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 March 31,
2008
 
 OR
 
 (
) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
 OF
THE EXCHANGE ACT
 For
the transition period from ____ to
 
 Commission
File Number 0-11730
 
 BayHill
Capital Corporation
 (Exact
name of small business issuer as specified in its charter)
 
 Delaware                                                         84-1089377
 (State or other
jurisdiction
of                                       (I.R.S.
Employer
 incorporation or
organization)                
                    Identification
No.)
 
 10757
S. Riverfront Pkwy, Suite 125
 South
Jordan, Utah 84095
 (Address
of principal executive offices)
 
 801-705-5128
 (Issuer’s
Telephone number)
 
 Cognigen
Networks, Inc.
 _____________________________________________________________________
 (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
 
 Indicate
by checkmark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).  Yes  ___  No X
 
 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.
 Class
              Outstanding
      at
                March 31,
      2008Common
      Stock, $.001 par value
              1,749,401
 
 Transitional
Small Business Disclosure Format (Check one):  Yes
_____   No  X
 
 
 
 
 Commission
File Number:  0-11730
 Quarter
Ended March 31, 2008
 
 
 FORM
10-QSB
 
 Part
      I - FINANCIAL INFORMATIONItem
      1.  Consolidated Financial StatementsConsolidated
      Balance Sheets
                Page
      2Unaudited
      Consolidated Statements of Operations
                Page
      3Unaudited
      Consolidated Statements of Cash Flows
                Page
      4Supplemental
      Disclosures of Cash Flow Information and Non-Cash
    Transactions
                Page
      5Notes
      to Unaudited Consolidated Financial Statements
                Page
      6Item
      2.  Management's Discussion and Analysis or Plan of
      Operation
                Page
      16Item
      3.  Controls and Procedures
                Page
      19Part
      II – OTHER INFORMATIONItem
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                Page
      20Item
      4.  Submission of Matters to a Vote of Security
      Holders
                Page 20Item 5.  Other Information
                Page 21Item
      6.  Exhibits
                Page
      22Signature
                Page
      23
 
  BAYHILL
CAPITAL CORPORATION
   
 Item 1.
Financial Statements
 
 Consolidated
Balance Sheets
 
 March
      31,
              June
      30,2008
              2007(Unaudited)AssetsCurrent
      assetsCash and cash
      equivalents
              
              $
              90,953
              
              
              $
              -Marketing commissions receivable,
      net of allowance for doubtful accounts of $140,000 and $230,080,
      respectively
              
              
              525,060
              
              
              
              813,540Other current
    assets
              
              
              12,324
              
              
              
              24,552Total current
    assets
              
              
              628,337
              
              
              
              838,092Non-current
      assetsIntangible assets,
      net
              
              
              711,112
              
              
              
              -Deposits and other
      assets
              
              
              20,175
              
              
              
              146,549Net long-term assets of
      discontinued operations
              
              
              -
              
              
              
              30,849Total non-current
      assets
              
              
              731,287
              
              
              
              177,398Total
      assets
              
              $
              1,359,624
              
              
              $
              1,015,490Liabilities
      and Stockholders' DeficitCurrent
      liabilitiesAccounts payable
              
              $
              454,487
              
              
              $
              568,135Accrued liabilities and deferred
      revenue
              
              
              107,317
              
              
              
              99,453Accrued
    compensation
              
              
              66,600
              
              
              
              63,516Commissions
payable
              
              
              580,786
              
              
              
              600,309Financing
    arrangements
              
              
              425,495
              
              
              
              892,866Net current liabilities of
      discontinued operations
              
              
              68,883
              
              
              
              90,955Total current
      liabilities
              
              
              1,703,568
              
              
              
              2,315,234Other
      long-term liabilities
              
              
              -
              
              
              
              1,635Total liabilities
              
              
              1,703,568
              
              
              
              2,316,869Commitments
      and contingenciesStockholders'
      DeficitPreferred stock $.0001 par value,
      400,000 shares authorized, no shares are issued and outstanding as of
      March 31, 2008 and 500,000 shares issued as of June 30,
    2007
              
              
              -
              
              
              
              450,000Common stock $.0001 par value,
      100,000,000 shares authorized; 1,749,401 issued and outstanding as
      of  March 31, 2008 and 210,710 shares issued and outstanding as
      of June 30, 2007
              
              
              175
              
              
              
              21Additional paid-in
      capital
              
              
              15,910,317
              
              
              
              12,192,061Accumulated
deficit
              
              
              (16,254,436
              )
              
              
              (13,943,461
              )Total stockholders’
      deficit
              
              
              (343,944
              )
              
              
              (1,301,379
              )Total
      liabilities and stockholders’ deficit
              
              $
              1,359,624
              
              
              $
              1,015,490
 
 See
Notes to Consolidated Financial Statements
 
 
 BAYHILL
CAPITAL CORPORATION
  Unaudited
Consolidated Statements of Operations
 
 
 Three
      Months Ended
              
              
              Nine
      Months EndedMarch
      31,
              
              
              March
      31,2008
              
              
              2007
              
              
              2008
              
              
              2007(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)Revenue
      - Marketing commissions
              
              $
              922,344
              
              
              $
              1,418,168
              
              
              $
              3,217,452
              
              
              $
              4,423,688Operating
      expenses:Marketing
    commissions
              
              
              520,429
              
              
              
              906,938
              
              
              
              2,025,684
              
              
              
              3,098,385Selling, general and
      administrative
              
              
              693,324
              
              
              
              367,047
              
              
              
              2,912,493
              
              
              
              1,138,768Depreciation and
      amortization
              
              
              66,666
              
              
              
              3,687
              
              
              
              88,888
              
              
              
              7,143Total operating
      expenses
              
              
              1,280,419
              
              
              
              1,277,672
              
              
              
              5,027,065
              
              
              
              4,244,296Earnings
      (loss) from continuing operations
              
              
              (358,075
              )
              
              
              140,496
              
              
              
              (1,809,613
              )
              
              
              179,392Interest
      expense
              
              
              (55,117
              )
              
              
              (40,423
              )
              
              
              (426,772
              )
              
              
              (98,397
              )Earnings
      (loss) from continuing operations before income taxes
              
              
              (413,192
              )
              
              
              100,073
              
              
              
              (2,236,385
              )
              
              
              80,995Income
      taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Earnings
      (loss) from continuing operations
              
              
              (413,192
              )
              
              
              100,073
              
              
              
              (2,236,385
              )
              
              
              80,995Loss
      from discontinued operations
              
              
              -
              
              
              
              (245,417
              )
              
              
              (74,590
              )
              
              
              (248,304
              )Net
      loss
              
              
              (413,192
              )
              
              
              (145,344
              )
              
              
              (2,310,975
              )
              
              
              (167,309
              )Preferred
      dividends
              
              
              -
              
              
              
              (10,000
              )
              
              
              (11,667
              )
              
              
              (30,000
              )Loss
      attributable tocommon
shareholders
              
              $
              (413,192
              )
              
              $
              (155,344
              )
              
              $
              (2,322,642
              )
              
              $
              (197,309
              )Earnings
      (loss) per common share-basic and diluted:Continuing
    operations
              
              $
              (.33
              )
              
              $
              .49
              
              
              $
              (3.23
              )
              
              $
              .41Discontinued
      operations
              
              
              ( .00
              )
              
              
              (1.21
              )
              
              
              (.11
              )
              
              
              (1.26
              )$
              (.33
              )
              
