10-Q 1 a14-26590_110q.htm 10-Q

Table of Contents

 

 

 

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, 2014

 

or

 

o  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: 001-32490

 

HYPERDYNAMICS CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

 

87-0400335

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification No.)

 

12012 Wickchester Lane, # 475

Houston, Texas 77079

(Address of principal executive offices, including zip code)

 

713-353-9400

(registrant’s principal executive office telephone number)

 

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)  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 definition 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  x

 

 

 

Non-accelerated filer  o

 

Smaller reporting company  o

 

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

 

As of February 02, 2015, 21,046,591 shares of common stock, $0.001 par value, were outstanding.

 

 

 



Table of Contents

 

Table of Contents

 

Part I. Financial Information

 

 

 

Item 1.

Unaudited Consolidated Financial Statements

 

 

 

 

Condensed Consolidated Balance Sheets at December 31, 2014 and June 30, 2014

3

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2014 and 2013

4

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended December 31, 2014 and 2013

5

 

 

Condensed Consolidated Statement of Shareholders’ Equity for the period from July 1, 2013 to December 31, 2014

6

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2014 and 2013

7

 

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risks

19

 

 

 

Item 4.

Controls and Procedures

19

 

 

 

Part II. Other Information

 

 

 

Item 1. Legal Proceedings

20

 

 

Item 1A.  Risk Factors

20

 

 

Item 5.  Other Information

21

 

 

Item 6.     Exhibits

22

 

 

Signatures

25

 

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HYPERDYNAMICS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Number of Shares)

(Unaudited)

 

 

 

December 31,
2014

 

June 30,
2014

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

25,019

 

$

35,270

 

Accounts receivable — joint interest

 

65

 

65

 

Prepaid expenses

 

409

 

832

 

Other current assets

 

15

 

14

 

Total current assets

 

25,508

 

36,181

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $1,933 and $1,785

 

246

 

398

 

Unproved oil and gas properties excluded from amortization (Full-Cost Method)

 

14,291

 

14,259

 

 

 

14,537

 

14,657

 

 

 

 

 

 

 

Total assets

 

$

40,045

 

$

50,838

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable and accrued expenses

 

$

2,300

 

$

5,662

 

Total current liabilities

 

2,300

 

5,662

 

 

 

 

 

 

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Preferred stock, $0.001 par value; 20,000,000 authorized, 0 shares issued and outstanding

 

 

 

Common stock, $0.001 par value, 43,750,000 shares authorized; 21,046,591 shares issued and outstanding

 

169

 

169

 

Additional paid-in capital

 

317,077

 

316,760

 

Accumulated deficit

 

(279,501

)

(271,753

)

Total shareholders’ equity

 

37,745

 

45,176

 

Total liabilities and shareholders’ equity

 

$

40,045

 

$

50,838

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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HYPERDYNAMICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Number of Shares and Per Share Amounts)

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

December 31,

 

December 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Depreciation

 

$

69

 

$

111

 

$

155

 

$

221

 

General, administrative and other operating

 

3,633

 

8,262

 

7,595

 

12,630

 

Loss from operations

 

(3,702

)

(8,373

)

(7,750

)

(12,851

)

Interest income

 

1

 

20

 

2

 

44

 

Loss before income tax

 

(3,701

)

(8,353

)

(7,748

)

(12,807

)

Income tax

 

 

 

 

 

Net loss

 

$

(3,701

)

$

(8,353

)

$

(7,748

)

$

(12,807

)

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share

 

$

(0.18

)

$

(0.40

)

$

(0.37

)

$

(0.61

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding — basic and diluted

 

21,046,591

 

21,046,591

 

21,046,591

 

21,046,591

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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HYPERDYNAMICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)

(Unaudited)

 

 

 

Three Months Ended
December 31,

 

Six Months Ended
December 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

Net loss

 

$

(3,701

)

$

(8,353

)

$

(7,748

)

$

(12,807

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale securities

 

 

8

 

 

25

 

Other comprehensive income

 

 

8

 

 

25

 

Comprehensive loss

 

$

(3,701

)

$

(8,345

)

$

(7,748

)

$

(12,782

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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HYPERDYNAMICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In Thousands, Except Number of Shares)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

 

 

 

 

Common Stock

 

Paid-in

 

Accumulated

 

Comprehensive

 

 

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

 Income (Loss)

 

Total

 

Balance, July 1, 2013

 

21,046,591

 

$

169

 

$

316,235

 

$

(254,636

)

$

(94

)

$

61,674

 

Net loss

 

 

 

 

(17,117

)

 

(17,117

)

Unrealized gain on available-for-sale securities

 

 

 

 

 

25

 

25

 

Reclassification adjustment for realized losses included in net income

 

 

 

 

 

69

 

69

 

Amortization of fair value of stock options

 

 

 

525

 

 

 

525

 

Balance, June 30, 2014

 

21,046,591

 

$

169

 

$

316,760

 

$

(271,753

)

$

 

$

45,176

 

Net loss

 

 

 

 

(7,748

)

 

(7,748

)

Amortization of fair value of stock options

 

 

 

317

 

 

 

317

 

Balance, December 31, 2014

 

21,046,591

 

$

169

 

$

317,077

 

$

(279,501

)

$

 

$

37,745

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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HYPERDYNAMICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

 

 

 

Six Months Ended December 31,

 

 

 

2014

 

2013

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net loss

 

$

(7,748

)

$

(12,807

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation

 

155

 

221

 

Stock based compensation

 

317

 

439

 

Amortization of premium on short term investments

 

 

201

 

Changes in operating assets and liabilities:

 

 

 

 

 

Decrease in accounts receivable — joint interest

 

 

384

 

Decrease in Prepaid expenses

 

423

 

358

 

(Increase) decrease in Other current assets

 

(1

)

40

 

Increase (decrease) in Accounts payable and accrued expenses

 

(3,350

)

4,372

 

Decrease in Other liabilities

 

 

(24

)

Net cash used in operating activities

 

(10,204

)

(6,816

)

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Purchase of property and equipment

 

(3

)

(112

)

Investment in unproved oil and gas properties

 

(44

)

(1,523

)

Net cash Used in investing activities

 

(47

)

(1,635

)

 

 

 

 

 

 

DECREASE IN CASH AND CASH EQUIVALENTS

 

(10,251

)

(8,451

)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

35,270

 

26,468

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

25,019

 

$

18,017

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING TRANSACTIONS:

 

 

 

 

 

Decrease (Increase) in Accounts payable (receivable) for oil and gas properties and gas properties

 

$

12

 

$

(342

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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HYPERDYNAMICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

 

Nature of business

 

Hyperdynamics Corporation (“Hyperdynamics,” the “Company,” “we,” “us,” and “our”) is a Delaware corporation formed in March 1996. Hyperdynamics has two wholly-owned subsidiaries, SCS Corporation Ltd (SCS), a Cayman corporation, and HYD Resources Corporation (HYD), a Texas corporation. Through SCS and its wholly-owned subsidiary, SCS Guinea SARL (SCSG), which is a Guinea limited liability company formed under the laws of the Republic of Guinea (“Guinea”) located in Conakry, Guinea, Hyperdynamics focuses on oil and gas exploration offshore the coast of West Africa. Our exploration efforts are pursuant to a Hydrocarbon Production Sharing Contract, as amended (the “PSC”).  We refer to the rights granted under the PSC as the “Concession.” We began operations in oil and gas exploration, seismic data acquisition, processing, and interpretation in late fiscal 2002.

 

As used herein, references to “Hyperdynamics,” “Company,” “we,” “us,” and “our” refer to Hyperdynamics Corporation and our subsidiaries, including SCS Corporation Ltd (“SCS”). The rights in the Concession offshore Guinea are held by SCS.

 

Status of our Business

 

We have no source of operating revenue and there is no assurance when we will, if ever. On December 31, 2014, we had $25 million in cash, and $2.3 million in liabilities, all of which are current liabilities. We plan to use our existing cash to fund our general corporate needs, our legal and other professional fees and our expenditures associated with the Concession, including our share of future capital expenditures that are not paid by Tullow Guinea Ltd (“Tullow”) on our behalf. We have no other material commitments; however, it is likely that we will continue to incur significant legal expenses.

 

On December 31, 2012, we closed a sale to Tullow, a subsidiary of Tullow Oil plc, of a 40% gross interest in the Concession. We now hold a 37% participating interest, with Dana Petroleum, PLC (“Dana”), which is a subsidiary of the Korean National Oil Corporation, holding the remaining 23% interest in the Concession. We refer to Tullow, Dana and us in the Concession as the “Consortium”.

 

We have drilled one exploratory well, the Sabu-1 well, which reached the planned total depth of 3,600 meters below the surface in February 2012. We determined the well to be non-commercial. As a result, we evaluated the costs associated with the well, subjected them to the Full-Cost Ceiling Test, resulting in a Full-Cost Ceiling Test write-down.

