form-10qsb_123104

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ml1YLh9WYE8SSrAU5posDPUPdHiyeTYVIqDU4buVRc7jGOqvdUpRn04rQJG4o3rU u3xAxSX8tXWdBA7JF2Gjug== 0000949303-05-000017.txt : 20050214 0000949303-05-000017.hdr.sgml : 20050214 20050214164601 ACCESSION NUMBER: 0000949303-05-000017 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050214 DATE AS OF CHANGE: 20050214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COGNIGEN NETWORKS INC CENTRAL INDEX KEY: 0000726293 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 841089377 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-11730 FILM NUMBER: 05611406 BUSINESS ADDRESS: STREET 1: 7001 SEAVIEW AVENUE NW, SUITE 210 STREET 2: SUITE 210 CITY: SEATTLE STATE: WA ZIP: 98117 BUSINESS PHONE: 2062976151 MAIL ADDRESS: STREET 1: 3220 SOUTH HIGUERA STREET STREET 2: SUITE 304 CITY: SAN LUIS OBISPO STATE: CA ZIP: 93401 FORMER COMPANY: FORMER CONFORMED NAME: SILVERTHORNE PRODUCTION CO DATE OF NAME CHANGE: 19940422 FORMER COMPANY: FORMER CONFORMED NAME: CELLULAR RADIO SYSTEMS INC DATE OF NAME CHANGE: 19880713 10QSB 1 form-10qsb_123104.htm form-10qsb_123104

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

FORM 10-QSB

(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2004

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

Commission File Number 0-11730

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

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

6405 218th Street SW, Suite 305
Mountlake Terrace, WA 98043
(Address of principal executive offices)

(425) 329-2300
(Issuer's Telephone number)

N/A
----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

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

Outstanding at
Class January 31, 2005
- ------------------------------------ -------------------------

Common Stock, $.001 par value 8,753,972
-----------------------

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

COGNIGEN NETWORKS, INC.

Commission File Number: 0-11730
Quarter Ended December 31, 2004

FORM 10-QSB/A

Part I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Consolidated Balance Sheets

Unaudited Consolidated Statements of Operations

Unaudited Consolidated Statements of Cash Flows

Notes to Unaudited Consolidated Financial Statements

Item 2. Management's Discussion and Analysis or Plan of Operation

Item 3. Controls and Procedures

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 6. Exhibits

Signatures

COGNIGEN NETWORKS, INC.

Part I - Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets

December 31, June 30,
2004 2004
------------ ------------
Unaudited
Assets
Current assets
Cash .......................................................................... $ 155,365 $ 213,611
Accounts receivable, net ...................................................... 476,701 481,092
Commissions receivable, net ................................................... 806,939 773,168
Inventory ..................................................................... 8,903 15,543
Other current assets .......................................................... 41,231 52,210
------------ ------------
Total current assets .................................................... 1,489,139 1,535,624
------------ ------------

Non-current assets
Property, plant and equipment, net ............................................ 14,024 16,847
Deposits and other assets ..................................................... 49,151 60,424
------------ ------------
Total non-current assets ................................................ 63,175 77,271
------------ ------------

Total assets ..................................................................... $ 1,552,314 $ 1,612,895
============ ============

Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable .............................................................. $ 606,861 $ 670,416
Accrued liabilities ........................................................... 327,188 444,098
Commissions payable ........................................................... 823,456 811,729
Current portion of deferred commissions ....................................... 500,398 511,200
Receivables financing arrangement ............................................. 199,900 308,100
Other current liabilities ..................................................... -- 1,638
------------ ------------
Total current liabilities ............................................... 2,457,803 2,747,181

Deferred commissions less current portion ........................................ -- 237,346
Other long-term liabilities ...................................................... 1,030 68,391
------------ ------------
Total liabilities ....................................................... 2,458,833 3,052,918
------------ ------------

Stockholders' deficit
Preferred stock no par value, 20,000,000 shares authorized, 500,000 shares
issued and outstanding, $1.00 per share liquidation preference ............... 450,000 450,000
Common stock $.001 par value, 300,000,000 shares authorized; 8,753,972 issued
and outstanding as of December 31, 2004 and June 30, 2004 ................... 8,754 8,754
Additional paid-in capital .................................................... 11,954,331 11,954,331
Accumulated deficit ........................................................... (13,319,604) (13,853,108)
------------ ------------
Total stockholders' deficit ............................................. (906,519) (1,440,023)
------------ ------------
Total liabilities and stockholders' deficit ...................................... $ 1,552,314 $ 1,612,895
============ ============

See notes to unaudited consolidated financial statements.

