UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(X)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934


For
the quarterly period ended December 31,
2009





OR





(
) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


OF
THE SECURITIES EXCHANGE ACT OF 1934


For
the transition period from  to





Commission
File Number 0-11730





BayHill
Capital Corporation


(Exact
Name of Registrant as Specified in its Charter)





Delaware
            84-1089377(State
      or Other Jurisdiction of
            (I.R.S.
      EmployerIncorporation
      or Organization)
            Identification
      No.)





10757
S. Riverfront Pkwy, Suite 125


South
Jordan, Utah 84095


(Address
of Principal Executive Offices)





801-816-2529


(Registrant’s
Telephone Number, Including Area Code)








Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes  x     No  o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filer  o
            
            Accelerated
      filer  oNon-accelerated
      filer  o
            
            Smaller
      reporting company  x








Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes o  No x











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
                February
      3, 2010Common
      Stock, $0.0001 par value
            
            3,346,609





Table of Contents


Part I  FINANCIAL
      INFORMATIONItem
      1
            Consolidated Financial
      StatementsConsolidated Balance Sheets
            Page
      3Unaudited Consolidated Statements of
      Operations
            Page
      4Unaudited Consolidated Statements of Cash
      Flows
            Page
      5Supplemental Disclosures of Cash Flow
      Information and Non-Cash Transactions
            Page
      6Notes to Unaudited Consolidated Financial
      Statements
            Page
      7Item
      2
            Management's Discussion and Analysis of
      Financial Condition and Results of Operations
            Page
      12Item
      3
            Quantitative and Qualitative Disclosures
      About Market Risk
            Page
      14Item
      4T
            Controls and Procedures
            Page
      14Part IIOTHER INFORMATIONItem
      5
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            Page
      15Item
      6
            Exhibits
            Page
      15Signatures
            
            Page
      16





2
 Table of Contents


BAYHILL
CAPITAL CORPORATION





PART I – FINANCIAL INFORMATION





Item 1.  Consolidated Financial
Statements





Consolidated Balance Sheets





December 31,
            
            
            
            June
      30,2009
            
            
            
            2009AssetsCurrent AssetsCash
      and cash equivalents
            
            $
            48,690
            
            
            $
            68,947Marketing commissions receivable,
      net
            
            
            362,595
            
            
            
            395,087Prepaid
      expenses
            
            
            6,195
            
            
            
            -Total current
    assets
            
            
            417,480
            
            
            
            464,034Non-current
      assetsIntangible assets,
      net
            
            
            122,225
            
            
            
            188,891Investment
      in BayHill Energy Corporation
            
            
            11,000
            
            
            
            -Property
      and equipment, net
            
            
            12,662Deposits
      and other assets
            
            
            -
            
            
            
            400Total non-current
      assets
            
            
            145,887
            
            
            
            189,291Total
      assets
            
            $
            563,367
            
            
            $
            653,325Liabilities
      and Stockholders' DeficitCurrent
      liabilitiesAccounts payable
            
            $
            115,365
            
            
            $
            78,045Accrued
liabilities
            
            
            157,666
            
            
            
            104,351Commissions
payable
            
            
            667,588
            
            
            
            677,532Financing
    arrangements
            
            
            4,000
            
            
            
            4,000Net current liabilities of
      discontinued operations
            
            
            38,883
            
            
            
            38,883Total current
      liabilities
            
            
            983,501
            
            
            
            902,811Total
      liabilities
            
            
            983,501
            
            
            
            902,811Commitments
      and contingenciesStockholders'
      deficitPreferred stock $0.0001 par value,
      400,000 shares authorized, no shares are issued and
      outstanding
            
            
            -
            
            
            
            -Common stock $0.0001 par value,
      100,000,000 shares authorized; 3,346,609  issued and outstanding
      as of  December 31, 2009 and 2,635,560 shares issued and
      outstanding as of June 30, 2009
            
            
            335
            
            
            
            263Additional paid-in
      capital
            
            
            16,748,185
            
            
            
            16,551, 941Accumulated
deficit
            
            
            (17,168,654
            )
            
            
            (16,801,690
            )Total stockholders’
      deficit
            
            
            (420,134
            )
            