              $
              (.72
              )
              
              $
              (3.34
              )
              
              $
              (.85
              )Weighted
      average number of common shares outstanding:
                Basic and
    Diluted
              
              
              1,249,597
              
              
              
              203,475
              
              
              
              691,559
              
              
              
              197,044
 
 See
Notes to Consolidated Financial Statements
 
 BAYHILL
CAPITAL CORPORATION
 See
Notes to Consolidated Financial Statements
  Unaudited
Consolidated Statements of Cash Flows
 
 Nine
      Months EndedMarch
      31,2008
              
              
              2007Unaudited
              
              
              UnauditedCash
      flows from operating activitiesNet loss
              
              $
              (2,310,975
              )
              
              $
              (167,309
              )Adjustments to reconcile net loss
      to net cash used in operating activities:Amortization and provision on
      investment in Cantara Agency
              
              
              114,825
              
              
              
              -Depreciation and
      amortization
              
              
              88,888
              
              
              
              7,143Bad debt expense
              
              
              345,001
              
              
              
              58,456Beneficial conversion
      feature
              
              
              266,528
              
              
              
              -Issuance of stock as
      compensation
              
              
              1,238,667
              
              
              
              14,422Changes in assets and
      liabilities:Accounts
    receivable
              
              
              -
              
              
              
              (72,206
              )Commissions
      receivable
              
              
              (56,521
              )
              
              
              (48,966
              )Other current
    assets
              
              
              12,228
              
              
              
              (8,082
              )Accounts payable
              
              
              55,577
              
              
              
              158,340Accrued
    liabilities
              
              
              41,312
              
              
              
              (15,710
              )Accrued
    compensation
              
              
              3,084
              
              
              
              65,735Commissions
    payable
              
              
              (19,523
              )
              
              
              (120,876
              )Other liabilities
              
              
              (1,635
              )
              
              
              19,9092,088,431
              
              
              
              58,165Net cash used in continuing
      operations
              
              
              (222,544
              )
              
              
              (109,144
              )Net cash used in discontinued
      operations
              
              
              (22,072
              )
              
              
              (81,469
              )Net cash used in
      operations
              
              
              (244,616
              )
              
              
              (190,613
              )Cash
      flows from investing activitiesSale of Cognigen Business Systems,
      Inc.
              
              
              (14,458
              )
              
              
              -Decrease other
    assets
              
              
              11,549
              
              
              
              2,914Net cash provided by (used in)
      continuing investing activities
              
              
              (2,909
              )
              
              
              2,914Net cash provided by (used in)
      discontinued investing activities
              
              
              30,849
              
              
              
              (64,445
              )Net cash provided by (used in)
      investing activities
              
              
              27,940
              
              
              
              (61,531
              )Cash
      flows from financing activitiesProceeds from notes
      payable
              
              
              550,000
              
              
              
              250,000Payments towards notes
      payable
              
              
              (242,371
              )
              
              
              (22,064
              )Proceeds from other financing
      arrangements
              
              
              -
              
              
              
              24,208Net cash provided by financing
      activities
              
              
              307,629
              
              
              
              252,144Net
      increase in cash and cash equivalents
              
              
              90,953
              
              
              
              -Cash
      and cash equivalents-beginning of period
              
              
              -
              
              
              
              -Cash
      and cash equivalents-end of period
              
              $
              90,953
              
              
              $
              -
  
 BAYHILL
CAPITAL CORPORATION
  See
Notes to Consolidated Financial Statements
 
 
 Supplemental
Disclosures of Cash Flow Information and Non-Cash Transactions
 
 Cash
payments for interest expense during the nine months ended March 31, 2008 and
2007 were  $50,246 and $98,397, respectively.
 
 In
September 2007, the Company repurchased 24,921 of its common shares as partial
consideration for the sale of 100% of the equity interests of Cognigen Business
Systems, Inc.  Immediately following the repurchase of these common
shares, the Company cancelled such shares which the Company deemed to have a net
value of $42,984.  See Note 3 of the Notes to Consolidated Financial
Statements.
 
 During
the nine months ended March 31, 2008, the Company issued the following
restricted common shares for those reasons and values identified
below.  See Note 6 of the Notes to Consolidated Financial
Statements:
 
 Shares
              
              
              ValueSettlement
      of outstanding liabilities
              
              
              113,015
              
              
              $
              161,449Conversion
      of notes payable and related accrued interest
              
              
              607,930
              
              
              $
              801,224Conversion
      of preferred stock
              
              
              10,000
              
              
              $
              450,000Board
      of Directors fees or bonus – Former Directors
              
              
              12,000
              
              
              $
              24,000Board
      of Directors fees or bonus– Current Directors
              
              
              102,000
              
              
              $
              243,000Issuance
      to management as sign-on bonuses
              
              
              200,000
              
              
              $
              500,000Issuance
      to management in lieu of salaries
              
              
              148,667
              
              
              $
              371,667Issuance
      to consultants
              
              
              50,000
              
              
              $
              115,000Commission
      River asset acquisition
              
              
              320,000
              
              
              $
              800,000
 
 On
December 31, 2007, the Company entered into a lease termination agreement with
an unrelated third party.  Pursuant to the terms of the termination
agreement, the Company agreed to pay to the landlord $45,000, payable in the
form of $20,000 in cash and a short-term promissory note in the original
principal amount of $25,000, payable at $5,000 per month beginning February 1,
2008 as consideration for the termination of the lease.  See Note 7 of
the Notes to Consolidated Financial Statements.
 
  
   
   5
 BAYHILL
CAPITAL CORPORATION
   Notes
to Consolidated Financial Statements
 
 Note 1 – Description of
Business
 
 BayHill
Capital Corporation (“BHCC or the “Company”, formerly Cognigen Networks, Inc.)
was incorporated in May 1983 in the State of Colorado.  The Company
markets and sells services and products through commission-based marketing
agents who use the Internet as a platform to provide customers and subscribers
with a variety of telecommunications and technology-based products and
services.  Historically, the Company has generated revenues in two
ways. First, the Company has generated marketing commission revenues from
vendors who are represented on web sites operated by independent agents and for
whom the Company sells products and services via contractual agreements.
Generally, the Company enters into contractual agreements with these vendors,
who pay the Company commissions based on the volume of products and services
sold by the Company’s independent sales agents.  The Company then pays
a portion of those commission revenues to the independent sales agents
responsible for making the sales upon which the commissions were based. A
significant portion of the Company’s commission revenues is attributable to the
sale of domestic and international long distance services; however, the Company
also generates commission revenues from the sale of prepaid calling cards/pins
and paging, wireless communications, computers and Internet-based
telecommunications products.
 
