SHAREHOLDERS' EQUITY

12 Months Ended

Jun. 30, 2012

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

9. SHAREHOLDERS' EQUITY

Series A Preferred Stock

        In January 2000, we issued 3,000 shares of Series A Convertible Preferred Stock for net proceeds of $2,604,190. The stated value was $1,000 per share and par value is $0.001. This series was non-voting and had a dividend rate of 4%, payable at conversion in either cash or shares of common stock, at Hyperdynamics' option. During 2000 and 2001, 1,055 shares were converted to common stock. As a result, 1,945 shares remained outstanding at June 30, 2010. By terms of the original agreement, the preferred shares were convertible into Hyperdynamics' common stock at a price equivalent to the lower of the trading price when purchased of $5.25 or 80% of the current 5-day trading average. All or any of the stock could be converted at any time at the holder's option. According to the terms of the agreement, all preferred shares outstanding as of January 30, 2002 were to be automatically converted to common stock. If the Series A stock had been converted at that time, approximately 4,862,000 shares of common stock would have been issued. This conversion did not occur because of legal claims filed by both the Series A shareholders and Hyperdynamics against each other.

        Since the outcome was not known and no conversion had been effected, Hyperdynamics continued to accrue dividends on the 1,945 shares through September 30, 2004. Management evaluated the accrual as of September 30, 2004 and determined the accrual should be discontinued. Management reevaluated the accrual periodically and considered the accrual to be adequate to cover the liability, if any, pursuant to the lawsuit.

        On December 30, 2010, we entered into a settlement agreement pursuant to which we issued 239,437 shares of our common stock in connection with the conversion of 1,945 outstanding shares of Series A Preferred Stock. As part of the settlement, we were relieved of any Series A Preferred Stock dividend payments, two former officers agreed to the cancellation of an aggregate of 100,000 warrants which had an exercise price of $4.00 and 7,500 shares of our common stock were surrendered to us. As a result of this agreement, we were not required to issue the full amount of convertible securities under the terms of the Series A Preferred and we did not have to pay $372,000 of dividends we previously accrued as payable which represented accruals through September 30, 2004.

Common Stock issuances

Year ended June 30, 2012

For cash:

        On February 2, 2012, we closed the sale of 10,000,000 shares of our common stock and warrants to purchase 10,000,000 shares of our common stock in a registered direct public offering. The net proceeds to us from the offering were approximately $28,162,000. The warrants have an exercise price of $3.50 per share, become exercisable in August 2012, and expire in April 2013.

For exercise of options:

        During the year ended June 30, 2012, 804,999 options were exercised for total gross proceeds of $670,000. The options were exercised at prices ranging from $0.31 to $2.00.

For exercise of warrants:

        During the year ended June 30, 2012, we issued 340,208 shares of common stock upon the cashless exercise of warrants to purchase 430,000 shares of common stock.

Year ended June 30, 2011

For cash:

        On November 3, 2010, we entered into a Stock Purchase Agreement with two institutional funds under management of affiliates of BlackRock (collectively, the "Investors") pursuant to which the Investors agreed to purchase an aggregate of 15,000,000 shares of our common stock at a purchase price of $2.00 per share in a private placement. At closing, we received approximately $29.9 million, net of offering costs.

        On March 25, 2011, we entered into an underwriting agreement providing for the offer and sale in a firm commitment underwritten offering of 25,000,000 shares of our common stock at a price to the public of $5.00 per share ($4.75 per share net of underwriting discount but before deducting transaction expenses). In addition, we granted to the Underwriter a 45-day option to purchase up to 3,750,000 additional shares of common stock from us at the offering price, less underwriting discounts and commissions. On March 25, 2011, the Underwriter exercised its option with respect to all 3,750,000 shares.

        Closing of the sale of the shares of common stock, including the 3,750,000 shares purchased pursuant to exercise of the option by the Underwriter, was held on March 30, 2011. The Company received net proceeds, after underwriting discounts and commissions, and other transaction expenses, of approximately $136.1 million.

For exercise of options:

        During the year ended June 30, 2011, 858,613 options were exercised for total gross proceeds of $906,000. The options were exercised at prices ranging from $0.24 to $2.00.

For exercise of warrants:

        During the year ended June 30, 2011, 6,164,213 warrants were exercised for total gross proceeds of $7,709,000. The warrants were exercised at prices ranging from $0.98 to $1.58. Additionally, during the year ended June 30, 2011, we issued 384,848 and 175,714 shares of common stock to YA Global and a prior executive respectively upon the cashless exercise of warrants to purchase 702,222 and 240,000 shares of common stock respectively.

Issuance of common stock in Series A settlement:

        On December 30, 2010, we entered into a litigation settlement whereby we issued 239,437 shares of our common stock.