            
            (249,486
            )Total
      liabilities and stockholders’ deficit
            
            $
            563,367
            
            
            $
            653,325





See
Notes to Consolidated Financial Statements











3
 Table of Contents


BAYHILL
CAPITAL CORPORATION





Unaudited Consolidated Statements of
Operations





Three
      Months Ended
            
            
            Six
      Months EndedDecember
      31,
            
            
            December
      31,2009
            
            
            2008
            
            
            2009
            
            
            2008Unaudited
            
            
            Unaudited
            
            
            Unaudited
            
            
            UnauditedRevenue
      - Marketing commissions
            
            $
            631,439
            
            
            $
            791,244
            
            
            $
            1,264,908
            
            
            $
            1,497,548Operating
      expenses:Marketing
    commissions
            
            
            432,393
            
            
            
            515,777
            
            
            
            888,510
            
            
            
            969,240Selling, general and
      administrative
            
            
            273,124
            
            
            
            286,739
            
            
            
            685,249
            
            
            
            599,209Depreciation and
      amortization
            
            
            33,695
            
            
            
            66,666
            
            
            
            67,028
            
            
            
            133,332Total operating
      expenses
            
            
            739,212
            
            
            
            869,182
            
            
            
            1,640,787
            
            
            
            1,701,781Loss
      from operations
            
            
            (107,773
            )
            
            
            (77,938
            )
            
            
            (375,879
            )
            
            
            (204,233
            )Other
      Income and Expense:Interest
      expense
            
            
            (6,799
            )
            
            
            (19,122
            )
            
            
            (13,731
            )
            
            
            (33,016
            )Other
      income
            
            
            10,646
            
            
            
            -
            
            
            
            22,646
            
            
            
            -Total
      other income (expense)
            
            
            3,847
            
            
            
            (19,122
            )
            
            
            8,915
            
            
            
            (33,016
            )Loss
      from operations before   income taxes
            
            
            (103,926
            )
            
            
            (97,060
            )
            
            
            (366,964
            )
            
            
            (237,249
            )Income
      taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      Loss
            
            
            (103,926
            )
            
            
            (97,060
            )
            
            
            (366,964
            )
            
            
            (237,249
            )Loss
      attributable tocommon
      shareholders
            
            $
            (103,926
            )
            
            $
            (97,060
            )
            
            $
            (366,964
            )
            
            $
            (237,249
            )Loss
      per common share-basic and diluted:Continuing
      operations
            
            $
            (.03
            )
            
            $
            (.05
            )
            
            $
            (.12
            )
            
            $
            (.12
            )Discontinued
      operations
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -$
            (.03
            )
            
            $
            (.05
            )
            
            $
            (.12
            )
            
            $
            (.12
            )Weighted
      average number of common shares outstanding:
              Basic
      and Diluted
            
            
            3,346,609
            
            
            
            1,959,759
            
            
            
            3,026,471
            
            
            
            1,956,544








See
Notes to Consolidated Financial Statements








4
 Table of Contents


BAYHILL
CAPITAL CORPORATION





Unaudited Consolidated Statements of Cash
Flows





Six
      Months EndedDecember
      31,2009
            
            
            2008Cash
      flows from operating activities
            
            Unaudited
            
            
            UnauditedNet loss
            
            $
            (366,964
            )
            
            $
            (237,249
            )Adjustments to reconcile net loss
      to net cash provided by (used in) operating activities:Depreciation and
      amortization
            
            
            67,028
            
            
            
            149,339Amortization of note
      discount included in interest expense
            
            
            -
            
            
            
            5,387Changes in assets and
      liabilities:Marketing commissions
      receivable
            
            
            32,492
            
            
            
            31,747Other assets
            
            
            (5,795
            )
            
            
            -Accounts payable
            
            
            37,320
            
            
            
            (117,735
            )Accrued
    liabilities
            
            
            164,630
            
            
            
            32,852Commissions
    payable
            
            
            (9,944
            )
            
            
            108,207285,371
            
            
            
            209,797Net cash provided by (used in)
      operating activities
            
            
            (81,233
            )
            
            
            (27,452
            )Cash
      flows from investing activitiesPurchase of fixed
      assets
            
            
            (13,024
            )
            
            
            -Investment in BayHill Energy
      Corporation
            
            
            (11,000
            )
            
            
            -Net cash used in investing
      activities
            
            
            (24,024
            )
            
            
            -Cash
      flows from financing activitiesProceeds
      from financing arrangements
            
            
            -
            
            
            
            151,252Payments
      towards financing arrangements
            
            
            -
            
            
            
            (10,775
            )Proceeds
      from sale of common stock
            
            
            85,000
            
            
            