 Second,
the Company has also generated revenues from sales of proprietary products and
services. Generally, the Company has acquired or developed these proprietary
products and services with the intention of marketing such products and services
through its independent agent network. These products and services have included
long distance telecommunication services, online shopping websites and broadband
voice, data, video and management communication and control support services.
Most of these products have been sold by independent agents, and the Company has
generally paid commissions to independent agents based on the dollar volume of
products sold.
  On March
31, 2008, the Company conducted a special meeting of shareholders at which the
shareholders of the Company approved a series of proposals previously approved
by the Company’s Board of Directors.  These proposals consisted of i)
a proposal to amend the Company’s Articles of Incorporation of the Company to
effect a reverse split of the outstanding shares of the Company’s common stock
pursuant to which each 50 shares of the Company’s pre-split common stock issued
and outstanding as of the effective date of the reverse split would be exchanged
for one share of the Company’s post-split common stock, ii) a proposal to amend
the Company’s Articles of Incorporation to reduce the number of authorized
shares of the Company’s common stock from 300,000,000 shares, $.001 par value
per share, to 100,000,000 shares, $.0001 par value per share, and the number of
authorized shares of the Company’s preferred stock from 20,000,000 shares, no
par value per share, to 400,000 shares, $.0001 par value per share, (iii) a
proposal to amend the Articles of Incorporation to change the name of the
Company to BayHill Capital Corporation and make other changes necessary to
facilitate the foregoing actions and the re-incorporation of the Company, (iv) a
proposal to re-incorporate the Company under the laws of the State of Delaware,
and (v) a proposal to adopt the Cognigen Networks, Inc. 2008 Stock Incentive
Plan.
 
 Effective
April 23, 2008 the Company’s management completed the actions necessary to
effect the name change, reverse stock split, Delaware re-incorporation and
reduction in the number of authorized
   
  6
 BAYHILL
CAPITAL CORPORATION
  shares of
common and preferred stock.  The Company’s common stock began trading
on April 23, 2008 on a post-split basis under the symbol "BYHL."  All
share and per-share amounts included in these consolidated financial statements
have been restated to reflect the 1 for 50 reverse stock split.
 
 Note 2 – Summary of
Significant Accounting Policies
  The
accompanying consolidated financial statements of the Company include the
accounts of the Company and its former subsidiaries, LowestCostMall.com (“LCM”)
and Cognigen Business Systems, Inc. (“CBSi”), both of which are treated as
discontinued operations (see Note 3).  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 statement of
operations for the three and nine-month periods ended March 31, 2008 and 2007,
respectively, (b) the unaudited consolidated balance sheet as of March 31, 2008
and (c) the unaudited consolidated statements of cash flows for the nine-month
periods ended March 31, 2008 and 2007, respectively, in order to make the
financial statements not misleading.
 
 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,
2007, included in the Company’s Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission, as amended by Amendments No. 1 and No. 2 on
Forms 10-KSB/A filed with the U.S. Securities and Exchange
Commission.
 
 The
preparation of the Company’s consolidated financial statements requires the
Company’s 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 nine months ended March 31, 2008 may not necessarily be
indicative of the results for the fiscal year ending June 30,
2008.
  Note 3 – Discontinued
Operations
  LowestCostMall
  In July
2006, the Company discontinued the operations conducted by LCM.
  Cognigen Business Systems,
Inc.
  On
September 14, 2007, the Company sold its 100% ownership in CBSi to Carl Silva
and Anza Borrego Partners, Inc. (“ABP”) for 24,921 shares of the Company’s
common stock valued at $56,196 and the retention of $30,844 of CBSi-related
accounts payable.  The consideration was calculated to have a total
value of $42,984 after considering the net assets of CBSi given up, the
retention of accounts payable and the value of the shares of common stock
returned to the Company and cancelled.  The decision to sell the
ownership interest in CBSi was based on the determination by the Company’s Board
of Directors that CBSi likely would be unable to generate sufficient cash flows
to cover its anticipated expenses.  In conjunction with this sale, an
employment agreement entered into between
   
 7
 BAYHILL
CAPITAL CORPORATION
  the
Company and Carl Silva, a principal of ABP, and all benefits related to that
employment agreement, were terminated and or relinquished.  All other
agreements with ABP were also terminated in relation to delivering to ABP shares
of the Company’s common stock based on pretax income for CBSi that was included
in the original agreement with Carl Silva and ABP.
  Sale of Proprietary
Telecommunications Accounts
  On
October 13, 2006, the Company agreed to sell its interest in the majority of its
telecommunications “one plus” accounts for which it recorded telecommunications
revenue through sales of proprietary products and services.
  The
following is financial information as of March 31, 2008 relative to the
discontinued operations described above.
  Accrued
      liabilities
              
              $
              (68,883
              )Net
      current liabilities
              
              $
              (68,883
              )
  
  Nine
      Months Ended
                  March
      31, 2008
              
              
              Nine
      Months Ended
                  March
      31, 2007Total
      revenue
              
              $
              22,535
              
              
              $
              1,332,893Operating
      expenses
              
              
              97,125
              
              
              
              1,783,477Loss
      from operations
              
              
              (74,590
              )
              
              
              (450,584
              )Gain
      on sale of assets
              
              
              -
              
              
              
              202,280Income
      taxes
              
              
              -
              
              
              
              -Net
      loss
              
              $
              (74,590
              )
              
              $
              (248,304
              )
   Note4– Management’s
Plan
  Cash
flows generated from operations, advances pursuant to the Company’s Receivables
Purchase Agreement, dated December 26, 2003, with Silicon Valley Bank (the
“Receivables Purchase Agreement”) and cash from the issuance of notes payable to
BayHill Capital, LC were sufficient to meet the Company’s working capital
requirements for the nine months ended March 31, 2008, but will not likely be
sufficient to meet the Company’s working capital requirements for the
foreseeable future or provide for expansion opportunities.  The
Company incurred $2,236,385 in losses from continuing operations and used
$244,616 in operations for the nine months ended March 31, 2008.  Net
cash flows generated from financing activities for the nine months ended March
31, 2008 were $307,629 primarily due to $550,000 of proceeds from
financings.
  The
Receivables Purchase Agreement expired March 24, 2008.  Silicon Valley
Bank did not renew the Receivables Purchase Agreement and demanded that the
Company repay the outstanding balance by
   8
 BAYHILL
CAPITAL CORPORATION
  May 8,
2008.  As of March 31, 2008 the balance owed by the Company to Silicon
Valley Bank pursuant to the Receivable Purchase Agreement was
$240,753.  On May 12, 2008, the Company repaid the full amount owing
to Silicon Valley Bank pursuant to the Receivables Purchase Agreement and the
Receivables Purchase Agreement was terminated.
 
 On
October 10, 2006, the Company entered into an agreement with VenCore Solutions,
LLC (“VenCore”) to borrow $250,000 under a term loan to be repaid by making
monthly payments of $9,000, which includes interest at 16.7% per
annum.  The loan is fully amortizable over 36 months, and was used for
working capital purposes.  VenCore was granted a lien subordinate to
Silicon Valley Bank on all assets of the Company.  In November 2007,
the Company made a proposal, to VenCore, for a change in payment terms that is
pending approval by their loan committee.  VenCore’s loan committee
has not approved or accepted the Company’s proposal.  Since November
2007, the Company has made monthly payments to VenCore of only $5,000 per
month.  Although the Company may be in technical default under the
VenCore loan agreement, VenCore has not notified the Company of its default at
this time.
 
 On June
15, 2007 and June 28, 2007, BayHill Capital, LC extended to the Company
short-term loans in the amount of $100,000 and $150,000,
respectively.  Both of these notes, together with accrued interest,
were converted on October 17, 2007 into 206,621 shares of the Company’s common
stock.
 