COGNIGEN NETWORKS, INC.

Unaudited Consolidated Statements of Operations

Three Months Ended Six Months Ended
December 31, December 31,
-------------------------- --------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Unaudited Unaudited Unaudited Unaudited
Revenue
Marketing commissions ............... $ 1,369,035 $ 1,229,612 $ 2,615,256 $ 2,622,971
Telecommunications .................. 1,550,833 1,594,118 3,049,456 2,817,360
Other ............................... -- (6,944) -- 432
----------- ----------- ----------- -----------
Total revenue ..................... 2,919,868 2,816,786 5,664,712 5,440,763
----------- ----------- ----------- -----------

Operating expenses
Commissions:
Marketing ...................... 707,834 554,768 1,338,248 1,291,668
Telecommunications ............. 230,333 189,213 453,975 352,701
Telecommunications .................. 830,744 797,253 1,691,379 1,500,683
Selling, general and administrative . 914,227 1,005,298 1,681,727 2,184,617
Depreciation and amortization ....... 3,292 21,565 8,315 44,801
----------- ----------- ----------- -----------
Total operating expenses .......... 2,686,430 2,568,097 5,173,644 5,374,470
----------- ----------- ----------- -----------

Income from operations ................. 233,438 248,689 491,068 66,293
Interest expense ....................... (12,518) (11,706) (25,786) (22,210)
----------- ----------- ----------- -----------

Income before income taxes ............. 220,920 236,983 465,282 44,083

Income taxes ........................... -- -- -- --
----------- ----------- ----------- -----------
Net income ............................. 220,920 236,983 465,282 44,083

Preferred dividends .................... (10,000) (10,000) (20,000) (20,000)
----------- ----------- ----------- -----------

Net income attributable to
common shareholders .................. $ 210,920 $ 226,983 $ 445,282 $ 24,083
=========== =========== =========== ===========

Income per common share-
basic and diluted .................... $ .02 $ .02 $ .05 $ .00
=========== =========== =========== ===========

Weighted average number of common shares
outstanding:
Basic ......................... 8,753,972 9,553,972 8,753,972 9,553,972
=========== =========== =========== ===========

Diluted ....................... 8,759,100 9,553,972 8,759,100 9,553,972
=========== =========== =========== ===========

See notes to unaudited consolidated financial statements.

COGNIGEN NETWORKS, INC.

Unaudited Consolidated Statements of Cash Flows

Six Months Ended
December 31,
----------------------
2004 2003
--------- ---------
Unaudited Unaudited
Cash flows from operating activities
Net income .......................................................... $ 465,282 $ 44,083
--------- ---------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ..................................... 8,315 44,801
Bad debt expense .................................................. 120,289 41,660
Changes in assets and liabilities:
Accounts receivable ............................................. (115,898) (352,727)
Commissions receivable, net ..................................... (33,771) 28,583
Inventory ....................................................... 6,640 13,294
Deposits and other assets ....................................... 10,979 3,323
Accounts payable ................................................ (63,555) 148,783
Commissions payable ............................................. 11,727 (784)
Accrued liabilities ............................................. (116,910) 60,743
Other current liabilities ....................................... (1,638) (33,477)
Other ........................................................... 12,134 19,461
--------- ---------
(161,688) (26,340)
--------- ---------
Net cash provided by operations ............................... 303,594 17,743
--------- ---------

Cash flows from investing activities
Capital expenditures ................................................ (5,492) (2,746)
Increase in investments to Intandem ................................. -- (214,647)
--------- ---------
Net cash used in investing activities ......................... (5,492) (217,393)
--------- ---------

Cash flows from financing activities
Payments on deferred commissions .................................... (248,148) (260,845)
Decrease in receivables financing arrangement ....................... (108,200) --
Proceeds from notes payable ......................................... -- 85,475
Payment on notes payable ............................................ -- (25,000)
--------- ---------
Net cash used in financing activities ......................... (356,348) (200,370)
--------- ---------

Net decrease in cash and cash equivalents .............................. (58,246) (400,020)

Cash and cash equivalents-beginning of period .......................... 213,611 412,992
--------- ---------

Cash and cash equivalents-end of period ................................ $ 155,365 $ 12,972
========= =========

Supplemental Disclosures of Cash Flow Information and Non-Cash Transactions
Cash payments for interest expense during the six months ended December 31,
2004 and 2003 were $25,786 and $25,000, respectively.

See notes to unaudited consolidated financial statements.