            -Net cash provided by financing
      activities
            
            
            85,000
            
            
            
            140,477Net
      increase in cash and cash equivalents
            
            
            (20,257
            )
            
            
            113,025Cash
      and cash equivalents-beginning of period
            
            
            68,947
            
            
            
            -Cash
      and cash equivalents-end of period
            
            $
            48,690
            
            
            $
            113,025





See
Notes to Consolidated Financial Statements








5
 Table of Contents


BAYHILL
CAPITAL CORPORATION





Supplemental Disclosuresof Cash Flow
Information and Non-Cash Transactions





Cash
payments for interest expense during the six months ended December 31, 2009 and
2008 were $8,392 and $5,889, respectively.





During
the six months ended December 31, 2009, we issued the following restricted
shares of our common stock for the reasons and values identified
below.





Shares
            
            ValueIssued
      to outside board of directors for accrued director fees
            57,333
            
            $17,200Issued
      to management for accrued salaries
            110,000
            
            $33,000Issued
      to director for accrued legal and consulting fees
            130,383
            
            $39,115Issued
      to consultants for accrued consulting fees
            73,333
            
            $22,000





The values we recorded for the
settlement of accrued payables and director fees payable were at the “last sale”
market price for free-trading shares of our common stock on the date our Board
of Directors approved the issuances, which was $0.40 per share.The difference between the
market price and settlement value was booked to additional paid in capital,
since all parties were affiliates of the Company.





During
the six months ended December 31, 2008, we issued the following restricted
shares of our common stock for those reasons and values identified
below:





Shares
            
            ValueSettlement
      of accounts payable
            35,930
            
            $46,489Directors
      fees payable
            38,028
            
            $46,533





The values we recorded for the
settlement of accounts payable and director fees payable were at prices ranging
from $1.20 per share to $1.30 per share based on negotiated settlements. The
closing market price for free trading shares of our common stock on the date our
Board of Directors approved the issuances was $1.25 per share.The difference between the
market price of our common stock and negotiated settlements, on the date of
issuance, was approved by the Board of Directors and does not materially impact
the financial statements.





During
the six month period ended December 31, 2008, we recorded a beneficial
conversion feature of $13,058 on a convertible promissory note. As of December
31, 2008, $5,387 of the beneficial conversion feature was accreted to interest
expense.


































6
 Table of Contents




NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS







Note 1 – Description of
Business





BayHill Capital Corporation (“we,” “us”
or “BHCC”, formerly Cognigen Networks, Inc.), was incorporated in May 1983 in
the state of Colorado. Through our wholly-owned subsidiary, Commission River
Corporation (“Commission River”), we market and sell 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, we have generated revenues
in two ways:





First, we have generated marketing
commission revenues from vendors who are represented on web sites operated by
independent agents and for whom we sell products and services via contractual
agreements. Generally, we enter into contractual agreements with these vendors,
who pay commissions based on the volume of products and services sold by
independent sales agents. We then pay 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 our commission revenues is
attributable to the sale of domestic long distance services and commercial
telecommunications services; however, we also generate commission revenues from
the sale of wireless communications, residential broadband services, Voice over
Internet (“VoIP”) services and prepaid calling cards/PINs.





Second,
we have, at times, also generated revenues from sales of proprietary products
and services. Generally, we have acquired or developed these proprietary
products and services with the intention of marketing such products and services
through independent agent networks. 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 we have
generally paid commissions to independent agents based on the dollar volume of
products sold. Currently we do not offer any proprietary products or services.
We regularly look for opportunities to acquire or develop proprietary products
or services. If we identify any proprietary products or services which we
believe we could market profitably, we may offer proprietary products or
services in the future. See also descriptions of our oil and gas initiative and
our rural broad-band initiative described below, respectively in Note 9 and Note
10.





Note 2 – Summary of
Significant Accounting Policies





The
accompanying consolidated financial statements include the accounts of our
wholly owned subsidiary, Commission River Corporation, and our former
subsidiaries, Cognigen Business Systems, Inc. (“CBSi”),and Intandem
Communications Corp. (“Intandem”). For purposes of the accompanying financial
statements, we have treated these former subsidiaries as discontinued operations
(see Note 3). All intercompany accounts and transactions have been eliminated in
consolidation.  Our position in BayHill Energy Corporation (“BEC”) is
reflected only as an investment as our holdings on a “common equivalent” basis
amounted to eighteen percent (18%) of outstanding shares of BEC (see Note
9).