 On
September 26, 2007, BayHill Capital, LC extended to the Company a short-term
loan in the amount of $30,000, which bore interest at 10% per
annum.  The promissory note evidencing the loan was due on October 13,
2007.  Beginning October 14, 2007, the promissory note became
convertible at the lower of $2.50 per share or 80% of the average closing bid
price of the Company’s common stock for the preceding five trading
days.  On November 5, 2007, BayHill Capital, LC extended to the
Company a short-term loan in the amount of $150,000, with interest at 10% per
annum.  The promissory note evidencing the loan was convertible into
shares of the Company’s common stock at $1.50 per share.  This note
was due on December 4, 2007.  Both the $30,000 and $150,000 short-term
loans, together with accrued interest of $8,852, were converted on March 31,
2008 into 118,033 shares of the Company’s common stock.
 
 BayHill
Capital, LC extended to the Company a series of short-term loans, with interest
at 12% per annum, on the following dates and for the following amounts: December
5, 2007 for $125,000, December 27, 2007 for $100,000, January 24, 2008 for
$30,000, February 15, 2008 for $40,000, and March 6, 2008 for $50,000. These
short-term loans, together with accrued interest of $9,593, were converted on
March 31, 2008 into 283,677 shares of the Company’s common stock.
  There can
be no assurance that the Company will be able to secure additional debt or
equity financing, or that the Company will be able to reduce or eliminate more
costs and expenses or that cash flows from operations will produce adequate cash
flow to enable the Company to meet all future obligations or to be able to
expand.  As of March 31, 2008, the Company’s current liabilities of
$1,703,568 exceeded its current assets by $1,075,231. All of the Company’s
existing financing arrangements are short-term.  On February 27, 2008
the Company’s Board of Directors approved the issuance of $1,500,000 of
unsecured convertible notes as part of the Company’s attempts to secure
additional financing.  On March 31, 2008 this amount was reduced to
$1,000,000.  As of March 31, 2008 the Company had no unsecured notes
outstanding.
  The
Company has previously reported its possible interest in filing an application
and other materials with the SEC in order to obtain a charter as a Business
Development Company (hereinafter, a "BDC"), as defined in the Investment Company
Act of 1940, as amended. If the Company elects to become a
   9
 BAYHILL
CAPITAL CORPORATION
  BDC, and
is granted a charter by the SEC, the Company plans to continue its historic
business operations through its wholly-owned subsidiary, Commission River
Corporation.  The Company’s management would continue to operate and
manage the wholly-owned subsidiary and continue its efforts to develop and
expand the Company’s historical business.
 
 If the
Company elects to make application for a charter as a BDC, if the Company’s
application for a BDC charter is approved, and if the Company is able to obtain
additional capital financing, the Company’s management believes the Company
would have the ability to provide capital and management advisory services to
smaller public and private companies seeking access to public capital markets,
financial and operational management expertise, and various forms of traditional
equity and debt capital.  Prior to finalizing a decision to become a
BDC, the Company intends to move forward with its plans and activities in an
effort to secure additional equity financing and enhance and expand its
affiliate marketing business.
 
 Note
5 – Financing Arrangements
 
 The
following consists of the Company’s financing arrangements as of March 31,
2008:
 
 Receivables
      Purchase Agreement with SVBank
              
              $
              240,753Secured
      Term Loan with VenCore
              
              
              174,742Note
      Payable to Cardelco
              
              
              10,000$
              425,495
 
 Receivables Purchase
Agreement
 
 On
December 26, 2003, the Company and Silicon Valley Bank entered into the
Receivables Purchase Agreement which, as subsequently amended, provided for up
to $1,000,000 in marketing commissions receivable to be used as collateral for
advances under the Receivables Purchase Agreement, of which 80% of the marketing
commissions receivable balances were available in cash advances to the
Company.  Interest charges were 1.5% per month on the marketing
commissions receivable balances used as collateral.  Silicon Valley
Bank was given a first-position security interest in the assets of the Company,
including all of the Company’s copyrights, trademarks, patents and mask works,
as a condition to the Receivables Purchase Agreement.  The Receivables
Purchase Agreement contains certain positive and negative covenants with respect
to the Company’s business operations, including but not limited to, the
requirement of Silicon Valley Bank’s approval to the disposition of assets,
change in ownership and additional indebtedness.  The Company paid
facility, audit and due diligence fees to Silicon Valley Bank upon renewal of
the Receivables Purchase Agreement in March of 2007 of approximately
$7,000.  This amount was amortized into interest expense over one
year.  Silicon Valley Bank did not renew the Receivables Purchase
Agreement and demanded that the Company repay the outstanding balance by May 8,
2008.  As of March 31, 2008 the balance owed by the Company to Silicon
Valley Bank pursuant to the Receivable Purchase Agreement was
$240,753.  On May 12, 2008, the Company repaid the full amount owing
to Silicon Valley Bank pursuant to the Receivables Purchase Agreement, and the
Receivables Purchase Agreement was terminated.
 
 Secured Term Loan with
VenCore Solutions, Inc.
 
 On
October 10, 2006, the Company entered into an agreement with VenCore to borrow
$250,000 under a term loan to be repaid by making monthly payments of $9,000,
which includes interest at 16.7% per annum.  The loan is fully
amortizable over 36 months.  The loan documents contain certain
   10
 BAYHILL
CAPITAL CORPORATION
 covenants,
which include but are not limited to, the requirement of VenCore’s approval of
the disposition of material assets of the Company, the incurrence of additional
liens on the Company’s assets or the change of debtors.  As part of
the agreement, the Company issued to VenCore warrants to purchase 1,500 shares
of restricted common stock of the Company valued at $5,093.  The
warrants have an exercise price of $6.00 per share and are exercisable for up to
seven years from date of grant.  The Company granted VenCore a
second-lien position on substantially all assets of the Company, which is
subordinate to the claim of Silicon Valley Bank pursuant to the Receivables
Purchase Agreement.  The Company also paid to VenCore commitment and
documentation fees of $5,500.  These fees are being amortized over
three years as an adjustment to interest expense.  In November 2007,
the Company made a proposal, to VenCore, for a change in payment terms that is
pending approval by their loan committee. VenCore’s loan committee has not
approved or accepted the Company’s proposal.  Since November 2007, the
Company has made monthly payments of only $5,000 per month.  Although
the Company may be in technical default under the VenCore loan agreement,
VenCore has not notified the Company of its default at this time.
 
 Convertible Secured
Promissory Notes with BayHill Capital
 
 On June
15, 2007 and June 28, 2007, BayHill Capital, LC extended to the Company
short-term loans in the amount of $100,000 and $150,000,
respectively.  Both of these notes, together with accrued interest of
$7,776, were converted on October 17, 2007 into 206,621 shares of the Company’s
common stock.  The conversion feature within the promissory notes that
was exercised in October 2007 resulted in the Company recording a beneficial
conversion feature in stockholders equity of approximately $255,000 and an
offset to interest expense during the nine months ended March 31, 2008 in the
Company’s statement of operations.
 
 On
September 26, 2007, BayHill Capital, LC extended to the Company a short-term
loan in the amount of $30,000, with interest at 10% per annum.  The
promissory note evidencing the loan was due on October 13,
2007.  Beginning October 14, 2007, the promissory note became
convertible at the lower of $2.50 per share or 80% of the average closing bid
price of the Company’s common stock for the preceding five trading
days.  On November 5, 2007, BayHill Capital, LC extended to the
Company a short-term loan in the amount of $150,000, with interest at 10% per
annum.  The promissory note evidencing the loan was convertible into
shares of the Company’s common stock at $1.50 per share.  This note
was due on December 4, 2007.  Both the $30,000 and $150,000 short-term
loans, together with accrued interest of $8,852, were converted on March 31,
2008 into 118,033 shares of the Company’s common stock. The conversion feature
within the short-term loans that was exercised resulted in the Company recording
a beneficial conversion feature in stockholders equity of approximately $110,000
and an offset to interest expense in the Company’s statement of
operations.
 