COGNIGEN NETWORKS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Description of Business

Cognigen Networks, Inc. (the Company) was incorporated in May 1983 in the State
of Colorado to engage in the cellular radio and broadcasting business and to
engage in any other lawful activity permitted under Colorado law. In June 1988,
the Company changed its name to Silverthorne Production Company (Silverthorne)
and commenced operations in the oil and gas industry. These operations were
discontinued in 1989. Between 1989 and 1999, Silverthorne attempted to locate
acquisition prospects and negotiate an acquisition. Silverthorne's pursuit of an
acquisition did not materialize until August, 1999, with the acquisition of the
assets of Inter-American Telecommunications Holding Corporation (ITHC), which
was accounted for as a reverse acquisition. The surviving entity changed its
name to Cognigen Networks, Inc. on July 12, 2000. The Company is an Internet and
relationship enabled marketer of long distance telephone and personal
communications services. Revenue is generated in two ways. First, marketing
commissions revenue is generated from a number of vendors who are represented on
the Company's agent web sites and for whom the Company sells their products and
services via contractual agreements. Second, telecommunications revenue is
generated through sales of the Company's proprietary products and services
through the Company's agent web sites.

Note 2 - Summary of Significant Accounting Policies

The accompanying consolidated financial statements include the accounts of
Cognigen Networks, Inc. and its subsidiaries, Cognigen Switching Technologies,
Inc. (CST) through January 31, 2004 and Intandem Communications Corp. (Intandem)
since February 1, 2004. See Note 8 regarding information regarding the sale of
CST and Note 4 for information on Intandem. All intercompany accounts and
transactions have been eliminated in consolidation. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
have been made to (a) the unaudited consolidated statements of operations for
the three and six months ended December 31, 2004 and 2003, respectively, (b) the
unaudited consolidated balance sheet as of December 31, 2004 and (c) the
unaudited consolidated statements of cash flows for the six months ended
December 31, 2004 and 2003, respectively, in order to make the financial
statements not misleading.

The Company has not recorded a provision for income taxes for the three and six
months ended December 31, 2004 and 2003. The Company has net operating loss
carryforwards to offset taxable income in these periods.

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for financial
statements. For further information, refer to the audited consolidated financial
statements and notes thereto for the year ended June 30, 2004, included in the
Company's Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission.

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

The results for the three and six months ended December 31, 2004 may not
necessarily be indicative of the results for the fiscal year ending June 30,
2005.

On November 21, 2001, the Company entered into a Stock Redemption Agreement with
a stockholder, in which the stockholder agreed to sell to the Company 2,712,501
shares of the Company's common stock, at approximately $.77 per share, which
approximated market value, in exchange for potential future commissions of
$2,088,622 on certain customers, as defined in the agreement. The shares were
purchased in December 2001. Deferred commissions payable are being paid out
based upon commissions earned as defined in the agreement. The agreement does
not guarantee that commissions will be earned. As of December 31, 2004, the
remaining balance of deferred commissions payable was $500,398. The Company has
classified the entire balance as current based on historical commissions. After
the $500,398 of deferred commissions has been earned and paid to the
stockholder, commissions will continue to be paid to the stockholder and
recorded as marketing commissions expense in the statement of operations. Had
the payments of $125,601 and $248,148 for the three and six months ended
December 31, 2004, respectively, been recorded as marketing commissions expense
instead of a reduction of deferred commissions payable on the balance sheet,
marketing commissions expense would have been higher by $125,601 and $248,148.
The Company does not anticipate recording these payments as marketing
commissions expense until sometime in the year ending June 30, 2006.

The following presents a proforma table of certain statement of operations
accounts for the three and six months ended December 31, 2004 that reflect the
increase in commissions expense had the payments to the stockholder, described
in the preceding paragraph, during these periods been accounted for as
commissions expense rather than a reduction to deferred commissions payable.

Pro Forma Three Pro Form Six
Months Ended Months Ended
December 31, December 31,
2004 2004
---------- ------------

Total revenue ................................ $2,919,868 $5,664,712
---------- ----------

Operating expenses:
Marketing commissions ..................... 1,063,768 2,040,371
Telecommunications ........................ 830,744 1,691,379
Selling, general and administrative ....... 914,227 1,681,727
Depreciation and amortization ............. 3,292 8,315
---------- ----------
Total operating expenses ............ 2,812,031 5,421,792
---------- ----------

Income from operations ....................... $ 107,837 $ 242,920
========== ==========

Net income attributable to common shareholders $ 85,319 $ 197,134
========== ==========

Income per common share - basic and diluted .. $ .01 $ .02
========== ==========

Certain amounts in prior consolidated financial statements have been
reclassified to conform to the current presentation.