In our
opinion, we have made all adjustments, consisting only of normal recurring
adjustments, to (a) the unaudited consolidated statements of operations for the
six months ended December 31, 2009 and 2008, respectively, (b) the unaudited and
audited consolidated balance sheets as of December 31, 2009 and June 30, 2009,
respectively, and (c) the unaudited consolidated statements of cash flows for
the six months ended December 31, 2009 and 2008, respectively, in order to make
such financial statements not misleading.





We have
prepared the accompanying unaudited consolidated financial statements 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, 2009, included in our Annual
Report on Form 10-K filed with the Securities and Exchange
Commission.





The
preparation of our consolidated financial statements requires us 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.


7
 Table of Contents


The results for the six months ended December 31, 2009 may not necessarily be
indicative of our actual results for the fiscal year ending June 30, 2010. All
share and per-share amounts reflected in this report have been restated to
reflect the 1 for 50 reverse stock split effected in 2008 (see Note 6) unless
otherwise indicated.





Note 3 – Discontinued
Operations





Cognigen Business Systems,
Inc.





In
September 2008, we repurchased 24,921 of our common shares as partial
consideration for the sale of 100% of the equity interests of our subsidiary
CBSi. Immediately following the repurchase of these common shares, we cancelled
such shares, which we deemed to have a net value of $42,984.





Sale of Proprietary
Telecommunications Accounts





On October 13, 2006, we agreed to sell
our interest in the majority of our telecommunications “one plus” accounts for
which we recorded telecommunications revenue through sales of proprietary
products and services.


The
following is financial information as of December 31, 2009 and 2008 relative to
the discontinued operations described above.





Accrued
      liabilities
            $           (38,883)Net
      current liabilities
            $           (38,883)








Note 4 – Management’s
Plan





Cash
flows generated from operations and cash received from the sale of common stock
were sufficient to meet our working capital requirements for the six months
ended December 31, 2009, but will not likely be sufficient to meet our working
capital requirements for the foreseeable future or provide for expansion
opportunities. We incurred $366,964 in losses from operations and used $81,233
in cash for operations for the six months ended December 31, 2009. Net cash
flows generated from our financing activities for the six months ended December
31, 2009 were $85,000, from the sale of common stock. These conditions raise
substantial doubt about our ability to continue as a going concern.





In July
2009, we formed a subsidiary, BayHill Energy Corporation (“BEC”) to pursue the
exploration and development of oil and gas. As part of this initiative, in April
2009, we entered into Letters of Intent (“LOI”) with five parties to acquire
certain oil and gas properties. As of September 30, 2009 all LOIs expired
without our entering into any acquisition transactions. During the six months
ended December 31, 2009 we invested $1,000 to acquire 100,000 shares of common
stock and $10,000 to acquire 100,000 shares of preferred stock in BEC. As of
December 31, 2009, BEC had issued an additional 885,000 shares of its common
stock to six individuals who became members of the BEC management team.
Following these transactions, we held a minority interest in BEC of
18%.





During
the six months ended December 31, 2009 we entered into an Administrative and
Accounting Services Agreement with one of the parties to the LOIs and received
$19,000 cash for services relating to the Agreement, which is included in other
income (see also Note 9 below).





On
September 30, 2009 we announced the execution of a LOI to merge with Yonder
Media, Inc. This LOI expired on November 30, 2009 without entering into any
transaction (see Note 10 below).





We intend
to move forward with our plans and activities in an effort to secure additional
equity financing and enhance and expand our affiliate marketing business along
with expansion into other related and unrelated areas of interest.





In order
to continue as a going concern, we plan to obtain additional debt or equity
financing, increase revenues, and increase cash flows from operations. There can
be no assurance that we will be able to secure additional debt or equity
financing, that we will be able to reduce our operating costs and expenses, that
we will be able to increase our revenues, or that cash flows from operations
will produce adequate cash flow to enable us to meet all our future obligations
or to be able to expand. We also plan to continue our search for
appropriate


8
 Table of Contents


acquisitions
of businesses that can augment our current business or expand into additional
businesses that could be unrelated to our current operations. And we are
currently working on initiatives in the oil and gas business.  We can
give no assurance that we will be successful in these initiatives or any others
that we may pursue and if we are unable to obtain additional debt or equity
financing, we may be required to significantly reduce or cease
operations.




