be appointed by the Board of Directors.

II. Purposes of the Audit Committee. The Audit Committee's primary duties and
responsibilities are to:

1. Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting and legal compliance.

2. Monitor the independence and performance of the Company's independent
auditors and internal auditing department.

3. Provide an avenue of communication among the independent auditors,
management, the internal auditing department and the Board.

The function of the Audit Committee is oversight. The management of the
Company is responsible for the preparation, presentation and integrity of the
Company's financial statements. Management and the internal auditing department
are responsible for maintaining appropriate accounting and financial reporting
principles and policies and internal controls and procedures that provide for
compliance with accounting standards and applicable laws and regulations. The
outside auditors are responsible for planning and carrying out a proper audit of
the Company's financial statements, reviews of the Company's quarterly financial
statements prior to the filing of each quarterly report on Form 10-Q or Form
10-QSB, and other procedures. In fulfilling their responsibilities hereunder, it
is recognized that members of the Audit Committee are not full-time employees of
the Company and are not, and do not represent themselves to be, accountants or
auditors by profession or experts in the fields of accounting or auditing
including in respect of auditor independence. As such, it is not the duty or
responsibility of the Audit Committee or its members to conduct "field work" or
other types of auditing or accounting reviews or procedures or to set auditor
independence standards, and each member of the Audit Committee shall be entitled
to rely on (i) the integrity of those persons and organizations within and
outside the Company from which it receives information (ii) the accuracy of the
financial and other information provided to the Audit Committee by such persons
or organizations absent actual knowledge to the contrary (which shall be
promptly reported to the Board of Directors) and (iii) representations made by
management as to any information technology, internal audit and other non-audit
services provided by the auditors to the Company.

Notwithstanding the foregoing, the Audit Committee has the authority to
conduct any investigation appropriate to fulfilling its responsibilities, and
shall have direct access to the independent auditors as well as any employee of
the Company. The Audit Committee has the ability to retain, at the Company's
expense, special legal, accounting, or other consultants or experts it deems
necessary in the performance of its duties.

III. Meetings of the Audit Committee.

Audit Committee members shall be appointed by the Board. If an Audit
Committee Chair is not designated or present, the members of the Committee may
designate a Chair by majority vote of the Committee membership.

The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. The Audit Committee Chair shall prepare and/or approve
an agenda in advance of each meeting. In addition, the Committee should meet
privately in executive session at least annually with management, the director
of the internal auditing department, the independent auditors, and as a
committee to discuss any matters that the Committee or each of these groups
believe should be discussed.

IV. Audit Committee Responsibilities and Duties.

1. Review Procedures.

The Audit Committee shall:

a. Review and reassess the adequacy of this Charter at least annually,
submit the charter to the Board of Directors for approval and have the
document published at least every three years in accordance with SEC
regulations.

b. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with management
and independent auditors of significant issues regarding accounting
principles, practices, and judgments.

c. In consultation with management, the independent auditors and the
internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Meet periodically with management to
discuss significant financial risk exposures and the steps management has
taken to monitor, control, and report such exposures. Review significant
findings prepared by the independent auditors and the internal auditing
department together with management's responses.

d. Review with financial management and the independent auditors the
Company's quarterly financial results prior to the release of earnings
and/or the Company's quarterly financial statements prior to filing or
distribution. Discuss any significant changes to the Company's accounting
principles and any items required to be communicated by the independent
auditors in accordance with SAS 61. The Chair of the Committee may
represent the entire Audit Committee for purposes of this quarterly review.

2. Independent Auditors.

The independent auditors are ultimately accountable to the Audit Committee.
The Audit Committee shall review the independence and performance of the
auditors. The Audit Committee, shall select, evaluate, and where deemed
appropriate, replace the outside auditors (or nominate the outside auditors to
be proposed for shareholder approval in any proxy statement).

The outside auditors shall submit to the Company annually a formal written
statement delineating all relationships between the outside auditors and the
Company ("Statement as to Independence"), addressing each non-audit service
provided to the Company and at least the matters set forth in Independence
Standards Board No. 1.

The Audit Committee shall:

a. Approve the fees and other significant compensation to be paid to
the independent auditors for audit services and approve the retention of
the independent auditors for any non-audit service and the fee for any such
service.

b. On an annual basis, ensure that the independent auditors prepare
and deliver a Statement as to Independence, and review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence. The Audit Committee
shall take appropriate action to oversee the independence of the
independent auditors.

c. Review the independent auditors' audit plan, discussing scope,
staffing, locations, reliance upon management, and internal audit and
general audit approach.

d. Prior to releasing the year-end earnings, discuss the results of
the audit with the independent auditors.

e. Consider the independent auditors' judgment about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.

f. Instruct the independent auditors that the independent auditors are
ultimately accountable to the Audit Committee.

g. Resolve any disagreements between the management of the Company and
the Company's independent auditors.

3. Internal Audit Department and Legal Compliance.

The Audit Committee shall:

a. Review the budget, plan, changes in plan, activities, organization
structure, and qualifications of the internal audit department, as needed.

b. Review the appointment, performance, and replacement of the senior
internal audit executive.

c. Review significant reports prepared by the internal audit
department together with management's response and follow-up to these
reports.

d. Consider any reports or communications (and management's and/or the
internal audit department's responses thereto) submitted to the Audit
Committee by the independent auditors required by or referred to in SAS 61,
as may be modified or supplemented.

e. Review on a regular basis with the Company's counsel any legal
matters that could have a material impact on the organization's financial
statements, the Company's compliance with applicable laws and regulations,
and inquiries received from regulators or governmental agencies.

4. Other Audit Committee Responsibilities.

The Audit Committee shall:

a. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be included in the
Company's annual proxy statement.

b. Maintain minutes of meetings and periodically report to the Board
of Directors on significant results of the foregoing activities.

c. Periodically perform self-assessment of Audit Committee
performance.

d. Annually review policies and procedures associated with directors'
and officers' expense accounts and perquisites.

e. Approve in advance all director, officer and other person related
party transactions with the Company.

f. Monitor a code of ethics for the Company's Chief Executive Officer,
Chief Financial Officer, Principal Accounting Officer or Controller or
persons performing similar functions.

g. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and for the confidential, anonymous
submission by employees of the Company of concerns regarding questionable
accounting or auditing matters.

h. Engage independent counsel and other advisors as it deems necessary
to carry out its duties.

i. Determine funding for independent counsel and other advisors
employed under paragraph IV.4.h of this Charter.

j. Review any other aspects of the Company's affairs as the Committee
deems necessary or appropriate.

k. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the Board deems
necessary or appropriate.