Note 3 -Note Receivable

As of December 31, 2004, the Company has a note receivable outstanding with a
net book value of zero from American Communications, LLC (formerly known as
American Internet Communications, LLC) in accordance with a $300,000 Promissory
Note and Agreement due in October 2004, originally recorded on the balance sheet
at $77,500. This note bears interest at 12% payable annually, is secured by the
personal guaranty of the principals of American Communications, and was due
October 4, 2004. The Company agreed to payment on the note of $100,000 plus
$2,000 in attorneys' fees as full satisfaction of the note, if paid by July
2004. All but $20,000 was paid by the due date which put the agreement in
default and the $80,000 received was applied to interest on the original note.
Subsequently, $21,000 was received and applied to interest outstanding. The
remaining balance of approximately $300,000 remains due and in default. The
Company has filed a lawsuit against American Communications and the two
guarantors of the note to attempt to collect the remaining balance due.

Note 4 - Acquisition of Intandem

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

The Termination Agreement provided that the Company would convert notes
receivable outstanding at the time of $387,399 into 100% of the outstanding
stock of Intandem in exchange for payments of $10,000 per month for eight
months, assumption of up to approximately $45,000 in liabilities, cancellation
of all employment contracts of the Intandem principals and cancellation of
options to purchase common stock of the Company. All required amounts have been
funded under the Funding Agreement and Termination Agreement. Due to questions
of recoverability of amounts funded under the Termination Agreement, a provision
of $494,149 was taken in the statement of operations in the year ended June 30,
2004.

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

Note 5 -Receivables Financing Arrangement

The balance of receivables financing arrangement as of December 31, 2004 is
$199,900. This represents the amount of commissions receivable that have been
sold under an Accounts Receivable Purchase Agreement (Receivables Purchase
Agreement) with a bank. The Receivables Purchase Agreement provides for up to
$1,250,000 in commissions receivable to be used as collateral for advances under
the Receivables Purchase Agreement, of which 75% of the commissions receivable
balances are available in cash advances to the Company. Interest charges are
1.3% per month on the commissions receivable balances used as collateral.

Note 6 -Stockholders' Deficit

On October 17, 2002, the Company issued 500,000 shares of 8% Convertible Series
A Preferred Stock (Preferred Stock). Each share of the Preferred Stock is
convertible, at the option of the holder, into one share of the Company's common
stock for a period of five years. 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.

Dividends on the Preferred Stock are cumulative at the rate of 8% per annum of
the liquidation value, $1.00 per share, are payable in cash, when and if
declared by the Board of Directors, and are preferential to any other junior
securities, as defined. The Company has not accrued for dividends on the balance
sheet for the Preferred Stock as the Board of Directors has not declared
dividends. As of December 31, 2004, total undeclared cumulative dividends that
would have been payable if declared was $88,222.

Note 7 - Stock Options and Warrants

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

During the six months ended December 31, 2004 and 2003, the Company granted
10,000 and zero options, respectively, to employees to purchase shares of common
stock of the Company. The prior year options that were grated vested 5,000
immediately and 5,000 in one year, were exercisable at market value and expired
five years from the date of grant.

As of December 31, 2004, the number of stock options outstanding under the Plan
was 475,000.

As of December 31, 2004, the number of stock options outstanding not under any
plan was 25,000. 1,000,000 options exercisable at $3.68 per share expired in
August 2004.

As of December 31, 2004, there were 1,050,000 warrants outstanding that were
exercisable into shares of common stock of the Company. In October 2004, 150,000
warrants that were exercisable at $.50 per share expired unexercised.

Note 8 - Stock for Stock Exchange Agreement

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

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

Overview

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

We made a major strategic transition in our business profile and delivery of
products and services over the past nineteen months. In addition to earning
commissions on the sale of the services and products of outside vendors, we are
now selling more of our own proprietary branded products and services. Because
we show the total revenue for these customers, not just a commission on the
revenue of outside vendors products and services, we generate approximately five
to seven times as much revenue on an equivalent customer usage. Our profit
margins on our own proprietary products and services are somewhat less compared
to the profit margins we recognize from selling products and services of our
outside vendors but our overall net income can be much higher because there is
five to seven times as much revenue.

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

We had net income of $220,920 and $465,282 for the three and six months ended
December 31, 2004. This net income in large part was derived from our actions
taken during the past year to reduce costs and to diversify our product line. We
are undertaking other initiatives aimed at providing our agents with more
attractive and competitive product offerings, improving our proprietary products
and services, and expanding our vendor relationships.

Three Months Ended December 31, 2004 Compared to Three Months Ended December 31,
2003

Total revenue for the three months ended December 31, 2004 was $2,919,868
compared to $2,816,786 for 2003. Marketing commissions revenue was $1,369,035
for 2004 compared to $1,229,612 for the prior year. Telecommunications revenue
was $1,550,833 for 2004 as compared to $1,594,118 for the prior year.