Note 5 – Financing
Arrangements





The
following consists of our financing arrangements as of December 31,
2009:





Note
      Payable to Cardelco
            $
      4,000





Note Payable to
Cardelco





On December 31, 2007, Cardelco, LLC
(“Cardelco”) entered into a short-term promissory note with us in the amount of
$25,000. The note obligated us 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
the rate of 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 the form of a short-term promissory note. The unpaid balance on
this note at December 31, 2009 was $4,000. Although we may be in technical
default under the note, Cardelco had not given us written notice of default as
of December 31, 2009.





Note 6 - Stockholders'
Equity





Special Meeting of the
Stockholders





On March
31, 2008, we held a special meeting of shareholders at which our shareholders
approved a series of proposals previously approved by our Board of Directors.
These proposals consisted of (i) a proposal to amend our Articles of
Incorporation to effect a reverse split of the outstanding shares of our common
stock pursuant to which each 50 shares of our pre-split common stock issued and
outstanding as of the effective date of the reverse split would be exchanged for
one share of our post-split common stock, (ii) a proposal to amend our Articles
of Incorporation to reduce the number of authorized shares of our 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 our 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 our Articles of Incorporation to
change our name to BayHill Capital Corporation and make other changes necessary
to facilitate the foregoing actions and the reincorporation of BHCC, (iv) a
proposal to reincorporate BHCC under the laws of the State of Delaware, and (v)
a proposal to adopt the Cognigen Networks, Inc. 2008 Stock Incentive
Plan.





Based
upon the approval of our shareholders at the March 31, 2008 special meeting,
effective April 23, 2008 our management completed the actions necessary to
effect the name change, reverse stock split, Delaware reincorporation and
reduction in the number of authorized shares of common and preferred stock. Our
common stock began trading on April 23, 2008 on a post-split basis under the
symbol "BYHL." All share and per-share amounts reflected in this report have
been restated to reflect the 1 for 50 reverse stock split unless otherwise
indicated.





Preferred
Stock





As of
December 31, 2009 we had authorized 400,000 shares of Preferred Stock. There are
currently no shares of Preferred Stock outstanding.





Common
Stock





During
the six months ended December 31, 2009, we issued the following restricted
shares of our common stock for the reasons and values identified
below.






9
 Table of Contents





Shares
            
            ValueIssued
      for private placement of common stock
            340,000
            
            $85,000Issued
      to outside board of directors for accrued director fees
            57,333
            
            $17,200Issuance
      to management for accrued salaries
            110,000
            
            $33,000Issuance
      to director for accrued legal and consulting fees
            130,383
            
            $39,115Issuance
      to consultants for accrued consulting fees
            73,333
            
            $22,000





The values we recorded for the
settlement of accrued payables and director fees payable were at the closing
“last sale” market price for free-trading shares of our common stock on the date
our Board of Directors approved the issuances, which was $0.40 per share.The values we recorded for
the cash received for common stock issued in conjunction with the Private
Placement was at $0.25 per share as set forth in the private placement through
which the shares were sold.





Stock
Options





We did
not grant any stock options during the six months ended December 31, 2009. As of
December 31, 2009 there were no outstanding options to purchase shares of our
common stock.





Warrants





We did
not grant any warrants during the six months ended December 31, 2009. As of
December 31, 2009 there were no outstanding warrants to purchase shares of our
common stock.





Note 7 - Commitments and
Contingencies





Operating
Leases





We were
not obligated to pay any future minimum lease payments under any leases as of
December 31, 2009.





Note 8 – Related Party
Activity





Payments to Telarus,
Inc.





During
the six months ended December 31, 2009, we accrued $4,255 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. We have included this amount in accounts payable at December 31, 2009.
Telarus is owned by two executive officers of Commission River Corporation, our
wholly-owned subsidiary. We plan 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 us on an hourly
basis and are approved by an executive of the Company who is not affiliated with
Telarus. In addition, all charges and billings from Telarus are reviewed on a
quarterly basis by the Board of Directors as part of their review of the
quarterly financial statements.We anticipate that the
expense of services provided by Telarus will be less than $2,500 per month in
the future.