 

We received subpoenas from the United States Department of Justice (“DOJ”) in September 2013 and from the United States Securities and Exchange Commission (“SEC”) in February 2014 requesting that we produce documents relating to our Concession in Guinea. See additional discussion in Note 7. We are unable to predict the outcome or future cost associated with legal proceedings and the investigations being conducted by the DOJ and SEC; however, we incurred approximately $7.5 million in legal and other professional fees related to the investigations in the year ended June 30, 2014 and another $2.8 million in the six month period ended December 31, 2014. It is likely that we will continue to incur significant legal expenses.

 

Pursuant to the Share Purchase Agreement (“SPA”) between Tullow and us, Tullow agreed to pay all of our participating interest share of expenditures associated with joint operations in the Concession up to a gross expenditure cap of $100 million incurred during the carry period that began on September 21, 2013. The timing of the planned well is uncertain. We will be responsible for our 37% interest share of the cost in excess of the remaining gross carry amount. Additionally, Tullow agreed to pay our participating interest share of future costs associated with the drilling of an appraisal of the initial exploration well, if drilled, up to a gross expenditure cap of $100 million.

 

The Consortium planned to drill the exploration well in the ultra-deepwater portion of the Concession in the first half of calendar 2014. On March 11, 2014 Tullow unilaterally asserted its claim that there had been a Force Majeure event under the PSC with the Government of Guinea, the Joint Operating Agreement (“JOA”) between Dana, Tullow and us and the SPA. Tullow stated in its notice that the decisions by the DOJ and the SEC to open investigations into our activities in obtaining and retaining the Concession rights constituted a Force Majeure event under the terms of the PSC, JOA and SPA.  Tullow unilaterally lifted its declaration of Force Majeure effective May 3, 2014.  Diligent efforts are being made to satisfy the conditions to resuming petroleum operations which include clarification from the government of Guinea that the investigations of Hyperdynamics will not adversely affect operations under the PSC. The Ebola virus outbreak in Guinea and surrounding countries is closely being evaluated by the Consortium  and it may

 

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be an impediment to the resumption of petroleum operations. The Consortium continues to monitor efforts to control this epidemic. We cannot predict the timing or outcome of these events.

 

Our costs related to the items referred to above and any additional expenses, or any negative outcomes, could adversely affect our liquidity and financial condition and results of operations. We also will be responsible for our participating interest share of costs in excess of $100 million gross costs associated with joint operations expenditures, including operator overhead and the ultra-deepwater exploration well, when drilled, and such excess expenditures could exacerbate our liquidity. Absent cash inflows, we could exhaust our current available liquidity within the next twelve months.  The timing and amount of our cash outflows are dependent on a number of factors including: Legal and other professional fees related to the FCPA investigations, a negative outcome related to any of our legal proceedings and investigations, inability to resume petroleum operations or drilling delays due to the Ebola epidemic or other factors, well costs exceeding our carry, or if we have unfavorable well results. As a result, absent cash inflows, there is substantial doubt as to whether we will have adequate capital resources to meet our current obligations as they become due and therefore be able to continue as a going concern. Our ability to meet our current obligations as they become due over the next twelve-months, and to be able to continue exploration, will depend on obtaining additional resources through sales of additional interests in the Concession, equity or debt financings, or through other means, although no assurance can be given that any of these actions can be completed.

 

Principles of consolidation

 

The accompanying unaudited consolidated financial statements include the accounts of Hyperdynamics and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the Securities and Exchange Commission (SEC), and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report filed with the SEC on Form 10-K for the year ended June 30, 2014. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein.  The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year ended June 30, 2014, as reported in the Form 10-K, have been omitted.

 

Use of estimates

 

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses at the balance sheet date and for the period then ended. Actual results could differ from these estimates.

 

Cash and cash equivalents

 

Cash equivalents are highly liquid investments with an original maturity of three months or less.  For the periods presented, we maintained all of our cash in bank deposit accounts which, at times, exceed the federally insured limits.

 

Joint interest receivable and allowance for doubtful accounts

 

We establish provisions for losses on accounts receivable if we determine that we will not collect all or part of the outstanding balance. Accounts receivable are written down to reflect our best estimate of realizability based upon known specific analysis, historical experience, and other currently available evidence of the net collectible amount. There is no allowance for doubtful accounts as of December 31, 2014 or June 30, 2014. At December 31, 2014 and at June 30, 2014 we had a balance of $65 thousand, all of which related to joint interest billings to Tullow and Dana Petroleum (E&P) Limited (“Dana”), who own 40% and 23% participating interests in the Concession, respectively.

 

Earnings per share

 

Basic loss per common share has been computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. In period of earnings, diluted earnings per common share are calculated by dividing net income available to common shareholders by weighted-average common shares outstanding during the period plus weighted-average dilutive potential common shares.  Diluted earnings per share calculations assume, as of the beginning of the period, exercise of stock options and warrants using the treasury stock method.

 

All potential dilutive securities, including potentially dilutive options, warrants and convertible securities, if any, were excluded from the computation of dilutive net loss per common share for the three and six month periods ended December 31, 2014 and 2013, respectively, as their effects are antidilutive due to our net loss for those periods.

 

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Stock options to purchase approximately 0.9 million common shares at an average exercise price of $10.20 and warrants to purchase approximately 26 thousand shares of common stock at an average exercise price of $12.64 were outstanding at December 31, 2014. Using the treasury stock method, had we had net income, no common shares attributable to our outstanding stock options would have been included in the fully diluted earnings per share for the three month period ended December 31, 2014 while approximately 800 common shares attributable to our outstanding stock options would have been included in the fully diluted earnings per share for the six month period ended December 31, 2014.  There would have been no dilution attributable to our outstanding warrants to purchase common shares. Had we had net income, no common shares attributable to restricted stock awards would have been included in the fully diluted earnings per share for the three month period ended December 31, 2014 while approximately 8,300 common shares attributable to our restricted stock awards would have been included in the fully diluted earnings per share for the six month period ended December 31, 2014.

 

Stock options to purchase approximately 1.3 million common shares at an average exercise price of $12.53 and warrants to purchase approximately 0.4 million shares of common stock at an average exercise price of $10.40 were outstanding at December 31, 2013. Using the treasury stock method, had we had net income, approximately 3 thousand and 27 thousand common shares attributable to our outstanding stock options would have been included in the fully diluted earnings per share for the three and six month period ended December 31, 2013.  There would have been no dilution attributable to our outstanding warrants to purchase common shares.

 

Contingencies

 

We are subject to legal proceedings, claims and liabilities. We accrue for losses associated with legal claims when such losses are probable and can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. Legal fees are charged to expense as they are incurred.  See Note 7 for more information on legal proceedings.

 

Financial instruments

 

The accounting standards (ASC 820, “Fair Value Measurements and Disclosures”) regarding fair value of financial instruments and related fair value measurements define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement, and enhance disclosure requirements for fair value measures.

 

The three levels are defined as follows:

 

· Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

· Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

· Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The carrying values of cash and cash equivalents, accounts receivable — joint interest and accounts payable approximate fair value. Available-for-sale securities, which consisted entirely of Corporate Debt securities, were valued at the closing price reported in the active market in which the security was traded. As of December 31, 2014, there were no remaining investments on hand.

 

Foreign currency gains and losses from current operations

 

In accordance with ASC Topic 830, Foreign Currency Matters, the functional currency of our international subsidiaries is the U.S. Dollar. Gains and losses from foreign currency transactions arising from operating assets and liabilities are included in general, administrative and other operating expense, have not been significant. Net foreign currency transaction gains (losses) were $(5) thousand and $(19) thousand for the three and six month period ended December 31, 2014, as compared to $(0.2) million and $(0.5) million for the three and six month period ended December 31, 2013.

 

Recently issued or adopted accounting pronouncements

 

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward exists, which requires that an entity present an

unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset

 

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for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. ASU 2013-11 eliminates diversity in practice for presentation of an unrecognized tax benefits when such a carryforward is available to reduce the taxable income or tax payable that would result from the disallowance of a tax position. We adopted this accounting guidance in this, our first quarter of fiscal 2015 with no impact on our financial position or results of operations.

 

2. INVESTMENT IN OIL AND GAS PROPERTIES

 

Investment in oil and gas properties consists entirely of our Guinea Concession in offshore West Africa. We owned a 77% participating interest in our Guinea Concession prior to the sale of a 40% gross interest to Tullow which closed on December 31, 2012. We now own a 37% interest in the Concession.