Marketing commissions revenue for 2004 increased $139,423 from that of 2003 or
11%. This increase reflects initiatives we have taken to increase marketing
commissions revenue. We have entered into agreements to market additional and
new products that are in demand. We have also emphasized customer service
reducing our response time to customer inquiries and order verification.
Marketing additional and new products and better customer service have helped
increase marketing commissions revenue.

Telecommunications revenue decreased $43,285 for 2004 compared to 2003, or 3%.
This decrease resulted from an increase in telecommunications revenue from the
sale of new proprietary products and services offset by a decrease resulting
from the sale of our former subsidiary Cognigen Switching Technologies, Inc.
(CST). Our proprietary customer base increased by approximately 4,500 customers
when comparing this quarter to that of the prior year. This increase, however,
was offset by a decrease in proprietary products and services resulting from our
sale of CST effective February 1, 2004. As part of the sale, CST maintained
approximately $70,000 in monthly telecommunications revenue and the related
customers that use these products and services.

Marketing commissions expense increased from $544,768 for 2003 to $707,834 for
2004, an increase of $153,066, or 28%. This increase correlates to an increase
in marketing commissions revenue explained above. The higher percentage increase
in marketing commissions expense compared to the increase in marketing
commissions revenue results from a difference in product mix between the
periods.

Telecommunications commissions expense increased from $189,213 for 2003 to
$230,333 for 2004, an increase of $41,120. This increase is a result of a change
in mix of the sale of these proprietary products and services resulting from the
loss of the CST products and services which were paid a lower commission rate.
In addition, commissions expense being paid to Intandem agents is higher
currently than in the prior year, which is a result of the mix of products and
services being sold by these agents.

Had the payments to a shareholder described in Note 2 to the Consolidated
Financial Statements been recorded as marketing commissions expense instead of a
reduction of deferred commissions payable on the balance sheet, marketing
commissions expense would have been higher by $125,601, therefore reducing net
income by this same amount. We do not anticipate recording these payments as
marketing commissions expense until sometime in the year ending June 30, 2006.

Telecommunications expense, or carrier costs, increased from $797,253 for 2003
to $830,744 for 2004, or an increase of $33,491, or 4%. This increase is largely
related to higher carrier costs.

Our operating profit margin, defined as revenue less commissions expenses and
telecommunications carrier costs, has decreased for 2004 compared to 2003 by
$124,595 or 10%. This decrease results from mix changes in both our commission
revenue and our telecommunications revenue to higher commission products and
services and from higher carrier costs on telecommunications revenue.

Selling, general and administrative expenses decreased $91,071 for 2004 compared
to 2003, or 9%. This decrease is largely attributed to decreases in legal fees
and salaries and related benefits expenses of approximately $313,000. The
decrease in salaries and related benefits is $288,769 of this decrease and is
largely attributed to the sale of CST. This decrease is offset by fees paid to
CST for servicing our telecommunications customers of $152,451 for 2004. Bad
debt expense increased $86,758 over the prior year due to the increased number
of proprietary customer accounts.

The decrease in depreciation and amortization of $18,273 results from the sale
of CST previously explained.

Interest expense for 2004 of $12,518 is consistent with that for 2003 of
$11,706.

Six Months Ended December 31, 2004 Compared to Six Months Ended December 31,
2003

Total revenue for the six months ended December 31, 2004 was $5,664,712 compared
to $5,440,763 for 2003. Marketing commissions revenue was $2,615,256 for 2004
compared to $2,622,971 for the prior year. Telecommunications revenue was
$3,049,456 for 2004 as compared to $2,817,360 for the prior year.

Marketing commissions revenue for 2004 decreased $7,715 from that of 2003. The
second quarter of fiscal 2005 contributed increased commissions revenue compared
to the same quarter for fiscal 2004. The second quarter activity helped
compensate for a decrease in marketing commissions revenue for the first quarter
compared to the same period in the prior year, as a result of initiatives we
have taken to increase marketing commissions revenue. We have entered into
agreements to market additional and new products that are in demand. We have
also emphasized customer service reducing our response time to customer
inquiries and order verification. Marketing additional and new products and
better customer service have helped increase marketing commissions revenue.