Stock Issuance for Payment
of Liabilities to Officers and Directors





During
the six months ended December 31, 2009, we issued the following restricted
common shares to officers and directors of the Company, for the reasons and
values identified below:






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Shares
            
            ValueRobert
      Bench as participant in a private placement of common
stock
            40,000
            
            $10,000Robert
      Bench for payment of accrued salary
            100,000
            
            $30,000Robyn
      Farnsworth for payment of accrued salary
            10,000
            
            $  3,000Taylor
      Bench for payment of accrued consulting fees
            23,333
            
            $  7,000David
      Keller for payment of accrued consulting fees
            50,000
            
            $15,000James
      U. Jensen for payment of accrued legal and consulting fees from Woodbury
      & Kesler, PC
            100,383
            
            $30,115James
      U. Jensen for payment of accrued consulting fees from
              ClearWater
      Group
            30,000
            
            $  9,000James
      U. Jensen for payment of director fees
            20,667
            
            $  6,200John
      D. Thomas for payment of director fees
            18,333
            
            $  5,500John
      M. Knab for payment of director fees
            18,333
            
            $  5,500





The values we recorded for the
settlement of accrued payables and director fees payable were recorded at the
”last sale” market price for free-trading shares of our common stock on the date
our Board of Directors approved the issuances, which was $0.40 per share.The difference between the
settlement value and the market price was booked to Additional Paid in Capital
since all parties were affiliates of the Company. The values we recorded for the
cash received was at $0.25 per share as set forth in the private placement
through which the shares were sold.





Note 9 – Formation of
BayHill Energy Corporation





In July
2009, we formed a subsidiary, BayHill Energy Corporation (“BEC”) to pursue the
exploration and development of oil and gas properties. During the six months
ended December 31, 2009, we invested $1,000 to acquire 100,000 shares of common
stock and invested $10,000 plus the assignment of any interests that the Company
may have had in the oil and gas initiative, to acquire 100,000 shares of
preferred stock in BEC. BEC issued an additional 885,000 shares of its common
stock to six individuals, including 260,000 shares to Robert Bench, who was
appointed President, and 90,000 shares to Robyn Farnsworth, who was appointed
Secretary. The six individuals will form the management team and pursue the
intended oil and gas exploration and development strategy.





At
December 31, 2009 we held a minority interest in BEC of 18%. The preferred stock
is convertible into 10% of BEC outstanding common stock until BEC has acquire
over $50 million of value in assets, thus preserving our interest in this
strategic initiative without further dilution to the shareholders of the
Company.





In July
2009, the Company executed an Accounting and Administrative Agreement with
Genesis Petroleum US, Inc. (“Genesis”), to act as their bookkeeper and perform
office administration duties. During the six months ended December 31, 2009, the
Company recognized $19,000 of other income from services provided under the
Administrative Agreement. During September 2009, the Accounting and
Administrative Agreement was cancelled and a Management, Administrative, and
Operations Agreement was entered into between Genesis and BEC to act as Genesis
agent in their oil and gas operations.





Note 10 – Letter of Intent
to Merge with Yonder Media, Inc.





On
September 30, 2009 we announced the execution of a letter of intent (“LOI”) to
merge with Yonder Media, Inc. (“Yonder Media”), a leading provider of wireless
broadband access exclusively for rural communities. Under the proposed merger
agreement BayHill was to issue shares of its common stock for all of the issued
and outstanding stock of Yonder Media. Under the terms of the LOI, Yonder Media
was required to raise a minimum of $8 million to be injected into BayHill at the
time of the merger or by November 30, 2009, whichever came earlier. This
requirement was not accomplished and therefore, the LOI expired on November 30,
2009.








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Item
2.             Management's
Discussion and Analysis of Financial Condition and Results of
Operations





Cautionary Statement
Concerning Forward-Looking Statements





Certain of the information discussed
herein, and in particular in this section entitled “Management’s Discussion and
Analysis of Financial Condition and Results 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 ability to implement,
and obtain funding to carry out our business and growth strategy, the
consequences of the corporate restructuring associated with the actions approved
by our stockholders at a special meeting of stockholders held on March 31, 2008,
the integration and operation of the assets we acquired from Commission River in
November 2007 and our conduct of business based thereon, our possible inability
to become or remain certified as a reseller in all jurisdictions in which we
apply or are currently certified, the possibility that our proprietary customer
base will not grow as management currently expects, 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.