 

We follow the “Full-Cost” method of accounting for oil and natural gas property and equipment costs. Under this method, internal costs incurred that were directly identified with exploration, development, and acquisition activities undertaken by us for our own account, and which were not related to production, general corporate overhead, or similar activities, are capitalized. Capitalization of internal costs was discontinued April 1, 2013 when Tullow became the operator. Geological and geophysical costs incurred that are directly associated with specific unproved properties are capitalized in “Unproved properties excluded from amortization” and evaluated as part of the total capitalized costs associated with a prospect. The cost of unproved properties not being amortized is assessed to determine whether such properties have been impaired. In determining whether such costs should be impaired, we evaluate current drilling results and available geological and geophysical information.

 

We exclude capitalized costs of unproved oil and gas properties from amortization until evaluated. Geological and geophysical information pertaining to the Guinea concession was collected and evaluated and no reserves have been attributed to the concession.

 

The following table provides detail of total capitalized costs for our Guinea concession which remain unproved and unevaluated and are excluded from amortization as of December 31, 2014 and June 30, 2014 (in thousands):

 

 

 

December 31,
2014

 

June 30,
2014

 

Oil and Gas Properties: 

 

 

 

 

 

Unproved properties not subject to amortization 

 

$

14,291

 

$

14,259

 

 

During the six month period ended December 31, 2014, our oil and gas property balance increased by $32 thousand as a result of additional geological and geophysical costs incurred. Evaluation activities of these unproved properties are expected to be completed within the next one to two years.

 

Sale of Interest to Tullow

 

On December 31, 2012, we closed a sale to Tullow of a 40% gross interest in the Concession. As consideration, we received $27 million from Tullow as reimbursement of our past costs in the Concession and, as additional consideration, Tullow agreed to:  (i) pay all of our participating interest share of expenditures associated with joint operations in the Concession up to a gross expenditure cap of $100 million incurred during the carry period that began on September 21, 2013 associated with the drilling of an exploration well in at least 2,000 meters of water in the deepwater fan area of the Concession; and (ii) pay our share of costs for an appraisal well of the initial exploration well, if drilled, subject to a gross expenditure cap on the appraisal well of $100 million. Tullow is obligated to pay its 40% participating interest share of costs associated with the Concession as of November 20, 2012, the date of execution of the purchase and sale agreement. Tullow began to pay our costs attributable to the Concession on September 21, 2013.  Tullow will continue to pay our costs, subject to the gross expenditure cap of $100 million, until 90 days following the date on which the rig contracted to drill the exploration well moves off the well location. We are responsible for our share of any costs exceeding the gross expenditure cap of $100 million on either well. Tullow agreed to use reasonable endeavors to provide for the commencement of drilling of the exploration well not later than April 1, 2014. The $27 million payment was received by us on December 31, 2012 and was recorded as a reduction in unproved oil and gas properties, net of transaction costs of approximately $3.3 million.

 

In connection with the transaction, SCS, Tullow and Dana entered into a Joint Operating Agreement Novation and Amendment Agreement reflecting that as a result of the sale to Tullow, the interest of the parties in the Concession are SCS 37%, Dana 23%, and Tullow 40%, and that Tullow will be bound by the PSC and the Joint Operating Agreement previously entered into between SCS and Dana. Tullow will assume all the respective liabilities and obligations of SCS in respect of the assigned 40% interest. SCS and Tullow executed a Deed of Assignment. The Assignment was approved by Guinea’s Ministry of Mines and Geology by issuing an Arrêté on December 27, 2012 which formally authorized our assignment of a participating interest to Tullow. SCS, Dana and Tullow have elected Tullow as the Operator of the Concession beginning April 1, 2013.

 

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3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses (in thousands) as of December 31, 2014 and June 30, 2014 include the following:

 

 

 

December 31, 
2014

 

June 30, 
2014

 

Accounts payable — trade and oil and gas exploration activities

 

$

156

 

$

998

 

Accounts payable — joint interest partner share of legal settlement

 

 

1,890

 

Accounts payable — legal costs

 

1,761

 

2,492

 

Accrued payroll and bonus

 

383

 

282

 

 

 

$

2,300

 

$

5,662

 

 

4. INVESTMENTS

 

During the third and fourth quarters of fiscal 2013, we purchased a total of $15.5 million in debt securities which were classified as available-for-sale. These securities matured during the third quarter of fiscal 2014. No investments were held and we had no securities classified as held-to-maturity as of December 31, 2014 or June 30, 2014.

 

5. SHARE-BASED COMPENSATION

 

On February 18, 2010, at our annual meeting of stockholders, stockholders approved the 2010 Equity Incentive Plan (the “2010 Plan”). Prior to the 2010 stockholder meeting, we had two stock award plans: the Stock and Stock Option Plan, which was adopted in 1997 (“1997 Plan”) and the 2008 Restricted Stock Award Plan (“2008 Plan”). In conjunction with the approval of the 2010 Plan at the annual meeting, the 1997 Plan and the 2008 Plan were terminated as of February 18, 2010. Subsequently, on February 17, 2012, the 2010 Plan was amended to increase the maximum shares issuable under the 2010 Plan.

 

The 2010 Plan provides for the grants of shares of common stock, restricted stock units or incentive stock options and/or nonqualified stock options to purchase our common stock to selected employees, directors, officers, agents, consultants, attorneys, vendors and advisors of ours’ or of any parent or subsidiary thereof. Shares of common stock or restricted stock can only be granted under the 2010 Plan within 10 years from the plan effective date of February 18, 2010. A maximum of 1,250,000 shares are issuable under the 2010 Plan and at December 31, 2014, 369,753 shares remained available for issuance.

 

The 2010 Plan provides a means to attract and retain the services of participants and also to provide added incentive to such persons by encouraging stock ownership in the Company. Plan grants are administered by the Compensation Committee, which has substantial discretion to determine which persons, amounts, time, price, exercise terms, and restrictions, if any.

 

Additionally, from time to time, we issue non-compensatory warrants, such as warrants issued to investors.

 

Stock Options

 

The fair value of stock option awards is estimated using the Black-Scholes valuation model. For market based stock option awards, those options where vesting terms are dependent on achieving a specified stock price, the fair value was estimated using a Black-Scholes option pricing model with inputs adjusted for the probability of the vesting criteria being met and the median expected term for each grant as determined by utilizing a Monte Carlo simulation. Expected volatility is based solely on historical volatility of our common stock over the period commensurate with the expected term of the stock options. We rely solely on historical volatility as we do not have traded options. The expected term calculation for stock options is based on the simplified method as described in the Securities and Exchange Commission Staff Accounting Bulletin number 107. We use this method because we do not have sufficient historical information on exercise patterns to develop a model for expected term. The risk-free interest rate is based on the U. S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield rate of zero is based on the fact that we have never paid cash dividends on our common stock and we do not expect to pay cash dividends on our common stock during the expected term of the options.

 

The following table provides information about options during the three months ended December 31, 2014 and 2013:

 

 

 

2014

 

2013

 

Number of options granted

 

101,106

 

3,359

 

Compensation expense recognized

 

$

247,000

 

$

439,000

 

Weighted average fair value of options outstanding

 

$

7.02

 

$

8.25

 

 

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The following table details the significant assumptions used to compute the fair market values of employee and director stock options granted during the six month periods ended December 31, 2014 and 2013:

 

 

 

2014

 

2013

 

Risk-free interest rate

 

0.05-0.12

%

0.08-0.90

%

Dividend yield

 

0

%

0

%

Volatility factor

 

65-216

%

74-95

%

Expected life (years)

 

0.5

 

0.50-3.25

 

 

Summary information regarding employee and director stock options issued and outstanding under all plans as of December 31, 2014 is as follows:

 

 

 

Options

 

Weighted 
Average 
Exercise Price

 

Aggregate 
intrinsic value

 

Weighted 
average 
remaining 
contractual 
term (years)

 

Options outstanding at July 1, 2014

 

1,441,727

 

$

8.76

 

$

8,327

 

3.14

 

Granted

 

101,106

 

3.25

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

Forfeited

 

(474,353

)

3.82

 

 

 

 

 

Expired

 

(174,276

)

11.62

 

 

 

 

 

Options outstanding at December 31, 2014

 

894,204

 

$

10.20

 

$

 

3.02

 

Options exercisable at December 31, 2014

 

645,449

 

$

12.66

 

$

6

 

2.64

 

 

Options outstanding and exercisable as of December 31, 2014

 

Exercise Price

 

Outstanding Number of 
Shares

 

Remaining Life

 

Exercisable 
Number of Shares

 

$

1.92-4.00

 

121,068

 

1 year

 

121,068

 

$

1.92-4.00

 

328,469

 

4 years

 

117,027

 

$

4.01-10.00

 

87,249

 

1 year

 

87,249

 

$

4.01-10.00

 

122,126

 

3 years

 

90,667

 

$

4.01-10.00

 

5,562

 

4 years

 

750

 

$

4.01-10.00

 

30,500

 

5 years

 

30,500

 

$

10.01-20.00

 

1,250

 

1 year

 

1,250

 

$

10.01-20.00

 

1,875

 

2 years

 

1,250

 

$

10.01-20.00

 

28,750

 

5 years

 

28,750

 

$

20.01-30.00

 

16,667

 

1 year

 

16,667

 

$

20.01-30.00

 

1,250

 

2 years

 

833

 

$

20.01-30.00

 

31,625

 

6 years

 

31,625

 

$

30.01-40.00

 

52,750

 

1 year

 

52,750

 

$

30.01-40.00

 

26,250

 

2 years

 

26,250

 

$

30.01-40.00

 

27,563

 

6 years

 

27,563

 

$

40.01-50.00

 

6,250

 

1 year

 

6,250

 

$

40.01-50.00

 

5,000

 

6 years

 

5,000

 

 

 

894,204

 

 

 

645,449

 

 

At December 31, 2014, there was $0.5 million of unrecognized compensation costs related to non-vested share based compensation arrangements granted to employees and directors under the plans, with an amortization period of two to three years.