Telecommunications revenue increased $232,096 for 2004 compared to 2003, or 8%.
This increase resulted from an increase in telecommunications revenue from new
proprietary products and services being sold, offset by the transfer of some
revenue to CST in their sale mentioned below. Our proprietary customer base
increased by approximately 6,800 customers when comparing this period to that of
the prior year., again partially offset by the transfer of some products and
their customers resulting from our sale of CST effective February 1, 2004. As
part of the sale, CST maintained approximately $70,000 in monthly
telecommunications revenue and the related customers that use these products and
services.

Marketing commissions expense increased from $1,291,668 for 2003 to $1,338,248
for 2004, an increase of $46,580, or 4%. This increase is a result of a change
in mix of products and services being sold.

Telecommunications commissions expense increased from $352,701 for 2003 to
$453,975 for 2004, an increase of $101,274, or 29%. This increase is a result of
an increase in the mix to higher telecommunications services resulting from the
transfer of some services to CST noted above In addition, commissions expense
being paid to Intandem agents is higher currently than in the prior year, due to
the mix of products and services being sold by these agents.

Had the payments to a shareholder described in Note 2 to the Consolidated
Financial Statements been recorded as marketing commissions expense instead of a
reduction of deferred commissions payable on the balance sheet, marketing
commissions expense would have been higher by $248,148, therefore reducing net
income by this same amount. We do not anticipate recording these payments as
marketing commissions expense until sometime in the year ending June 30, 2006.

Our operating profit margin, defined as revenue less commissions and
telecommunications expenses, has decreased for 2004 compared to 2003 by $94,601,
or 4%. . This decrease results from mix changes in both our commission revenue
and our telecommunications revenue to higher commission products and services
and from higher carrier cost on telecommunications revenue.

Telecommunications expense or carrier costs increased from $1,500,683 for 2003
to $1,691,379 for 2004 or an increase of $190,696 or 13%. This increase is
primarily a result of increased carrier costs and the mix change resulting from
certain products and services transferred to CST as noted above.

Selling, general and administrative expenses decreased $502,890 for 2004
compared to 2003, or 23%. This decrease is largely attributed to decreases in
legal fees and salaries and related benefits expenses of approximately $780,000.
The decrease in salaries and related benefits is $618,732 of this decrease and
is largely attributed to the sale of CST. This decrease is offset by fees paid
to CST for servicing our telecommunications customers of $281,483 for 2004. Bad
debt expense increased $78,629 over the prior year due to the increased number
of proprietary customer accounts.

The decrease in depreciation and amortization of $36,486 results from the sale
of CST previously explained.

Interest expense for 2004 of $25,786 is consistent with that for 2003 of $22,210.

Liquidity and Capital Resources

We have historically funded our operations primarily from sales of securities
and operations. As of December 31, 2004 we had cash and cash equivalents of
$155,365 and negative working capital of $968,664. Cash provided by operations
during the six months ended December 31, 2004 was $303,594. Cash used in
financing activities of $356,348 included the payment of deferred commissions of
$248,148 and a decrease in the receivables financing arrangement of $108,200.

We have a balance outstanding under a receivables financing arrangement as of
December 31, 2004 of $199,900. This represents the amount of marketing
commissions receivable that have been sold under an Accounts Receivable Purchase
Agreement (Receivables Purchase Agreement) with a bank. The Receivables Purchase
Agreement provides for up to $1,250,000 in marketing commissions receivable to
be used as collateral for advances under the Receivables Purchase Agreement of
which 75% of the marketing commissions receivable balances are available in cash
advances to the Company. Interest charges are 1.3% per month on the marketing
commissions receivable balances used as collateral. After one year, the
Receivables Purchase Agreement is from year to year unless terminated in writing
by either party. The Company is in compliance with the terms and conditions of
the Receivables Purchase Agreement.

Cash flows generated from operations and from our receivables financing
arrangement were sufficient to meet our working capital requirements for the six
months ended December 31, 2004, but may not be sufficient to meet our working
capital requirements for the foreseeable future or provide for expansion
opportunities. Currently, we are slowly reducing our average balances
outstanding under our receivables financing arrangement. We have reduced costs
and expenses by reducing personnel, reducing or eliminating unwarranted expenses
and have sold CST, our former subsidiary, which all combined have increased our
cash flows in excess of $50,000 per month from certain levels in 2004. We are
looking at various financing and equity opportunities to provide additional
working capital or for expansion opportunities and continue to identify costs
and expenses that can be reduced or eliminated. There can be no assurance we
will be able to secure additional debt or equity financing, that we will be able
to reduce or eliminate more costs and expenses or that cash flows from
operations will produce adequate cash flow to enable us to meet all of our
future obligations or to be able to expand. However, we believe that we will be
successful in producing sufficient cash flows from all collective sources to
continue for at least the next twelve months.