Overview





BayHill Capital Corporation (“we,” “us”
or “BHCC”, formerly Cognigen Networks, Inc.), was incorporated in May 1983 in
the state of Colorado. Through our wholly-owned subsidiary, Commission River
Corporation (“Commission River”), we market and sell 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, we have generated revenues
in two ways:





First, we have generated marketing
commission revenues from vendors who are represented on web sites operated by
independent agents and for whom we sell products and services via contractual
agreements. Generally, we enter into contractual agreements with these vendors,
who pay commissions based on the volume of products and services sold by
independent sales agents. We then pay 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 our commission revenues is
attributable to the sale of domestic long distance services and commercial
telecommunications services; however, we also generate commission revenues from
the sale of wireless communications, residential broadband services, Voice over
Internet (“VoIP”) services and prepaid calling cards/PINs.





Second,
we have, at times, also generated revenues from sales of proprietary products
and services. Generally, we have acquired or developed these proprietary
products and services with the intention of marketing such products and services
through independent agent networks. 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 we have
generally paid commissions to independent agents based on the dollar volume of
products sold. Currently we do not offer any proprietary products or services.
We regularly look for opportunities to acquire or develop proprietary products
or services. If we identify any proprietary products or services which we
believe we could market profitably, we may offer proprietary products or
services in the future.





Results of
Operations





Three
Months Ended December 31, 2009 Compared to Three Months Ended December 31,
2008





Total
revenue for the three months ended December 31, 2009, including $7,000 in fees
received as part of an Administrative and Accounting Agreement with a third
party, was $642,085, compared to $791,244 for the comparable period of 2008.
This represents a decrease of $149,159 from that of 2008, or 19%. This decrease
reflects decreases in sales of long distance products and cell phones, including
unauthorized discontinuances of residual payments previously paid under
commission contracts still in effect, and 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. We are pursuing collection from the few vendors
that have unilaterally discontinued payments due under existing
contracts.


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Marketing
commission expense decreased from $515,777 for the three months ended December
31, 2008 to $432,393 for the three months ended December 31, 2009, a decrease of
$83,384, or 16%. This decrease is due to the decrease in marketing revenues and
related commissions.





Selling,
general and administrative expenses decreased $13,615, or 5% for the three
months ended December 31, 2009 compared to the comparable period of 2008. This
decrease was mainly attributable to the decrease in overall administrative
activity.





Interest
expense for the quarter ended December 31, 2009 of $6,799 was $12,323, or 64%,
lower than the $19,122 we incurred during the comparable period of 2008. The
decrease was due primarily to the retirement and conversion of certain debt and
lines of credit during the past year and the decrease in the amortization of
beneficial conversion feature from the comparable period in 2008.





Six
Months Ended December 31, 2009 Compared to Six Months Ended December 31,
2008





Total
revenue for the six months ended December 31, 2009, including $19,000 in fees
received as part of an Administrative and Accounting Agreement with a third
party, was $1,287,554, compared to $1,497,548, for the comparable period of
2008. This represents a decrease of $209,994 from that of 2008, or 14%. This
decrease reflects decreases in sales of long distance products and cell phones,
including unauthorized discontinuances of residual payments previously paid
under commission contracts still in effect, and 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. We are pursuing collection from
the few vendors that have unilaterally discontinued payments due under existing
contracts.





Marketing
commission expense decreased from $969,240 for the six months ended December 31,
2008 to $888,510 for the six months ended December 31, 2009, a decrease of
$80,730, or 8%. This decrease is reflective of the decreased marketing revenues
and associated commissions.





Selling,
general and administrative expenses increased $86,040, or 14% for the six months
ended December 31, 2009 compared to the comparable period of 2008. This increase
was mainly attributable to the increased legal expenses and consulting expenses
related to the Company’s oil and gas initiative.





Interest
expense for the six months ended December 31, 2009 of $13,731 was $19,285, or
58%, lower than the $33,016 we incurred during the comparable period of 2008.
The decrease was due primarily to the retirement and conversion of certain debt
and lines of credit during the past year and the decrease in the amortization of
beneficial conversion feature from the comparable period in 2008.