 

Restricted Stock

 

The fair value of restricted stock awards classified as equity awards is based on the Company’s stock price as of the date of grant. During the year ended June 30, 2014, we granted 21,030 shares of restricted stock awards with a fair value of $0.1 million. These

 

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awards did not grant any rights as a shareholder of the company until a certificate for the vested shares of common stock had been issued. During the six months ended December 31, 2014, all such awards were forfeited, none issued, and none are outstanding at December 31, 2014.

 

6. INCOME TAXES

 

Federal income taxes are not due as we have had losses since inception. Our effective tax rate for the three and six month periods ended December 31, 2014 and 2013 is zero percent. This rate is lower than the U.S. statutory rate of 35 percent primarily due to the valuation allowance applied against our net deferred tax assets.

 

7. COMMITMENTS AND CONTINGENCIES

 

LITIGATION AND OTHER LEGAL MATTERS

 

From time to time, we and our subsidiaries are involved in disputes. We are unable to predict the outcome of such matters when they arise. We review the status of on-going proceedings and other contingent matters with legal counsel.  Liabilities for such items are recorded if and when it is probable that a liability has been incurred and when the amount of the liability can be reasonably estimated. If we are able to reasonably estimate a range of possible losses, an estimated range of possible loss is disclosed for such matters in excess of the accrued liability, if any. Liabilities are periodically reviewed for adjustments based on additional information.

 

Shareholder Lawsuits

 

On April 2, 2012, a lawsuit styled as a class action was filed in the U.S. District Court for the Southern District of Texas against us and our chief executive officer alleging that we made false and misleading statements that artificially inflated our stock prices. The lawsuit alleges, among other things, that we misrepresented the prospects and progress of our drilling operations, including our drilling of the Sabu-1 well and plans to drill the Baraka-1 well off the coast of the Republic of Guinea.  The lawsuit seeks an unspecified amount of damages based on Sections 10(b) and 20 of the Securities Exchange Act of 1934. Although several lead plaintiffs were appointed by the Court and then withdrew from the matter, a lead plaintiff has now been appointed and a scheduling order governing briefing on a motion to dismiss has been entered by the Court.  On May 12, 2014, lead plaintiff filed his amended complaint adding our current and former chief financial officers as defendants, and defendants filed their motion to dismiss on July 11, 2014. On August 20, 2014, the lead plaintiff filed a response to our motion to dismiss, and we filed our reply on September 19, 2014. We have assessed the status of this matter and have concluded that an adverse judgment remains reasonably possible, but not probable. As a result, no provision has been made in the consolidated financial statements. Given the early stage of this dispute, we are unable to estimate a range of possible loss; however, in our opinion, the outcome of this dispute will not have a material effect on our financial condition and results of operations.

 

Beginning on March 13, 2014, two lawsuits styled as class actions were filed in the U.S. District Court for the Southern District of Texas against us and several officers of the Company alleging that we made false and misleading statements that artificially inflated our stock prices.  The lawsuits allege, among other things, that we misrepresented our compliance with the Foreign Corrupt Practices Act and anti-money laundering statutes and that we lacked adequate internal controls.  The lawsuits seek damages based on Sections 10(b) and 20 of the Securities Exchange Act of 1934, although the specific amount of damages is not specified. On May 12, 2014, a shareholder filed a motion for appointment as lead plaintiff, which remains pending. Also, on May 12, 2014, lead plaintiff in the April 2012 lawsuit described above filed a motion to consolidate the March 2014 cases with the earlier case. The parties await a ruling on the motion to consolidate.  In addition to these lawsuits, we have received demands from stockholders to inspect our books and records; however, no proceedings have been initiated. We have assessed the status of these matters and have concluded that an adverse judgment remains reasonably possible, but not probable. As a result, no provision has been made in the consolidated financial statements. Given the early stage of these disputes, we are unable to estimate a range of possible loss; however, in our opinion, the outcome of this dispute will not have a material effect on our financial condition and results of operations.

 

On May 6, 2014, a purported shareholder derivative petition was filed against all of our then-current directors and our current and former chief financial officer in the District Court of Harris County, Texas. The petition alleges breaches of their fiduciary duties, gross mismanagement, abuse of control, waste and unjust enrichment in connection with potential violations by us of the FCPA. The plaintiff seeks an unspecified amount of damages against these persons and does not request any damages from us. The plaintiff did not make a demand on our Board of Directors prior to filing the suit. The plaintiff filed an amended petition on September 16, 2014 which names only current and former board members. We filed a response on October 31, 2014 that seeks to dismiss the case for failure to make demand on the board of directors before the suit was filed. As of January 23, 2015, that motion is fully briefed.

 

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Iroquois Lawsuit

 

On May 9, 2012, a lawsuit was filed in the Supreme Court of the State of New York against us and all of our directors. The plaintiffs, five hedge funds that invested in us in early 2012, allege that we breached an agreement with the plaintiffs, and that we and the directors made certain negligent misrepresentations relating to our drilling operations.  Among other claims, the plaintiffs allege that we misrepresented the status of our drilling operations and the speed with which the drilling would be completed.  The plaintiffs advance claims for breach of contract and negligent misrepresentation and seek damages in the amount of $18.5 million plus pre-judgment interest. On July 12, 2012, we and the directors moved to dismiss the suit for failure to state a claim as to all defendants and for lack of personal jurisdiction over the director defendants.  On June 19, 2013, the court dismissed the negligent misrepresentation claim but declined to dismiss the breach of contract claim. The negligent misrepresentation claim was dismissed without prejudice, meaning plaintiffs could attempt to refile it. On August 12, 2013, the plaintiffs filed an amended complaint. That complaint names only us and seeks recovery for alleged breaches of contract. We filed an answer to the plaintiffs’ amended complaint on September 9, 2013, and the court has entered a scheduling order governing pre-trial proceedings in the matter.  The maximum possible loss is the full amount of $18.5 million plus interest accrued thereon until judgment. We, however, have assessed the status of this matter and have concluded that although an adverse judgment is reasonably possible, it is not probable. As a result, no provision has been made in the consolidated financial statements. In our opinion, the outcome of this dispute will not have a material effect on our financial condition and results of operations.

 

Foreign Corrupt Practices Act Investigations

 

In September 2013, we received a subpoena from the United States Department of Justice and in January 2014 we received a subpoena from the United States Securities and Exchange Commission for the production of documents relating to our business in Guinea.  We understand that they are investigating whether our activities in obtaining and retaining the Concession rights and our relationships with charitable organizations potentially violate the U.S. Foreign Corrupt Practices Act or U.S. anti-money laundering statutes. We have retained legal counsel to represent us in these matters and are cooperating fully with the government.

 

If violations of the FCPA occurred, we could be subject to fines, civil and criminal penalties, equitable remedies, and injunctive relief. We could also face fines, sanctions and other penalties from authorities in other jurisdictions that could affect our ability to conduct business operations in those jurisdictions. In addition, disclosure and the pendency of the investigation could adversely affect our reputation and our ability to obtain new business or retain existing business or implement our business plan, to attract and retain employees and to access the capital markets. No amounts have been accrued related to any potential fines, sanctions or other penalties. We cannot currently predict what, if any, actions may be taken by the DOJ, the SEC, the applicable government or other authorities or the effect any actions may have on our results of operations, financial condition, on our financial statements or on our business in Guinea and other jurisdictions. We are unable to predict when the investigations will be completed, what outcome will result or what total costs we will incur in the course of the investigations. To date, we incurred approximately $7.5 million in legal and other professional fees associated with the FCPA investigations in the year ended June 30, 2014, an additional $2.8 million in the six month period ended December 31, 2014, and it is likely that we will continue to incur additional significant legal expenses.

 

COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

We lease office space under long-term operating leases with varying terms. Most of the operating leases contain renewal and purchase options. We expect that in the normal course of business, the majority of operating leases will be renewed or replaced by other leases.