Year ended June 30, 2010

Common Stock Issuances:

        During year ended June 30, 2010, the Company issued 442,049 shares of common stock from its Stock and Stock Option plan to employees, directors and consultants for services valued at $324,000. The shares were valued using the market close price on the date of grant. On November 12, 2009, we entered into a Shares Purchase Agreement with Enable Growth Partners, L.P. ("Enable"), which held certain securities that were previously issued by us. Pursuant to the Shares Purchase Agreement, we issued to Enable 1,578,948 shares of our common stock, par value $0.001 per share. The aggregate net proceeds from the offering, after deducting offering expenses was approximately $1,485,000. The offering closed on November 17, 2009.

        On December 3, 2009, the Company entered into a Securities Purchase Agreement pursuant to which the Company agreed to sell an aggregate of 7,222,223 shares of its common stock and warrants to purchase a total of 3,250,000 shares of its common stock to institutional investors for gross proceeds of approximately $6.5 million. The net proceeds to the Company from the offering, after deducting placement agent fees and the Company's offering expenses, were approximately $6,045,000. The placement agent also received warrants to purchase 144,444 shares of common stock as additional compensation. The purchase price of a share of common stock and fractional warrant was $0.90 with the warrants priced at $0.98. Subject to certain ownership limitations, the warrants were exercisable 181 days following the closing date of the offering and expire four years following the initial exercise date at an exercise price of $0.98. The offering closed on December 7, 2009.

        On April 20, 2010, the Company entered into a securities purchase agreement pursuant to which the Company agreed to sell an aggregate of 8,076,925 shares of our common stock and warrants to purchase a total of 2,826,923 shares of our common stock to institutional investors for gross proceeds of approximately $10.5 million. The net proceeds to us from the offering, after deducting placement agent fees and our offering expenses, were approximately $9,670,000. The purchase price of a share of common stock and warrant was $1.30. Subject to certain ownership limitations, the warrants are exercisable 181 days following the closing date of the offering. Warrants to purchase 807,692 shares of common stock expire one year following the initial exercise date. Warrants to purchase 2,019,231 shares of common stock expire five years following the initial exercise date. The warrants have an exercise price of $1.58. The exercise price of the warrants is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.

Series B Preferred Stockholders

        Prior to the conversion of our Series B preferred stock on September 29, 2009, the Series B stockholders were entitled to a 4% cumulative dividend on the stated value, which was payable only upon conversion of the preferred stock. Dividends were to be paid in stock or cash at Hyperdynamics' option.

        On September 29, 2009, we entered into the Series B Agreement with the holders of all of our Series B preferred stock in which the Series B holders (i) converted all of their shares of Series B preferred stock into approximately 15,822,222 shares of common stock, (ii) agreed to the cancellation of warrants to purchase 1,000,000 shares of common stock, (iii) agreed to donate, pursuant to a specified schedule, 2,000,000 shares of common stock, issued upon conversion of the Series B preferred stock, and warrants to purchase 1,000,000 shares of common stock, to the American Friends of Guinea, a charitable organization that provides support to the people of Guinea, and (iv) agreed to be subject to a nine month lock-up of the 15,822,222 million shares of common stock received in connection with the conversion of the Series B preferred stock, and any shares that may be received upon exercise of their warrants. The common stock received upon conversion represented a reduction of 2,000,000 shares that otherwise would have been issuable under the original terms of the Series B preferred stock.

        Under the terms of the Series B Agreement, if we completed an equity or debt financing in the future of $10,000,000 or more, we also agreed to (i) pay a previously owed dividend in the aggregate amount of $430,000 to the Series B holders and (ii) subject to market conditions, release from the lock-up provision described above, up to 1,000,000 shares of common stock received in connection with the Series B preferred stock conversion in order to allow for resale by the Series B holders. On April 23, 2010, following our April 20, 2010 registered direct offering, $430,000 was paid to the Series B holders for previously owed dividends.

        The Series B Agreement was terminated as a result of the Letter Agreements discussed above.

For exercise of warrants:

        During the fiscal year ended June 30, 2010, Enable exercised all warrants to purchase 4,646,465 shares of common stock at an exercise price of $0.95 for total gross proceeds of $4,414,142. Additionally, during the year ended June 30, 2010, we issued 201,490 shares of common stock to YA Global upon the cashless exercise of warrants to purchase 520,000 shares of common stock.

For exercise of options:

        During the year ended June 30, 2010, we issued 124,653 shares of common stock upon the cashless exercise of stock options to purchase 220,000 shares of common stock.

For conversion of convertible debenture:

        During the year ended June 30, 2010, based upon the conversion prices of $1.65 and $0.95 per share, the convertible debenture investor converted a total principal amount, including interest accreted to principal, of $1,296,000 (net of a discount of $1,116,000) into 1,949,411 shares of our common stock.