Liquidity and Capital
Resources





Cash
flows generated from operations and cash received from the sale of common stock
were sufficient to meet our working capital requirements for the six months
ended December 31, 2009, but will not likely be sufficient to meet our working
capital requirements for the foreseeable future or provide for expansion
opportunities. We incurred $366,964 in losses from operations and used $81,233
in cash for operations during the six months ended December 31, 2009. Net cash
flows generated from financing activities for the six months ended December 31,
2009 were $85,000, from the sale of common stock, and cash used in investing
activities was $24,024





In July
2009, we formed a subsidiary, BayHill Energy Corporation (“BEC”) to pursue the
exploration and development of oil and gas. Prior to the date of formation of
BEC and  continuing as  part of our oil and
gas  initiative we entered into Letters of Intent (“LOI”) with five
parties to acquire certain oil and gas properties. Prior to December 31, 2009
all LOIs expired without our entering into any acquisition transactions. During
the six months ended December 31, 2009 we invested $1,000 to acquire 100,000
shares of common stock and $10,000 to acquire 100,000 shares of preferred stock
in BEC. As of December 31, 2009, BEC had issued an additional 885,000 shares of
its common stock to six individuals who became members of the BEC management
team. Following these transactions, we held a minority interest in BEC of
18%.





During
the six months ended December 31, 2009 we entered into an Administrative and
Accounting Services Agreement with one of the parties to the LOIs and received
$19,000 cash for services relating to the Agreement (see also Note 9 to the
financial statements).


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On
September 30, 2009 we announced the execution of a LOI to merge with Yonder
Media, Inc., which expired on November 30, 2009 without the completion of the
anticipated transaction (see Note 10 to the financial statements).





We intend
to move forward with our plans and activities in an effort to secure additional
equity financing and enhance and expand our affiliate marketing business along
with expansion into other related areas of interest.





In order
to continue as a going concern, we plan to obtain additional debt or equity
financing, increase revenues, and increase cash flows from operations. There can
be no assurance that we will be able to secure additional debt or equity
financing, that we will be able to reduce our operating costs and expenses, that
we will be able to increase our revenues or that cash flows from operations will
produce adequate cash flow to enable us to meet all our future obligations or to
be able to expand our business. If we are unable to obtain additional debt or
equity financing, we may be required to significantly reduce or cease
operations.





Item
3.              Quantitative
and Qualitative Disclosures About Market Risk





Not
required for a Small Reporting Company.





Item
4T.            Controls
and Procedures





(a)  Evaluation
of Disclosure Controls and Procedures





Our
management performed an evaluation of our disclosure controls and procedures as
of December 31, 2009. Our disclosure controls and procedures have been designed
to provide reasonable assurance that the information we are required to disclose
in the reports we file or submit under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), is accumulated and communicated to our management
to allow timely decisions regarding required disclosure, and recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission. Our chief
executive officer and other executive officers have concluded that the controls
and procedures were effective as of December 31, 2009 to reasonably ensure the
achievement of these objectives. While our disclosure controls and procedures
provide reasonable assurance that material information will be available on a
timely basis, this assurance is subject to limitations inherent in any control
system, no matter how well it is designed or administered, including, without
limitation, resource constraints and the need for management to apply its
judgment in evaluating the benefits of possible controls and procedures relative
to their costs.





(b)  Changes
in Internal Control Over Financial Reporting





There
were no significant changes (including corrective actions with regard to
material weaknesses) in our internal control over financial reporting that
occurred during the period covered by this report that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.


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PART II– OTHER INFORMATION





Item 5.  Unregistered Sales of
Equity Securities and Use of Proceeds





During
the six months ended December 31, 2009, we issued the following restricted
common shares of the Company, for the reasons and values identified
below:





Shares
            
            ValueIssued
      for private placement of common stock
            340,000
            
            $85,000Issued
      for payment of accrued costs and expenses
            313,716
            
            $94,115Issued
      for payment of accrued director fees
            57,333
            
            $17,200





The values we recorded for the
settlement of accrued payables and accrued director fees payable were at the
“last sale” market price for free-trading shares of our common stock on the date
our Board of Directors approved the issuances, which was $0.40 per share.The values we recorded for
the cash received was at $0.25 per share as set forth in the private placement
through which the shares were sold.





We 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, we
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 our common stock had full information concerning us
and our 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
6.              Exhibits





Exhibit No.
            Description31.1
            Certification
      of Chief Executive Officer31.2
            Certification
      of Chief Financial Officer32.1
            Certification
      of Chief Executive Officer32.2
            Certification
      of Chief Financial Officer


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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: February 3, 2010


Robert K. Bench


Chief Executive Officer








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EXHIBIT
INDEX





Exhibit No.
            Description31.1
            Certification
      of Chief Executive Officer31.2
            Certification
      of Chief Financial Officer32.1
            Certification
      of Chief Executive Officer32.2
            Certification
      of Chief Financial Officer























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