 

The following is a schedule by years of minimum future rental payments required under operating leases that have initial or remaining non-cancellable lease terms in excess of one year as of December 31, 2014 (in thousands):

 

Years ending June 30:

 

 

 

2015

 

$

141

 

2016

 

386

 

2017

 

392

 

2018

 

399

 

2019 and thereafter

 

406

 

Total minimum payments required

 

$

1,724

 

 

Rent expense included in net loss from operations for the three and six month periods ended December 31, 2014 and 2013 was $0.1 million and $0.2 million respectively, compared to $0.1 million and $0.2 million for the three and six month periods ended December 31, 2013.

 

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

 

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

 

This Report contains “forward-looking statements” within the meaning of Section 27 A of the Securities Act of 1933, as amended, and Section 21 E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, future events or performance and underlying assumptions and other statements which are other than statements of historical facts.  Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “plan,” “project,” “anticipate,” “estimate,” “believe,” or “think.” Forward-looking statements involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.  We assume no duty to update or revise our forward-looking statements based on changes in plans or expectations or otherwise.

 

As used herein, references to “Hyperdynamics,” “Company,” “we,” “us,” and “our” refer to Hyperdynamics Corporation and our subsidiaries.

 

Overview

 

We are an independent oil and gas exploration company with large prospects in offshore Republic of Guinea (“Guinea”) in Northwest Africa pursuant to rights granted to us by Guinea (the “Concession”) under a Hydrocarbon Production Sharing Contract, as amended (“PSC”).  After having sold a 40% gross interest in the Concession to Tullow Guinea Ltd. (“Tullow”) during the second quarter of fiscal 2013, we now hold a 37% participating interest. Dana Petroleum, PLC (“Dana”), which is a subsidiary of the Korean National Oil Corporation, holds the remaining 23% interest in the Concession. Tullow became the Operator of the Concession on April 1, 2013.

We refer to Tullow, Dana and us in the Concession as the “Consortium”.

 

Pursuant to the Share Purchase Agreement (“SPA”) between Tullow and us, Tullow agreed to pay all of our participating interest share of expenditures associated with joint operations in the Concession up to a gross expenditure cap of $100 million incurred during the carry period that began on September 21, 2013. The timing of the planned well is uncertain. We will be responsible for our 37% interest share of the cost in excess of the remaining gross carry amount. Additionally, Tullow agreed to pay our participating interest share of future costs for the drilling of an appraisal of the initial exploration well, if drilled, up to a gross expenditure cap of $100 million.

 

The Consortium planned to drill the exploration well in ultra-deepwater in the first half of calendar 2014. On March 11, 2014 Tullow unilaterally asserted its claim that there had been a Force Majeure event under the PSC with the Government of Guinea, the Joint Operating Agreement (“JOA”) between Dana, Tullow and us and the SPA. Tullow stated in its notice that the decisions by the DOJ and the SEC to open investigations into our activities in obtaining and retaining the Concession rights constituted a Force Majeure event under the terms of the PSC, JOA and SPA. Tullow unilaterally lifted its declaration of Force Majeure effective May 3, 2014.  Diligent efforts are being made to satisfy the conditions to resuming petroleum operations which include clarification from the government of Guinea that the investigations of Hyperdynamics will not adversely affect operations under the PSC. The Ebola virus outbreak in Guinea and surrounding countries is closely being evaluated by the Consortium and it may be an impediment to resumption of petroleum operations. The Consortium continues to monitoring efforts to control this epidemic. We cannot predict the timing or outcome of these events.

 

Since the grant of the Concession, we have conducted 2-dimensional (“2D”) and 3-dimensional (“3D”) seismic surveys of a portion of the Concession and drilled one non-commercial well completed in February of 2012. The most recent 3D seismic survey covering approximately 4,000 square kilometers in the deeper water portion of the Concession was completed and processed. These results are being used by the Consortium in the planning of the next exploratory well.

 

Our primary focus is the advancement of exploration work in Guinea. We have no source of operating revenue, and there is no assurance when we will, if ever.  We have no operating cash flows, and we will require substantial additional funds, through additional participation arrangements, securities offerings, or through other means, to fulfill our business plans. If we farm-out additional interests in the Concession, our percentage will decrease.  Although we have been successful in raising capital and in entering into key participation arrangements with Dana and Tullow, we have no commitments for additional capital resources.  The terms of any such arrangements, if made, may not be advantageous. Our need for additional funding may also be affected by the uncertainties involved with the planned exploratory well and the FCPA investigations. Costs associated with these matters were significant in the year ended June 30, 2014, and while total costs and outcomes are not currently known, we expect the costs to continue to be substantial; having incurred $2.8 million in the six month period ended December 31, 2014.

 

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Results of Operations

 

Based on the factors discussed below the net loss attributable to common shareholders for the three months ended December 31, 2014 decreased $4.7 million, or 56% to a net loss of $3.7 million, or $0.18 per share, from a net loss of $8.4 million, or $0.40 per share for the three months ended December 31, 2013. Net loss attributable to common shareholders for the six months ended December 31, 2014 decreased $5.1 million, or 39%, to a net loss of $7.7 million, or $0.37 per share, from a net loss of $12.8 million, or $0.61 per share for the six months ended December 31, 2013.

 

Reportable segments

 

We have one reportable segment: our international operations in Guinea conducted through our subsidiary SCS. SCS is engaged in oil and gas exploration activities pertaining to offshore Guinea.

 

Three months ended December 31, 2014 Compared to Three Months Ended December 31, 2013

 

Revenues.  There were no revenues for the three months ended December 31, 2014 and 2013.

 

Depreciation.   Depreciation on property and equipment decreased 37% or $42 thousand from the fiscal 2014 period to the fiscal 2015 period. Depreciation expense was $69 thousand and $111 thousand in the three months ended December 31, 2014 and 2013, respectively.

 

General, Administrative and Other Operating Expenses. Our general, administrative and other operating expenses were $3.6 million and $8.3 million for the three months ended December 31, 2014 and 2013, respectively. This represents a decrease of 56% or $4.7 million from the fiscal 2014 period to the fiscal 2015 period. The decrease in expense was attributable to decreases in personnel related costs of approximately $0.3 million, investor services cost of $0.1 million, foreign currency losses of approximately $0.2 million and legal fees of $3.9 million, which can primarily be attributed to legal and other professional fees related to the FCPA investigations which decreased $1.6 million and the AGR lawsuit which decreased $1.5 million. Our prior period foreign currency transaction losses were primarily the result of a large balance in accounts payable denominated in foreign currency, primarily associated with our drilling contract with AGR, for which payment had been frozen pending the resolution of our legal dispute with AGR. This dispute was settled in May 2014 resulting in substantially reduced accounts payable activity denominated in foreign currency and therefore reduced foreign currency transaction losses in the three months ended December 31, 2014.

 

Loss from Continuing Operations. As a result of the factors discussed above, our loss from operations decreased by $4.7 million from $8.4 million in the three months ended December 31, 2013 to $3.7 million for the three months ended December 31, 2014.

 

Six months ended December 31, 2014 Compared to Six Months Ended December 31, 2013

 

Revenues.  There were no revenues for the six months ended December 31, 2014 and 2013.

 

Depreciation.   Depreciation on property and equipment decreased 30% or $65 thousand from the fiscal 2014 period to the fiscal 2015 period. Depreciation expense was $155 thousand and $221 thousand in the six months ended December 31, 2014 and 2013, respectively.

 

General, Administrative and Other Operating Expenses. Our general, administrative and other operating expenses were $7.6 million and $12.6 million for the six months ended December 31, 2014 and 2013, respectively. This represents a decrease of 40% or $5 million from the fiscal 2014 period to the fiscal 2015 period. The decrease in expense was attributable to decreases in personnel related costs of approximately $1 million, contract labor costs of $0.2 million, investor services cost of $0.2 million, foreign currency losses of approximately $0.5 million and legal fees of $3 million, which can primarily be attributed to legal and other professional fees related to the FCPA investigations which decreased $0.2 million and the AGR lawsuit which decreased $2.4 million. Our foreign currency transaction losses were primarily the result of a large balance in accounts payable denominated in foreign currency, primarily associated with our drilling contract with AGR, for which payment had been frozen pending the resolution of our legal dispute with AGR. This dispute was settled in May 2014 resulting in substantially reduced accounts payable activity denominated in foreign currency and therefore reduced foreign currency transaction losses in the six months ended December 31, 2014.

 

Loss from Continuing Operations. As a result of the factors discussed above, our loss from operations decreased by $5.1 million from $12.8 million in the six months ended December 31, 2013 to $7.7 million for the six months ended December 31, 2014.