Forward Looking Statements

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

Item 3. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934) as of December 31, 2004. Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that, our disclosure controls and
procedures are effective in timely alerting them to the material information
relating to us and our consolidated subsidiaries required to be included in our
periodic filings with the Securities and Exchange Commission.

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

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

We continue to analyze these potential control deficiencies and the actions
needed, if any, to address these potential deficiencies.

(b) Changes in internal controls.

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

Part II - Other Information

Item 1. Legal Proceedings

In September 2004, we filed a lawsuit against American Communications LLC
(American Communications), David Stone (Stone) and Harry Gorlovesky (Gorlovesky)
in the Circuit Court of the Twentieth Judicial Circuit in and for Dade County,
Florida. In our complaint, we allege (1) that American Communications breached a
settlement agreement by not making all of the $100,000 of payments required
thereunder to payoff a promissory note and agreement for $300,000 that was
assigned to and is owed to us and we demanded judgment of $334,119 on the
promissory note and agreement plus interest from May 10, 2004: (2) that we are
owed $81,000 for a dishonored check of $20,000 written as the last payment due
under the settlement agreement and (3) that Stone and Gorlovesky guaranteed the
promissory note and agreement and must pay the amount due under the promissory
note and agreement plus our attorneys fees, cost and expenses in collecting on
the promissory note and agreement. American Communications and Stone and
Gorlovesky have filed answers denying the claims in our complaint and setting
forth certain affirmative defenses which we have denied. In October 2004,
American Communications issued us a check for $21,000 as a complete settlement
of our claims. We returned the check to the attorney for American Communications
and subsequently sent a letter to the attorney for American Communications
stating that the check was not a complete settlement. The attorney for American
Communications never signed the letter. We deposited the check in February 2005.
The $21,000 will be reduced by any attorneys fees that we have to pay our
attorney. We will dismiss the claim for the dishonored check and might have to
argue that, by depositing the $21,000 check, we did not waive our other claims.

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

At our annual meeting of shareholders held on December 6, 2004, for which did
not solicit proxies from shareholders, the following items were approved, as
indicated by the vote stated following each item:

The first sentence of Article III, Section 2 of the bylaws was amended by
adding the words "or by the shareholders" to the end thereof;

The third paragraph of Article III, Section 2 of the bylaws was amended to
read, "By June 1, 2005, a majority of the board of directors must be
independent as that term is defined by the rules of the American Stock
Exchange LLC or by the rules of The NASDAQ Stock Market, whichever has the
most lenient rules.";

The last paragraph of Article III, Section 11, of the bylaws was amended by
adding the following sentences thereto: "The Chairman of the Audit
Committee may not be a member of the Compensation Committee. The Chairman
of the Compensation Committee may not be a member of the Audit Committee.
The provisions of the last two sentences may only be amended by a vote of
the shareholders."; and

Two new sentences were added to the beginning of Article IV, Section 5 of
the bylaws which read as follows. "The directors shall appoint from among
their members a director to serve as chairman of the board of directors.
This provision of the bylaws may only be amended by a vote of the
shareholders."

For - 4,828,673 (all present at the meeting). Against - None

That the number of directors to be voted on at the meeting be reduced to
six.

For - 4,828,673 (all present at the meeting). Against - None

The following persons were unanimously elected directors: Gary L. Cook,
David L. Jackson, Christopher R. Seelbach, Robert B. Segal, James H.
Shapiro and Thomas S. Smith to serve until the next Annual Meeting of
Shareholders or until their successors are elected and qualify.

For - 4,828,673 (all present at the meeting). Against - None

Item 6. Exhibits

Exhibits and Index of Exhibits.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SIGNATURES

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

COGNIGEN NETWORKS, INC.

By: /s/ Thomas S. Smith Date: February 14, 2005
------------------------------------------------------------------
Thomas S. Smith
President and Chief Executive
Officer

By: /s/ Gary L. Cook Date: February 14, 2005
---------------------------------------------------------
Gary L. Cook
Chief Financial Officer

EXHIBIT INDEX

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EX-31 2 form-10qsb_123104exh311.htm form-10qsb_123104

                                                                    EXHIBIT 31.1
                                  CERTIFICATION
I, Thomas S. Smith, certify that:

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

2.   Based on my knowledge, this 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
     report;

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

4.   The  small  business  issuer's  other  certifying   officer(s)  and  I  are
     responsible  for  establishing  and  maintaining  disclosure  controls  and
     procedures  (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for
     the small business issuer and have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision, to ensure that material information relating to the small
          business  issuer,  including its  consolidated  subsidiaries,  is made
          known to us by others within those entities,  particularly  during the
          period in which this report is being prepared;