 Unsecured Secured Promissory
Notes with BayHill Capital, LC
 
 BayHill
Capital, LC extended to the Company a series of short-term loans, with interest
at 12% per annum, on the following dates and for the following amounts: December
5, 2007 for $125,000, December 27, 2007 for $100,000, January 24, 2008 for
$30,000, February 15, 2008 for $40,000, and March 6, 2008 for $50,000. These
short-term loans, together with accrued interest of $9,593, were converted on
March 31, 2008 into 283,677 shares of the Company’s common stock.
   11
 BAYHILL
CAPITAL CORPORATION
 Note Payable to
Cardelco
 
 On
December 31, 2007, Cardelco, LLC (“Cardelco”) entered into a short-term
promissory note with the Company in the amount of $25,000. The note obligated
the Company to make payments in the amount of $5,000 per month starting February
1, 2008 until fully paid.  This promissory note did not bear interest
unless default occurred, at which time interest would accrue at 10% per
annum.   This note was part of a lease termination agreement
between the Company and Cardelco relating to a lease for office space in San
Diego, California.  The termination agreement consisted of paying
$45,000 to Cardelco, $20,000 of which was paid upon agreeing to the termination
agreement and $25,000 in form of a short-term promissory note.
  Note 6 - Stockholders'
Equity
  Special Meeting of the
Shareholders
 
 On March
31, 2008, the Company conducted a special meeting of shareholders at which the
shareholders of the Company approved a series of proposals previously approved
by the Company’s Board of Directors.  These proposals consisted of i)
a proposal to amend the Articles of Incorporation of the Company to effect a
reverse split of the outstanding shares of the Company’s common stock pursuant
to which each 50 shares of the Company’s pre-split common stock issued and
outstanding as of the effective date of the reverse split would be exchanged for
one share of the Company’s post-split common stock, ii) a proposal to amend the
Articles of Incorporation to reduce the number of authorized shares of the
Company’s common stock from 300,000,000 shares, $.001 par value per share, to
100,000,000 shares, $.0001 par value per share, and the number of authorized
shares of the Company’s preferred stock from 20,000,000 shares, no par value per
share, to 400,000 shares, $.0001 par value per share, (iii) a proposal to amend
the Articles of Incorporation to change the name of the Company to BayHill
Capital Corporation and make other changes necessary to facilitate the foregoing
actions and the re-incorporation of the Company, (iv) a proposal to
re-incorporate the Company under the laws of the State of Delaware, and (v) a
proposal to adopt the Cognigen Networks, Inc. 2008 Stock Incentive
Plan.
 
 Effective
April 23, 2008 the Company’s management completed the actions necessary to
effect the name change, reverse stock split, Delaware re-incorporation and
reduction in the number of authorized shares of common and preferred
stock.  The Company’s common stock began trading on April 23, 2008 on
a post-split basis under the symbol "BYHL."
  Preferred
Stock
  On
October 17, 2002 the Company issued 10,000 shares of 8% Convertible Series A
Preferred Stock (the “Series A Preferred Stock”) to Stanford International Bank
Limited for $500,000.  Each share of the Series A Preferred Stock was
convertible, at the option of the holder, into one share of the Company’s common
stock for a period of five years.  After five years, all of the
issued and outstanding shares of the Series A Preferred Stock were automatically
converted to shares of the Company’s common stock.  The Series A
Preferred Stock did not have voting rights and had a liquidation preference of
$50.00 per share. All of the issued and outstanding shares of Series A
Preferred Stock were automatically converted into 10,000 shares of the
Company’s common stock on October 14, 2007 according to the terms of the Series
A Preferred Stock and the 10,000 shares of Series A Preferred Stock were
cancelled.
   12
 BAYHILL
CAPITAL CORPORATION
  As of
March 31, 2008 the Company has authorized 400,000 shares of Preferred
Stock.  There are currently no shares of Preferred Stock
outstanding.
  Common
Stock
 BayHill Capital,
LC
 
 On
October 17, 2007, BayHill Capital, LC converted principal in the amount of
$250,000, together with accrued interest in the amount of $7,776, owing under
convertible promissory notes into 206,621 shares of the Company’s common
stock.  See Note 5 above.
 
 Commission River,
Inc.
 
 On
November 30, 2007, the Company entered into an Asset Purchase and Reorganization
Agreement (the “Purchase Agreement”) by and among the Company and Commission
River, Inc. (“Commission River”).  Pursuant to the terms of the
Purchase Agreement, the Company acquired substantially all of Commission River’s
assets in exchange for the issuance of 320,000 shares of the Company’s common
stock.  The Commission River assets acquired by the Company consisted
primarily of intellectual property, employment agreements and non-compete
agreements.   The cost of the acquisition was valued at $800,000,
of which $400,000 was allocated to intellectual property and $400,000 was
allocated to the three-year employment and non-compete
agreements.  These intangible costs are being amortized over their
three-year estimated useful lives.   Upon the issuance of these
320,000 common shares, Commission River became the largest holder of the
Company’s common stock.
 
 Cognigen Business Systems,
Inc.
 During
the fiscal years ended June 30, 2007 and June 30, 2006 and the fiscal quarter
ended September 30, 2007, the Company generated revenue from the CBSi’s
operations in the amount of $58,463, $0 and $15,233,
respectively.  During the same period (July 1, 2005 through September
30, 2007), the Company incurred in excess of $600,000 in expenses associated
with the CBSi operations.  After reviewing the activities and
operations of CBSi, the Board of Directors of the Company concluded that the
large loses generated by CBSi, and the projected amount of cash required to
develop and market the intended CBSi products, did not warrant further
investment in CBSi or continued marketing and sale of the CBSi
products.  The Company’s Board of Directors determined that it was in
the best interests of the Company and its shareholders to focus the Company’s
efforts on continuing to develop its historical agent marketing business and, on
September 14, 2007, agreed to sell its 100% ownership in CBSi to Carl Silva and
ABP, effective August 31, 2007, for 24,921 shares of the Company’s common stock
valued at $56,196 and the retention of $30,844 of CBSi-related accounts
payable.  In conjunction with this sale, the employment agreement and
all benefits related thereto with Carl Silva were terminated and or
relinquished.   All other agreements with ABP were also
terminated in relation to delivering to ABP shares of common stock based on
pretax income for CBSi that was included in the original agreement with Carl
Silva and ABP.  The 24,921 shares of the Company’s common stock the
Company received in the transaction were cancelled.
  Other issuances of common
stock
  During
the nine months ended March 31, 2008, the Company issued the following
restricted common shares for the reasons and values identified
below:
 
 
 13
 BAYHILL
CAPITAL CORPORATION
 
 Shares
              
              
              ValueSettlement
      of outstanding liabilities
              
              
              113,015
              
              
              $
              161,449Conversion
      of notes payable and related accrued interest
              