 

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Liquidity and Capital Resources

 

General

 

 

 

Six Months Ended December 31,

 

 

 

2014

 

2013

 

Net cash used in operating activities

 

$

(10,204

)

$

(6,816

)

Net cash used in investing activities

 

(47

)

(1,635

)

Net cash provided by financing  activities

 

 

 

DECREASE IN CASH AND CASH EQUIVALENTS

 

(10,251

)

(8,451

)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

35,270

 

26,468

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

25,019

 

$

18,017

 

 

Operating Activities

 

Net cash used in operating activities for the six months ended December 31, 2014 was $10.2 million compared to $6.8 million for the six months ended December 31, 2013. The increase in cash used in operating activities is primarily attributable to changes in working capital during the periods, a $3.4 million decrease of accounts payable in the current period compared to a $4.4 million increase in accounts payable in the prior period. The decrease in accounts payable in the current period can be attributed primarily to the decrease in legal and other professional fees and the payment of a joint interest owner’s share of the AGR legal settlement.

 

Investing Activities

 

Net cash used in investing activities for the six months ended December 31, 2014 was $47 thousand compared to $1.6 million in the six months ended December 31, 2013. The decrease in cash used in investing activities can primarily be attributed to completing the processing of the 3-D survey which was incurred in the prior period.

 

Financing Activities

 

There were no cash provided by financing activities during the six months ended December 31, 2014 and 2013.

 

Liquidity

 

On December 31, 2014, we had $25 million in cash and $2.3 million in liabilities, all of which are current. We plan to use our existing cash to fund our general corporate needs, our legal and other professional fees and our expenditures associated with the Concession, including our share of future capital expenditures that are not paid by Tullow on our behalf. We have no other material commitments; however, we have incurred significant legal expenses in the year ended June 30, 2014 and the six months ended December 31, 2014, and it is likely that we will continue to incur significant legal expenses.

 

Since September 2013, we have received subpoenas from the United States Department of Justice (“DOJ”) and the United States Securities and Exchange Commission (“SEC”) requesting that we produce documents relating to our Concession in Guinea. We are unable to predict the outcome or future cost associated with legal proceedings and the investigations being conducted by the DOJ and SEC. We incurred approximately $7.5 million in legal and other professional fees related to the investigations in the year ended June 30, 2014 and approximately $2.8 million in the six months ended December 31, 2014.

 

The Consortium sent notice in July 2013 to the Government of Guinea of its intention to renew the second exploration period to September 2016 and the coordinates of the area to be relinquished as required under the PSC. A renewal of the second exploration period by the Minister of Mines and Geology occurs upon application when the work and expenditure obligations from the preceding period have been fulfilled.  There has been no question raised by the Minister or others regarding satisfaction of these conditions.

 

The second exploration period may be extended for one additional year beyond 2016 to allow the completion of a well in process and for two additional years to allow the completion of the appraisal of any discovery made. Additionally, to satisfy the September 2013-2016 work requirement, one exploration well is required to be drilled, which is to be commenced by the end of September 2016, to a minimum depth of 2,500 meters below seabed.

 

The Consortium plans to drill an ultra-deepwater exploration well, the timing of which is uncertain. Tullow agreed to pay all of our participating interest share of expenditures associated with joint operations in the Concession up to a gross expenditure cap of $100 million incurred during the carry period that began on September 21, 2013. We will be responsible for our 37% interest share of the cost in excess of the remaining gross carry amount. Additionally, Tullow agreed to pay SCS’s participating interest share of future costs for the drilling of an appraisal of the initial exploration well, if drilled, up to a gross expenditure cap of $100 million.

 

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Our costs related to the items referred to above and any additional expenses, or any negative outcomes, could adversely affect our liquidity and financial condition and results of operations.  We also will be responsible for our participating interest share of costs in excess of $100 million gross costs associated with joint operations expenditures, including operator overhead and the ultra-deepwater exploration well, when drilled, and such excess expenditures could exacerbate our liquidity concerns. Absent cash inflows, we could exhaust our current available liquidity within the next twelve months.  The timing and amount of our cash outflows are dependent on a number of factors including: Legal and other professional fees related to the FCPA investigations, a negative outcome related to any of our legal proceedings and investigations, inability to resume petroleum operations or drilling delays due to the Ebola epidemic or other factors, well costs exceeding our carry, or if we have unfavorable well results. As a result, absent cash inflows, there is substantial doubt as to whether we will have adequate capital resources to meet our current obligations as they become due and therefore be able to continue as a going concern. Our ability to meet our current obligations as they become due over the next twelve months, and to be able to continue exploration, will depend on obtaining additional resources through sales of additional interests in the Concession, equity or debt financings, or through other means, although no assurance can be given that any of these actions can be completed.

 

Capital Expenditures

 

During the first six months of fiscal 2015, we incurred an additional $32 thousand in costs and we expended $12 thousand for previous property additions included in accounts payable as of June 30, 2014. Additionally, during the first six months of fiscal 2015, $3 thousand was expended for the purchase of property, plant and equipment. This compares to the first six months of fiscal 2014, where we received credits for costs previously incurred resulting in a $0.3 million reduction in oil and gas properties, but we expended $1.5 million for previous property additions included in accounts payable as of June 30, 2013. Additionally, during the first six months of fiscal 2014 $0.1 million was expended for the purchase of property, plant and equipment. Fiscal 2014 oil and gas properties expenditures mostly pertained to costs associated with the processing of our most recent 3-D survey.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Our functional currency is the US dollar. We had, prior to their closures, some foreign currency exchange rate risk resulting from our in-country offices in Guinea and the United Kingdom, and from certain costs in our drilling program. US dollars are accepted in Guinea and many of our purchases and purchase obligations, such as our office lease in Guinea, were denominated in US dollars. However, our costs for labor, supplies and fuel could have increased if the Guinea Franc, the Euro, or the Pound Sterling significantly appreciated against the US dollar. We did not hedge the exposure to currency rate changes. We do not believe our exposure to market risk to be material.

 

Item 4. Controls and Procedures

 

We conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2014. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.  Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of June 30, 2014, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

 

Our management, including the CEO and CFO, identified no change in our internal control over financial reporting that occurred during our fiscal quarter ended December 31, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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Table of Contents

 

Part II Other Information

 

Item 1. Legal Proceedings

 

From time to time, we and our subsidiaries are involved in business disputes. We are unable to predict the outcome of such matters when they arise. Currently pending proceedings, in our opinion, will not have a material adverse effect upon our consolidated financial statements. The following are the only litigation matters with material developments during the three month period ended December 31, 2014.

 

Shareholder Lawsuits

 

On April 2, 2012, a lawsuit styled as a class action was filed in the U.S. District Court for the Southern District of Texas against us and our chief executive officer alleging that we made false and misleading statements that artificially inflated our stock prices. The lawsuit alleges, among other things, that we misrepresented the prospects and progress of our drilling operations, including our drilling of the Sabu-1 well and plans to drill the Baraka-1 well off the coast of the Republic of Guinea.  The lawsuit seeks an unspecified amount of damages based on Sections 10(b) and 20 of the Securities Exchange Act of 1934. Although several lead plaintiffs were appointed by the Court and then withdrew from the matter, a lead plaintiff has now been appointed and a scheduling order governing briefing on a motion to dismiss has been entered by the Court.  On May 12, 2014, lead plaintiff filed his amended complaint adding our current and former chief financial officers as defendants, and defendants filed their motion to dismiss on July 11, 2014. On August 20, 2014, the lead plaintiff filed a response to our motion to dismiss. We have assessed the status of this matter and have concluded that an adverse judgment remains reasonably possible, but not probable. As a result, no provision has been made in the consolidated financial statements. Given the early stage of this dispute, we are unable to estimate a range of possible loss; however, in our opinion, the outcome of this dispute will not have a material effect on our financial condition and results of operations.

 

Beginning on March 13, 2014, two lawsuits styled as class actions were filed in the U.S. District Court for the Southern District of Texas against us and several officers of the Company alleging that we made false and misleading statements that artificially inflated our stock prices.  The lawsuits allege, among other things, that we misrepresented our compliance with the Foreign Corrupt Practices Act and anti-money laundering statutes and that we lacked adequate internal controls.  The lawsuits seek damages based on Sections 10(b) and 20 of the Securities Exchange Act of 1934, although the specific amount of damages is not specified. On May 12, 2014, a shareholder filed a motion for appointment as lead plaintiff, which remains pending. Also, on May 12, 2014, lead plaintiff in the April 2012 lawsuit described above filed a motion to consolidate the March 2014 cases with the earlier case. The parties await a ruling on the motion to consolidate.  In addition to these lawsuits, we have received demands from stockholders to inspect our books and records; however, no proceedings have been initiated. We have assessed the status of these matters and have concluded that an adverse judgment remains reasonably possible, but not probable. As a result, no provision has been made in the consolidated financial statements. Given the early stage of these disputes, we are unable to estimate a range of possible loss; however, in our opinion, the outcome of this dispute will not have a material effect on our financial condition and results of operations.