     (b)  Omitted

     (c)  Evaluated the effectiveness of the small business issuer's  disclosure
          controls and procedures  and presented in this report our  conclusions
          about the effectiveness of the disclosure controls and procedures,  as
          of the  end of the  period  covered  by  this  report  based  on  such
          evaluation; and

     (d)  Disclosed  in this  report any change in the small  business  issuer's
          internal  control over financial  reporting  that occurred  during the
          small business issuer's most recent fiscal quarter (the small business
          issuer's  fourth fiscal  quarter in the case of an annual report) that
          has materially affected, or is reasonably likely to materially affect,
          the small business issuer's internal control over financial reporting;
          and

5.   The  small  business  issuer's  other  certifying  officer(s)  and  I  have
     disclosed,  based on our most recent  evaluation  of internal  control over
     financial reporting,  to the small business issuer's auditors and the audit
     committee of the small  business  issuer's  board of directors  (or persons
     performing the equivalent functions):

     (a)  All significant deficiencies in the material weakness in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the small  business  issuer's
          ability   to  record,   process,   summarize   and  report   financial
          information; and

     (b)  Any fraud, whether or not material,  that involves management or other
          employees who have a significant  role in the small business  issuer's
          internal controls over financial reporting.

Date:    February 14, 2005          /s/ Thomas S. Smith
                                    -------------------
                                        Thomas S. Smith
                                        Title: Chief Executive Officer

EX-31 3 form-10qsb_123104exh312.htm form-10qsb_123104

                                                                    EXHIBIT 31.2

                                  CERTIFICATION
I, Gary L. Cook, certify that:

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

2.   Based on my knowledge, this 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
     report;

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

4.   The small business issuer's other certifying officers and I are responsible
     for  establishing  and maintaining  disclosure  controls and procedures (as
     defined  in  Exchange  Act Rules  13a-15(e)  and  15d-15(e))  for the small
     business issuer and have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision, to ensure that material information relating to the small
          business  issuer,  including its  consolidated  subsidiaries,  is made
          known to us by others within those entities,  particularly  during the
          period in which this report is being prepared;

     (b)  Omitted

     (c)  Evaluated the effectiveness of the small business issuer's  disclosure
          controls and procedures  and presented in this report our  conclusions
          about the effectiveness of the disclosure controls and procedures,  as
          of the  end of the  period  covered  by  this  report  based  on  such
          evaluation; and

     (d)  Disclosed  in this  report any change in the small  business  issuer's
          internal  control over financial  reporting  that occurred  during the
          small business issuer's most recent fiscal quarter (the small business
          issuer's  fourth fiscal  quarter in the case of an annual report) that
          has materially affected, or is reasonably likely to materially affect,
          the small business issuer's internal control over financial reporting;
          and

5.   The  small  business  issuer's  other  certifying  officer(s)  and  I  have
     disclosed,  based on our most recent  evaluation  of internal  control over
     financial reporting,  to the small business issuer's auditors and the audit
     committee of the small  business  issuer's  board of directors  (or persons
     performing the equivalent functions):

     (a)  All significant deficiencies in the material weakness in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the small  business  issuer's
          ability   to  record,   process,   summarize   and  report   financial
          information; and

     (b)  Any fraud, whether or not material,  that involves management or other
          employees who have a significant  role in the small business  issuer's
          internal controls over financial reporting.

Date:    February 14, 2005                  /s/ Gary L. Cook
                                            ------------------------------------
                                                Gary L. Cook
                                                Title: Chief Financial Officer

EX-32 4 form-10qsb_123104exh321.htm form-10qsb_123104



                                                                   EXHIBIT 32.1

                            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  Quarterly  Report  of  Cognigen  Networks,  Inc.  (the
"Company")  on Form 10-QSB for the period ended  December 31, 2004 as filed with
the Securities  and Exchange  Commission on the date hereof (the  "Report"),  I,
Thomas S. Smith, 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/  Thomas S. Smith
                                                     --------------------
                                                     Thomas S. Smith
                                                     Chief Executive Officer
Dated: February 14, 2005

EX-32 5 form-10qsb_123104exh322.htm form-10qsb_123104


                                                                    EXHIBIT 32.2

                            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  Quarterly  Report  of  Cognigen  Networks,  Inc.  (the
"Company")  on Form 10-QSB for the period ended  December 31, 2004 as filed with
the Securities  and Exchange  Commission on the date hereof (the  "Report"),  I,
Gary L. Cook, the 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/ Gary L. Cook
                                                     ----------------
                                                     Gary L. Cook
                                                     Chief Financial Officer

Dated: February 14, 2005

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