              
              607,930
              
              
              $
              801,224Conversion
      of preferred stock
              
              
              10,000
              
              
              $
              450,000Board
      of Directors fees or bonus – Former Directors
              
              
              12,000
              
              
              $
              24,000Board
      of Directors fees or bonus– Current Directors
              
              
              102,000
              
              
              $
              243,000Issuance
      to management as sign-on bonuses
              
              
              200,000
              
              
              $
              500,000Issuance
      to management in lieu of salaries
              
              
              148,667
              
              
              $
              371,667Issuance
      to consultants
              
              
              50,000
              
              
              $
              115,000
 
  The
values recorded to the settlement of outstanding liabilities, conversion of
notes payables and related accrued interest and conversion of preferred stock
were all recorded at contractually stated or negotiated amounts.  The
values of all other transactions were recorded at the closing market price of
the Company’s common stock on the date the Company’s Board of Directors approved
the issuance.
  Stock
Options
  At a
special meeting of the Company’s shareholders held on March 31, 2008, the
shareholders of the Company approved a proposal to adopt the Cognigen Networks,
Inc. 2008 Stock Incentive Plan (the “Stock Incentive Plan”).  The
Stock Incentive Plan became effective on April 23, 2008.  All
directors, employees, consultants and advisors of the Company and its
subsidiaries are eligible to receive awards under the Stock Incentive Plan.The Stock Incentive
Plan will be administered by the Compensation Committee of the Board of
Directors of the Company. The Stock Incentive Plan will continue until April 23,
2018.  A maximum of 15,000,000 shares of common stock of the Company
(which became 300,000 shares of common stock following the consummation of the
one for 50 reverse split of the Company’s common stock reverse split which also
became effective on April 23, 2008) are available for issuance under the Stock
Incentive Plan.   The following types of awards are available
under the Stock Incentive Plan: (i) stock options; (ii) stock appreciation
rights; (iii) restricted stock; (iv) restricted stock units; and (v) performance
awards.  The Board of Directors of the Company may, from time to time,
alter, amend, suspend or terminate the Stock Incentive Plan.  As of
March 31, 2008, the Company had made no awards under the Stock Incentive
Plan.
 
 The
Company has also established the 2001 Incentive and Nonstatutory Stock Option
Plan (the Plan), which authorizes the issuance of up to 12,500 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.
  The
Company did not grant any stock options during the nine months ended March 31,
2008.   As of March 31, 2008 there were 16,100 stock options
outstanding under the Plan and outside the Plan.  During the nine
months ended March 31, 2008, there were 1,940 stock options that either expired
or were cancelled unexercised.
  Warrants
  The
Company did not grant any warrants during the nine months ended March 31,
2008.  As of March 31, 2008 there were outstanding warrants to
purchase 5,500 shares of the Company’s common stock.  During the nine
months ended December 31, 2007, warrants to purchase 7,000 shares of the
Company’s common stock expired unexercised.
   14
 BAYHILL
CAPITAL CORPORATION
  Note 7- Commitments and
Contingencies
  Operating
Leases
  The
Company was not obligated to pay any future minimum lease payments under any
leases as of March 31, 2008.   On December 31, 2007, the Company
entered into a lease termination agreement with an unrelated third
party.  Pursuant to the terms of the termination agreement, the
Company agreed to pay to the landlord $45,000, payable in the form of $20,000 in
cash and a short-term promissory note in the original principal amount of
$25,000, payable at $5,000 per month beginning February 1, 2008 as consideration
for the termination of the lease.
  Note 8–  Related Party
Activity
   A prior
director of the Company has been performing consulting services for the Company
since June 15, 2007, and was paid a total of $52,500 during the nine months
ended March 31, 2008.
   Payments to
Telarus,
Inc.
   During
the nine months ended March 31, 2008, the Company accrued $75,479 for payments
to Telarus, Inc. (“Telarus”) for services performed by the employees of Telarus
on behalf of the Company and various expenses paid by Telarus on behalf of the
Company.   This amount was included in accounts payable of the
Company.  On March 31, 2008, upon the approval of the Company’s Board
of Directors, Telarus converted $75,000 of the accrued amount into 60,000 shares
of common stock of the Company.  Telarus is owned by two executive
officers of Commission River Corporation, a wholly-owned subsidiary of the
Company.  The Company plans to continue using the services of Telarus
employees on a limited basis for the next twelve months.  Services
provided by Telarus include the performance of various accounting and software
development projects which are limited in scope.  Services are billed
to the Company on an hourly basis and are approved by an executive of the
Company who is not affiliated with Telarus.  The Company anticipates
that the expense of services provided by Telarus will be less than $15,000 per
month in the future.
   15
  
 Item
2.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
 1.  Overview
  BayHill
Capital Corporation (the “Company” formerly Cognigen Networks, Inc.) markets and
sells services and products through commission-based marketing agents who use
the Internet as a platform to provide customers and subscribers with a variety
of telecommunications and technology-based products and
services.  Historically, the Company has generated revenues in two
ways. First, the Company has generated marketing commission revenues from
vendors who are represented on web sites operated by independent agents and for
whom the Company sells products and services via contractual agreements.
Generally, the Company enters into contractual agreements with these vendors,
who pay the Company commissions based on the volume of products and services
sold by the Company’s independent sales agents.  The Company then pays
a portion of those commission revenues to the independent sales agents
responsible for making the sales upon which the commissions were based. A
significant portion of the Company’s commission revenues is attributable to the
sale of domestic and international long distance services; however, the Company
also generates commission revenues from the sale of prepaid calling cards/pins
and paging, wireless communications, computers and Internet-based
telecommunications products.
 
 Second,
the Company has also generated revenues from sales of proprietary products and
services. Generally, the Company has acquired or developed these proprietary
products and services with the intention of marketing such products and services
through its independent agent network. These products and services have included
long distance telecommunication services, online shopping websites and broadband
voice, data, video and management communication and control support services.
Most of these products have been sold by independent agents, and the Company has
generally paid commissions to its independent agents based on the dollar volume
of products sold.
   Three
Months Ended March 31, 2008 Compared to Three Months Ended March 31,
2007
   Total
revenue for the three months ended March 31, 2008 was $922,344, compared to
$1,418,168 for 2007. This represents a decrease of $495,824 from that of 2007,
or 35%.  This decrease reflects decreases in sales of long distance
products and cell phones, including the effect of
decreased commissions paid by our largest cell phone carrier who filed for
protection under Chapter 11 of the U.S. Bankruptcy Code.
  Marketing
commission expense decreased from $906,938 for 2007 to $520,429 for 2008, a
decrease of $386,509, or 43%.  This decrease correlates to a decrease
in marketing commissions revenue explained above.
  Selling,
general and administrative expenses increased $326,277, or 89% for the quarter
ended March 31, 2008 compared to the comparable period of 2007.  This
increase was attributable to issuances of stock for services performed by a
director and a consultant of the Company, for which a value in the aggregate was
recorded to general and administrative expenses of approximately
$63,000   Also during the quarter ended March 31, 2008, the
Company had an increase in personnel as a result of the Commission River
acquisition, an increase in legal, accounting and other expense associated with
preparations for, and conduct of a special shareholders meeting on March 31,
2008, as well as corporate restructuring efforts resulting therefrom, and bad
debt expense of approximately $140,000.
  Interest
expense for the quarter ended March 31, 2008 of $55,117 was $14,694, or 36%,
higher than
   16
   the
$40,423 for the comparable period of 2007 due primarily to higher average
outstanding receivables financing and short-term loan balances during
2008.
  Nine
Months Ended March 31, 2008 Compared to Nine Months Ended March 31,
2007
 