 

On May 6, 2014, a purported shareholder derivative petition was filed against all of our then-current directors and our current and former chief financial officer in the District Court of Harris County, Texas. The petition alleges breaches of their fiduciary duties, gross mismanagement, abuse of control, waste and unjust enrichment in connection with potential violations by us of the FCPA. The plaintiff seeks an unspecified amount of damages against these persons and does not request any damages from us. The plaintiff did not make a demand on our Board of Directors prior to filing the suit. The plaintiff filed an amended petition on September 16, 2014, which names only current and former board members. We filed a response on October 31, 2014 that seeks to dismiss the case for failure to make demand on the board of directors before the suit was filed. As of January 23, 2015, that motion is fully briefed.

 

Item 1A. Risk Factors

 

The following risk factors are provided to reflect material developments and to modify the risk factors previously disclosed under Item 1A. of our Annual Report on Form 10-K for the fiscal year ended June 30, 2014.

 

An Epidemic of the Ebola virus disease in Guinea and other parts of West Africa is ongoing and if not contained in the near future, it could adversely affect our business operations and financial condition.

 

The current outbreak of the Ebola virus disease is ongoing in Guinea and other parts of West Africa. The World Health Organization has declared it a global health emergency and we are unable to predict the effect and potential spread of the Ebola virus. Despite the

 

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efforts of various agencies to tackle the outbreak, the Ebola epidemic has not been eradicated and the situation continues to be serious in Guinea, including Conakry. Governments have begun to institute policies on the testing, monitoring and quarantining of individuals traveling from affected countries in order to avoid a worldwide pandemic. Several countries have announced travel bans to the neighboring countries of Sierra Leone and Liberia and the U.S. Center for Disease Control is recommending that people avoid non-essential travel to and from any affected areas.

 

Any drilling activities of the Consortium will require safe access to the Conakry airport and other infrastructure in Guinea. If the Ebola virus is not contained, drilling plans will likely be compromised and will significantly increase costs of operations. Further, if travel bans are extended to Guinea or contractors or personnel refuse to travel there, drilling plans could be delayed or interrupted after commencement. It is likely that the cost of any services could be significantly higher than planned which in turn could have a material adverse effect on our liquidity, business, and results of operations.

 

We have received notices from the New York Stock Exchange (“NYSE”) that we have fallen below its continued listing standards, and unless meaningful improvement in our valuation is demonstrated, our common stock could be delisted from the NYSE.  Delisting could limit the liquidity of our common stock, hinder our ability to raise additional capital and have other negative results.

 

On January 9, 2015, we were notified by the NYSE that we did not satisfy the NYSE’s continued listing criteria.  The NYSE noted we were below criteria as the average closing price of our common stock was less than $1.00 per share over a consecutive 30 trading-day period.  As of January 8, 2015, the average price of our common stock was $0.98. We responded to the NYSE on January 26, 2015 with a business plan to demonstrate our ability to regain compliance. We will have six months following receipt of the non-compliance notice to cure the deficiency for this continued listing standard.

 

In addition, the NYSE noted we remain subject to NYSE continued listing standards with respect to our plan to regain compliance with the $50 Million Standard related to average market capitalization and total stockholders’ equity.  The $50 Million Standard requires us to maintain an average market capitalization and stockholders’ equity greater than $50 million over a 30 trading-day period.  In April 2014 we received notice from the NYSE of falling below the $50 Million Standard.  We submitted a plan and provided periodic updates to the NYSE to regain compliance within 18 months. Our plan was accepted by the NYSE but is subject to continued monitoring by the NYSE.

 

In its January 9, 2015 notification to us, the NYSE stated that it can take an accelerated listing action at any time if meaningful improvement in valuation is not demonstrated or our common stock trades at levels viewed by the NYSE to be abnormally low over a sustained period of time.  Our stock price has declined recently, and if meaningful improvement in our valuation is not demonstrated soon, our common stock could be delisted from the NYSE.

 

If our stock is delisted, our stock would likely be traded on an over-the-counter quotation system or on the pink sheets, which could adversely affect the market liquidity for our common stock and limit the ability of shareholders to sell securities in the secondary market.

 

Delisting from the NYSE could adversely affect our ability to raise additional financing through public or private sales of equity securities.  Delisting could also have other negative results, including the loss of institutional investor interest and fewer business development opportunities.

 

Item 5. Other Information

 

None.

 

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Table of Contents

 

Item 6. Exhibits and Reports on Form 8-K

 

(A)
Exhibit

Number

 

Description

 

 

 

3.1.1

 

Certificate of Incorporation (1)

 

 

 

3.1.2

 

Certificate of Amendment of Certificate of Incorporation, dated January 21, 1997 (1)

 

 

 

3.1.3

 

Certificate of Amendment of Certificate of Incorporation, dated September 20, 1999 (1)

 

 

 

3.1.4

 

Certificate of Amendment of Certificate of Incorporation, dated December 22, 2003 (1)

 

 

 

3.1.5

 

Certificate of Amendment of Certificate of Incorporation, dated March 11, 2011 (2)

 

 

 

3.1.6

 

Certificate of Amendment of Certificate of Incorporation, dated June 28, 2013 (18)

 

 

 

3.1.7

 

Series B Certificate of Designation (4)

 

 

 

3.2

 

Amended and Restated By-laws (15)

 

 

 

4.1

 

Form of Common Stock Certificate (3)

 

 

 

4.2

 

Form of Common Stock Purchase Warrant issued to investors on February 1, 2012 (17)

 

 

 

10.1

 

Hydrocarbon Production Sharing Contract (PSA) between SCS Corporation and the Republic of Guinea, dated September 22, 2006 (5)

 

 

 

10.2

 

Amendment No. 1 to the Hydrocarbons Production Sharing Contract between SCS Corporation and the Republic of Guinea, dated March 25, 2010 (8)

 

 

 

10.3*

 

Amended and Restated Employment Agreement between Hyperdynamics and Ray Leonard, effective as of July 23, 2012 (6)

 

 

 

10.4

 

Sale and Purchase Agreement between Hyperdynamics Corporation and Dana Petroleum (E&P) Limited, effective as of December 4, 2009 (9)

 

 

 

10.5

 

Operating Agreement between SCS Corporation and Dana Petroleum (E&P) Limited, dated January 28, 2010 (13)

 

 

 

10.6*

 

2010 Equity Incentive Plan as amended (11)

 

 

 

10.7*

 

Form of Incentive Stock Option Agreement (7)

 

 

 

10.8*

 

Form of Non-Qualified Stock Option Agreement (7)

 

 

 

10.9*

 

Form of Restricted Stock Agreement (7)

 

 

 

10.10

 

Contract Number:  AGR/C105/10 between SCS Corporation and AGR Peak Well Management Limited for Provision of Well Construction Management Services, including LOGIC General Conditions as Appendix I (10)

 

 

 

10.11

 

Agreement for the Supply of Marine Seismic Data Application and Processing Services, dated September 20, 2011 between SCS Corporation and CGG Veritas Services SA (16)

 

 

 

10.12

 

Form of Securities Purchase Agreement, dated January 30, 2012, between Hyperdynamics Corporation and investors in the offering (17)

 

 

 

10.13

 

Placement Agency Agreement, dated January 30, 2012, by and between Hyperdynamics Corporation and Rodman & Renshaw, LLC (17)

 

 

 

10.14

 

Purchase and Sale Agreement between SCS Corporation Ltd. and Tullow Guinea Ltd., dated November 20, 2012. (12)

 

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Table of Contents

 

10.15

 

Joint Operating Agreement Novation and Amendment Agreement relating to the Operating Agreement for the Hydrocarbon Production Sharing Contract, offshore Guinea, between SCS Corporation Ltd., Dana Petroleum E&P Limited, and Tullow Guinea Ltd. dated December 31, 2012. (14)

 

 

 

10.16

 

Parent Company Guarantee between Tullow Oil plc and SCS Corporation Ltd., dated December 31, 2012 (14)

 

 

 

10.17

 

Retention Bonus Agreement between Hyperdynamics and Paolo Amoruso, dated June 30, 2014 (19)

 

 

 

10.18

 

Settlement Deed between Hyperdynamics Corporation, SCS Corporation Ltd., AGR Well Management Ltd, and Jasper Drilling Private Ltd dated May 16, 2014 (20)

 

 

 

14.1

 

Code of Ethics (1)

 

 

 

21.1

 

Subsidiaries of the Registrant (20)

 

 

 

31.1**

 

Certification of Chief Executive Officer of Hyperdynamics Corporation required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

31.2**

 

Certification of Chief Financial Officer of Hyperdynamics Corporation required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

32.1**

 

Certification of Chief Executive Officer of Hyperdynamics Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)

 

 

 

32.2**

 

Certification of Principal Financial Officer of Hyperdynamics Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)

 

 

 

101.INS**

 

XBRL Instance Document

 

 

 

101.SCH**

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL**

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF**

 

XBRL Taxonomy Extension Definitions Linkbase Document

 

 

 

101.LAB**

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE**

 

XBRL Taxonomy Extension Presentation Linkbase Document

 


*

 

Management contracts or compensatory plans or arrangements.