  Total
revenue for the nine months ended March 31, 2008 was $3,217,452 compared to
$4,423,688 for 2007. This represents a decrease of $1,206,236 from that of 2007,
or 27%.  This decrease reflects decreases in sales of long distance
products and cell phones, including the effect of
decreased commissions paid by our largest cell phone carrier who filed for
protection under Chapter 11 of the U.S. Bankruptcy Code.
  Marketing
commission expense decreased from $3,098,385 for 2007 to $2,025,684 for 2008, a
decrease of $1,072,701, or 35%. This decrease correlates to a decrease in
marketing commissions revenue explained above.
  Selling,
general and administrative expenses increased $1,773,725, or 156%, during
the nine months ended March 31, 2008, compared to the comparable period of
2007.  This increase was largely attributable to issuances of shares
of the Company’s common stock in exchange for services provided by directors,
management and consultants of the Company, for which a value in the aggregate
was recorded to general and administrative expenses of approximately
$1,300,000.  In addition, during the nine months ended March 31, 2008,
the Company recorded bad debt expense of approximately $345,000 attributable to
receivables from our largest cell phone carrier who filed for protection under
Chapter 11 of the U.S. Bankruptcy Code and our evaluation of the collectibility
of other commissions receivable.  Also during the nine months ended
March 31, 2008 we had an increase in personnel due to the acquisition of
Commission River and an increase in legal, accounting and other
expenses associated with preparations for, and conduct of the Company’s
annual meeting of shareholders in December 2007, and the Company’s special
shareholders meeting on March 31, 2008, as well as corporate restructuring
efforts resulting therefrom.
  Interest
expense for the nine months ended March 31, 2008 of $426,772 was $328,375,
or 334%, higher than the $98,397 for the comparable period of 2007, due
primarily to beneficial conversion features of approximately $266,000 recorded
during the nine months ended March 31, 2008.   The beneficial
conversion features related to the promissory notes and short term loans from
BayHill Capital, LC that were subsequently converted to shares of the Company’s
common stock.
 
 Liquidity
and Capital Resources
  Cash
flows generated from operations, cash received from the Company’s Receivables
Purchase Agreement with Silicon Valley Bank and loans from BayHill Capital, LC
were sufficient to meet the Company’s working capital requirements for the nine
months ended March 31, 2008, but will not likely be sufficient to meet the
Company’s working capital requirements for the foreseeable future or provide for
expansion opportunities.  The Company incurred $2,236,385 in losses
from continuing operations and used $244,616 in operations for the nine months
ended March 31, 2008.   Net cash flows generated from financing
activities for the nine months ended March 31, 2008 were $307,629, primarily due
to $550,000 of proceeds from financings.
  The
Receivables Purchase Agreement expired March 24, 2008.  Silicon Valley
Bank did not renew the Receivables Purchase Agreement and demanded that the
Company repay the outstanding balance by May 8, 2008.  As of March 31,
2008 the balance owed by the Company to Silicon Valley Bank pursuant to the
Receivable Purchase Agreement was $240,753.  On May 12, 2008, the
Company
   17
  repaid
the full amount owing to Silicon Valley Bank pursuant to the Receivables
Purchase Agreement, and the Receivables Purchase Agreement was
terminated.
 
 On
October 10, 2006, the Company entered into an agreement with VenCore Solutions,
LLC (“VenCore”) to borrow $250,000 under a term loan to be repaid by making
monthly payments of $9,000, which includes interest at 16.7% per
annum.  The loan is fully amortizable over 36 months, and was used for
working capital purposes.  VenCore was granted a lien subordinate to
Silicon Valley Bank on all assets of the Company.  In November 2007,
the Company made a proposal, to VenCore, for a change in payment terms that is
pending approval by VenCore’s loan committee.  VenCore’s loan
committee has not approved or accepted the Company’s proposal.  Since
November 2007, the Company has made monthly payments to VenCore of only $5,000
per month.  Although the Company may be in technical default under the
VenCore loan agreement, VenCore has not notified the Company of its default at
this time.
 
 On June
15, 2007 and June 28, 2007, BayHill Capital, LC extended to the Company
short-term loans in the amount of $100,000 and $150,000, respectively, with
interest at the rate of 12% per annum.  Both of these notes, together
with accrued interest, were converted on October 17, 2007 into 206,621 shares of
the Company’s common stock.
 
 On
September 26, 2007, BayHill Capital, LC extended to the Company a short-term
loan in the amount of $30,000, which bore interest at 10% per
annum.  The promissory note evidencing the loan was due on October 13,
2007.  Beginning October 14, 2007, the promissory note became
convertible at the lower of $2.50 per share or 80% of the average closing bid
price of the Company’s common stock for the previous five trading
days.  On November 5, 2007, BayHill Capital, LC extended to the
Company a short-term loan in the amount of $150,000, which bore interest at 10%
per annum.  The promissory note evidencing the loan was convertible
into shares of the Company’s common stock at $1.50 per share.  This
note was due on December 4, 2007.  Both the $30,000 and $150,000
short-term loans, together with accrued interest of $8,852, were converted on
March 31, 2008 into 118,033 shares of the Company’s common stock.
 
 BayHill
Capital, LC extended to the Company a series of short-term loans, with interest
at 12% per annum, on the following dates and for the following amounts: December
5, 2007 for $125,000, December 27, 2007 for $100,000, January 24, 2008 for
$30,000, February 15, 2008 for $40,000, and March 6, 2008 for $50,000. These
short-term loans, together with accrued interest of $9,593, were converted on
March 31, 2008 into 283,677 shares of the Company’s common stock.
  There can
be no assurance that the Company will be able to secure additional debt or
equity financing, or that the Company will be able to reduce or eliminate more
costs and expenses or that cash flows from operations will produce adequate cash
flow to enable the Company to meet all future obligations or to be able to
expand.  As of March 31, 2008, the Company’s current liabilities of
$1,703,568 exceeded its current assets by $1,075,231. All of the Company’s
existing financing arrangements are short-term.  On February 27, 2008
the Company’s Board of Directors approved the issuance of $1,500,000 of
unsecured convertible notes as part of the Company’s attempts to secure
additional financing.  On March 31, 2008 this amount was reduced to
$1,000,000.  As of March 31, 2008 there were no unsecured convertible
notes outstanding.
 
 The
Company has previously reported its possible interest in filing an application
and other materials with the SEC in order to obtain a charter as a Business
Development Company (hereinafter, a "BDC"), as defined in the Investment Company
Act of 1940, as amended. If the Company elects to become a BDC, and is granted a
charter by the SEC, the Company plans to continue its historic business
   18
  operations
through its wholly-owned subsidiary, Commission River
Corporation.  The Company’s management would continue to operate and
manage the wholly-owned subsidiary and continue its efforts to develop and
expand the Company’s historical business.
 
 If the
Company elects to make application for a charter as a BDC, if the Company’s
application for a BDC charter is approved, and if the Company is able to obtain
additional capital financing, the Company’s management believes the Company
would have the ability to provide capital and management advisory services to
smaller public and private companies seeking access to public capital markets,
financial and operational management expertise, and various forms of traditional
equity and debt capital.  Prior to finalizing a decision to become a
BDC, the Company intends to move forward with its plans and activities in an
effort to secure additional equity financing and enhance and expand its
affiliate marketing business.
 
 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, the
Company’s ability to implement, and obtain funding to carry out, its business
and growth strategy, the consequences of the corporate restructuring associated
with the actions approved by the Company’s shareholders at a special meeting of
shareholders held on March 31, 2008, the integration and operation of the assets
the Company acquired from Commission River in November, 2007 and the Company’s
conduct of business based thereon, the Company’s potential application for
authorization to become chartered as a BDC, and the regulatory, financial and
operational consequences thereof, the Company’s possible inability to become or
remain certified as a reseller in all jurisdictions in which the Company applies
or is currently certified, the possibility that the Company’s proprietary
customer base will not grow as management currently expects, the Company’s
possible inability to obtain additional financing, the possible lack of
producing agent growth, the Company’s possible lack of revenue growth, the
Company’s possible inability to add new products and services that generate
increased sales, the Company’s possible lack of cash flows, the Company’s
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 the Company’s
control.
 
 Item
3.Controls and Procedures
  (a)  Evaluation of disclosure controls and
procedures.
 
  Under the
supervision and with the participation of the Company’s management, including
the Company’s Chief Executive Officer and Chief Financial Officer, the Company’s
management has evaluated the effectiveness of the design and operation of the
Company’s disclosure controls and procedures as of the end of the period covered
by this report.  Based on that evaluation, the Company’s Chief
Executive Officer and our Chief Financial Officer concluded that, as of the end
of the period covered by this report, the Company’s disclosure controls are
effective.
  (b)  Changes in internal controls.
  
 Since the
acquisition of Commission River, Inc. on November 30, 2007, the Company has
expanded its staff to include a separate management team who reviews and
approves the business and financial reporting conducted by the
Company.  Also during the three months ended December 31, 2007, the
   19
  Company
added a Chief Executive Officer and other senior officers with specific
responsibilities for the Company’s financial reporting.  The Company’s
management believe these personnel changes, as well as the Company’s
implementation of additional financial and management processes and procedures,
have enhanced the Company’s controls over financial reporting.
 
 
 Part
II – Other Information
 
 Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds
 
 During
the three months ended March 31, 2008, the Company issued the following shares
of its common stock to those parties identified and for those reasons
identified:
 
 Settlement of
      Outstanding Liabilities
                
                Shares
                
                
                LiabilityBayHill
      Capital LC
                
                
                6,667
                
                
                $
                10,000Telarus,
      Inc.
                
                
                60,000
                
                
                $
                75,000Nationwide
      Regulatory Compliance, LLC
                
                
                3,044
                
                
                $
                4,566Conversion of Notes
      Payable, Short-term loans and accrued interestBayHill
      Capital LC
                
                
                401,709
                
                
                $
                524,448Board of Directors
      Fees – New DirectorRoy
      Banks
                
                
                24,000
                
                
                $
                48,000Consulting
      FeesG&J
      Capital Management
                
                
                10,000
                
                
                $
                15,000
 
 The
Company did not engage the services of an underwriter in connection with the
issuance of any of the foregoing shares of common stock.
 
 In
agreeing to issue these shares, the Company relied on the exemption from
registration contained in Section 4(2) of the Securities Act of 1933, as amended
(the “Securities Act”).  Each of the parties who accepted the shares
of the Company’s common stock had full information concerning the Company and it
operations and financial condition and took the shares for purposes other than
distribution unless the shares or underlying shares are registered under the
Securities Act.  The certificate evidencing the shares of common stock
contained a legend restricting their transfer unless registered under the
Securities Act, or unless there is an exemption available for their
transfer.
 
 Item 4.  Submission
of Matters to a Vote of Security Holders
 
 On March
31, 2008, the Company conducted a special meeting of shareholders at which the
shareholders of the Company approved a series of proposals previously approved
by the Company’s Board of Directors.  These proposals consisted of i)
a proposal to amend the Articles of Incorporation of the Company to effect a
reverse split of the outstanding shares of the Company’s common stock pursuant
to which each 50 shares of the Company’s pre-split common stock issued and
outstanding as of the effective date of the reverse split would be exchanged for
one share of the Company’s post-split common stock, ii) a proposal to amend the
Articles of Incorporation to reduce the number of authorized shares of the
Company’s common stock from 300,000,000 shares, $.001 par value per share, to
100,000,000 shares, $.0001 par value per share, and the number of authorized
shares of the
   20
   Company’s
preferred stock from 20,000,000 shares, no par value per share, to 400,000
shares, $.0001 par value per share, (iii) a proposal to amend the Articles of
Incorporation to change the name of the Company to BayHill Capital Corporation
and make other changes necessary to facilitate the foregoing actions and the
re-incorporation of the Company, (iv) a proposal to re-incorporate the Company
under the laws of the State of Delaware, and (v) a proposal to adopt the
Cognigen Networks, Inc. 2008 Stock Incentive Plan.
 
 With
respect to each of the proposals submitted to the Company’s shareholders at the
special meeting, the number of votes cast for, against and withheld, as well as
the number of abstentions, were as follows:
 
 Proposal 1 – Proposal to
Effect a Reverse Split of the Company’s Common Stock
 
 With
respect to the proposal to effect a reverse split of the Company’s common stock,
there were 52,261,291 votes cast in favor of the proposal, 889 votes cast
against the proposal and 302 votes withheld.
 
 Proposal 2 – Proposal to
Reduce the Number of Authorized Shares of Capital Stock
 
 With
respect to the proposal to reduce the number of authorized shares of capital
stock of the Company, there were 52,260,999 votes cast in favor of the proposal,
1,149 votes cast against the proposal and 334 votes withheld.
 
 Proposal 3 – Proposal to
Change the Name of the Company to BayHill Capital
Corporation
 
 With
respect to the proposal to change the name of the Company to BayHill Capital
Corporation, there were 52,261,231 votes cast in favor of the proposal, 898
votes cast against the proposal and 353 votes withheld.
 
 Proposal 4- Proposal to
Re-Incorporate under the laws of the State of Delaware
 
 With
respect to the proposal to re-incorporate the Company under the laws of the
State of Delaware, there were 51,990,187 votes cast in favor of the proposal,
271,962 votes cast against the proposal and 333 votes withheld.
 
 Proposal 5 – Proposal to
Adopt the Cognigen Networks, Inc. 2008 Stock Incentive Plan
 
 With
respect to the proposal to adopt the Cognigen Networks, Inc. 2008 Stock
Incentive Plan, there were 52,261,147 votes cast in favor of the proposal and
941 votes cast against the proposal and 394 votes withheld.
 
 Item
5. Other Information
 
 On May
12, 2008, the Company’s Board of Directors adopted new Bylaws of the Company
(the “Delaware Bylaws”).  The Board of Directors adopted the Delaware
Bylaws in order to conform the Company’s Bylaws to the provisions of the
Delaware General Corporation Law, pursuant to the Company’s re-incorporation in
the State of Delaware.  A copy of the Delaware Bylaws is filed as
Exhibit 3.1 to this Report.
   21
 
 Item
6. Exhibits
 
 
 EXHIBIT
      NO.
              DESCRIPTION AND METHOD
      OF FILING
 
 
 
 3.1
              Bylaws
      of the Company
 
 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
      Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act
      of 2002.
 
 
 
 
 
 
 
 
  22
  
 
 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.
 
 
 BAYHILL
CAPITAL CORPORATION
 
 
 
 
 By:  /s/ Robert K.
Bench                                                                                                Date: May 14, 2008
 Robert K. Bench
 Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  23
  
 
 EXHIBIT
INDEX
 
 EXHIBIT
      NO.
              DESCRIPTION AND METHOD
      OF FILING
 
 
 3.1
              Bylaws
      of the Company
 
 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
      Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act
      of 2002.
 
 
 
  24