**

 

Filed herewith.

(1)

 

Incorporated by reference to Form 10-K filed September 11, 2013.

(2)

 

Incorporated by reference to Schedule 14A filed January 11, 2011 and filed herewith.

(3)

 

Incorporated by reference to Form S-1 filed January 12, 2006, as amended.

(4)

 

Incorporated by reference to Form 8-K filed June 15, 2001.

(5)

 

Incorporated by reference to Form 8-K filed September 28, 2006.

(6)

 

Incorporated by reference to Form 10-K filed on September 13, 2012.

(7)

 

Incorporated by reference to Form S-8 filed June 14, 2010.

(8)

 

Incorporated by reference to Form 8-K, dated March 31, 2010.

(9)

 

Incorporated by reference to Form 8-K, filed December 7, 2009.

(10)

 

Incorporated by reference to Form 8-K filed December 6, 2010.

(11)

 

Incorporated by reference to Form 8-K filed November 6, 2012.

(12)

 

Incorporated by reference to Form 8-K filed November 21, 2012.

(13)

 

Incorporated by reference to Form 8-K, dated January 29, 2010.

(14)

 

Incorporated by reference to Form 8-K, dated January 7, 2013.

(15)

 

Incorporated by reference to Form 8-K filed December 28, 2011.

(16)

 

Incorporated by reference to Form 8-K filed on September 23, 2011.

(17)

 

Incorporated by reference to Form 8-K filed on February 1, 2012.

 

23



Table of Contents

 

(18)

 

Incorporated by reference to Form 8-K filed on June 28, 2013

(19)

 

Incorporated by reference to Form 8-K filed on July 1, 2014.

(20)

 

Incorporated by reference to Form 10-K filed on September 12, 2014.

 

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Table of Contents

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

Hyperdynamics Corporation

 

(Registrant)

 

 

 

By:

/S/ Ray Leonard

 

 

 

Ray Leonard

 

 

 

Chief Executive Officer

 

 

Dated: February 5, 2015

 

 

By:

/S/ David Wesson

 

 

 

David Wesson

 

 

Vice President and Chief Financial and Accounting Officer

 

Dated: February 5, 2015

 

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Table of Contents

 

Exhibit Index

 

Exhibit
Number

 

Description

 

 

 

3.1.1

 

Certificate of Incorporation (1)

 

 

 

3.1.2

 

Certificate of Amendment of Certificate of Incorporation, dated January 21, 1997 (1)

 

 

 

3.1.3

 

Certificate of Amendment of Certificate of Incorporation, dated September 20, 1999 (1)

 

 

 

3.1.4

 

Certificate of Amendment of Certificate of Incorporation, dated December 22, 2003 (1)

 

 

 

3.1.5

 

Certificate of Amendment of Certificate of Incorporation, dated March 11, 2011 (2)

 

 

 

3.1.6

 

Certificate of Amendment of Certificate of Incorporation, dated June 28, 2013 (18)

 

 

 

3.1.7

 

Series B Certificate of Designation (4)

 

 

 

3.2

 

Amended and Restated By-laws (15)

 

 

 

4.1

 

Form of Common Stock Certificate (3)

 

 

 

4.2

 

Form of Common Stock Purchase Warrant issued to investors on February 1, 2012 (17)

 

 

 

10.1

 

Hydrocarbon Production Sharing Contract (PSA) between SCS Corporation and the Republic of Guinea, dated September 22, 2006 (5)

 

 

 

10.2

 

Amendment No. 1 to the Hydrocarbons Production Sharing Contract between SCS Corporation and the Republic of Guinea, dated March 25, 2010 (8)

 

 

 

10.3*

 

Amended and Restated Employment Agreement between Hyperdynamics and Ray Leonard, effective as of July 23, 2012 (6)

 

 

 

10.4

 

Sale and Purchase Agreement between Hyperdynamics Corporation and Dana Petroleum (E&P) Limited, effective as of December 4, 2009 (9)

 

 

 

10.5

 

Operating Agreement between SCS Corporation and Dana Petroleum (E&P) Limited, dated January 28, 2010 (13)

 

 

 

10.6*

 

2010 Equity Incentive Plan as amended (11)

 

 

 

10.7*

 

Form of Incentive Stock Option Agreement (7)

 

 

 

10.8*

 

Form of Non-Qualified Stock Option Agreement (7)

 

 

 

10.9*

 

Form of Restricted Stock Agreement (7)

 

 

 

10.10

 

Contract Number:  AGR/C105/10 between SCS Corporation and AGR Peak Well Management Limited for Provision of Well Construction Management Services, including LOGIC General Conditions as Appendix I (10)

 

 

 

10.11

 

Agreement for the Supply of Marine Seismic Data Application and Processing Services, dated September 20, 2011 between SCS Corporation and CGG Veritas Services SA (16)

 

 

 

10.12

 

Form of Securities Purchase Agreement, dated January 30, 2012, between Hyperdynamics Corporation and investors in the offering (17)

 

 

 

10.13

 

Placement Agency Agreement, dated January 30, 2012, by and between Hyperdynamics Corporation and Rodman & Renshaw, LLC (17)

 

 

 

10.14

 

Purchase and Sale Agreement between SCS Corporation Ltd. and Tullow Guinea Ltd., dated November 20, 2012. (12)

 

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Table of Contents

 

10.15

 

Joint Operating Agreement Novation and Amendment Agreement relating to the Operating Agreement for the Hydrocarbon Production Sharing Contract, offshore Guinea, between SCS Corporation Ltd., Dana Petroleum E&P Limited, and Tullow Guinea Ltd. dated December 31, 2012. (14)

 

 

 

10.16

 

Parent Company Guarantee between Tullow Oil plc and SCS Corporation Ltd., dated December 31, 2012 (14)

 

 

 

10.17

 

Retention Bonus Agreement between Hyperdynamics and Paolo Amoruso, dated June 30, 2014 (19)

 

 

 

10.18

 

Settlement Deed between Hyperdynamics Corporation, SCS Corporation Ltd., AGR Well Management Ltd, and Jasper Drilling Private Ltd dated May 16, 2014 (20)

 

 

 

14.1

 

Code of Ethics (1)

 

 

 

21.1

 

Subsidiaries of the Registrant (20)

 

 

 

31.1**

 

Certification of Chief Executive Officer of Hyperdynamics Corporation required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

31.2**

 

Certification of Chief Financial Officer of Hyperdynamics Corporation required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

32.1**

 

Certification of Chief Executive Officer of Hyperdynamics Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)

 

 

 

32.2**

 

Certification of Principal Financial Officer of Hyperdynamics Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)

 

 

 

101.INS**

 

XBRL Instance Document

 

 

 

101.SCH**

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL**

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF**

 

XBRL Taxonomy Extension Definitions Linkbase Document

 

 

 

101.LAB**

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE**

 

XBRL Taxonomy Extension Presentation Linkbase Document

 


*

 

Management contracts or compensatory plans or arrangements.

**

 

Filed herewith.

(1)

 

Incorporated by reference to Form 10-K filed September 11, 2013.

(2)

 

Incorporated by reference to Schedule 14A filed January 11, 2011 and filed herewith.

(3)

 

Incorporated by reference to Form S-1 filed January 12, 2006, as amended.

(4)

 

Incorporated by reference to Form 8-K filed June 15, 2001.

(5)

 

Incorporated by reference to Form 8-K filed September 28, 2006.

(6)

 

Incorporated by reference to Form 10-K filed on September 13, 2012.

(7)

 

Incorporated by reference to Form S-8 filed June 14, 2010.

(8)

 

Incorporated by reference to Form 8-K, dated March 31, 2010.

(9)

 

Incorporated by reference to Form 8-K, filed December 7, 2009.

(10)

 

Incorporated by reference to Form 8-K filed December 6, 2010.

(11)

 

Incorporated by reference to Form 8-K filed November 6, 2012.

(12)

 

Incorporated by reference to Form 8-K filed November 21, 2012.

(13)

 

Incorporated by reference to Form 8-K, dated January 29, 2010.

(14)

 

Incorporated by reference to Form 8-K, dated January 7, 2013.

(15)

 

Incorporated by reference to Form 8-K filed December 28, 2011.

(16)

 

Incorporated by reference to Form 8-K filed on September 23, 2011.

(17)

 

Incorporated by reference to Form 8-K filed on February 1, 2012.

(18)

 

Incorporated by reference to Form 8-K filed on June 28, 2013

 

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Table of Contents

 

(19)

 

Incorporated by reference to Form 8-K filed on July 1, 2014.

(20)

 

Incorporated by reference to Form 10-K filed on September 12, 2014.

 

28