UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A

(Amendment No. 1)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934: For the quarterly period ended: March 31, 2007

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: 000-25496

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.)

One Sugar Creek Center Blvd., # 125

Sugar Land, Texas 77748

(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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act)

Large Accelerated Filer o

Accelerated Filer o

Non-Accelerated Filer x

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

APPLICABLE ONLY TO CORPORATE ISSUERS

As of May 9, 2007, 48,702,422 shares of common stock, $0.001 par value, were outstanding. 

EXPLANATORY NOTE

This Form 10-Q Amendment No. 1 reflects the following changes: (1) the Company has corrected the heading on the supplemental information included in the Statement of Cash Flows.

This Amendment No. 1 amends only the information described above, and has not been updated to reflect events, results or developments that have occurred after the Original Filing. 

Table of Contents

	Part I. Financial Information
Item 1	Financial Statements
	Consolidated Balance Sheets at March 31, 2007 and June 30, 2006	2
	Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2007 and 2006	3
	Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2007 and 2006 and 2006	4
	Consolidated Notes to Financial Statements	6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3	Quantitative and Qualitative Disclosures about Market Risks	15
Item 4	Controls and Procedures	15
	Part II. Other Information
Item 1	Legal Proceedings	16
Item 1A	Risk Factors	18
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 4	Submission of Matters to a Vote of Security Holders	28
Item 6	Exhibits	28
	Signatures	29

HYPERDYNAMICS CORPORATION

Consolidated Balance Sheets

(In thousands, except number of shares and per share amounts)

(Unaudited)

	March 31,			June 30,
	2007			2006
ASSETS
Current assets
Cash	$	1,815		$	3,435
Restricted certificate of deposit		75			75
Accounts receivable, net of allowance for doubtful accounts of $44 and $13		67			58
Inventories, net		13			-
Prepaid expenses and other current assets		77			202
Total current assets		2,047			3,770
Property and equipment, net of accumulated depreciation of $136 and $125		264			93
Oil and gas properties, using full cost accounting, net of accumulated depreciation and depletion of $210 and $169		4,438			4,437
Deposits		7			3
Total assets	$	6,756		$	8,303
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt	$	13		$	106
Accounts payable and accrued expenses		787			637
Accounts payable seismic data		650			650
Asset retirement obligation		12			12
Deferred gain		159			159
Convertible debentures, net of discount of $1,993 and $2,444		7			1,556
Dividends payable		372			372
Dividends payable to related party		218			136
Total current liabilities		2,218			3,628
Deferred rent		109			67
Total liabilities		2,327			3,695
Commitments and contingencies		-			-
Shareholders' equity
Convertible preferred stock, par value $0.001; 20,000,000 shares authorized
Series A - 1,945 shares issued and outstanding		-			-
Series B - 2,725 shares issued and outstanding		-			-
Common stock, $0.001 par value, 250,000,000 shares authorized, 48,677,422 and 46,132,595 shares issued and outstanding		49			46
Additional paid-in capital		38,301			31,627
Accumulated deficit		(33,921	)		(27,065	)
Total shareholders' equity		4,429			4,608
Total liabilities and shareholders' equity	$	6,756		$	8,303

(See accompanying notes to consolidated financial statements) 

2

HYPERDYNAMICS CORPORATION

Consolidated Statements of Operations

(In thousands, except number of shares and per share amounts)

(Unaudited)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2007			2006			2007			2006
Revenues	$	113		$	134		$	780		$	329
Operating Expenses
Lease operating costs		81			36			204			489
Severance taxes		13			5			83			21
Other operational costs		175			189			576			985
Depreciation, depletion and amortization - oil gas properties		23			143			68			192
Selling, general and administrative, including depreciation expense of $18, $16, $40 and $40		1,927			1,043			5,414			2,816
Total Operating Expenses		2,219			1,416			6,345			4,503
LOSS FROM OPERATIONS		(2,106	)		(1,282	)		(5,565	)		(4,174	)
Other Income (Expense)
Interest income		23			-			81			2
Interest expense		(54	)		(1,150	)		(1,326	)		(1,314	)
Gain on settlement		28			-			28			135
Gain(loss) from disposition of assets		-			(361	)		8			(361	)
NET LOSS		(2,109	)		(2,793	)		(6,774	)		(5,712	)
Preferred stock dividend		(28	)		(27	)		(82	)		(82	)
Deemed dividend		(333	)		-			(333	)		-
Net loss chargeable to common shareholders	$	(2,470	)	$$	(2,820	)	$	(7,189	)	$	(5,794	)
Basic and diluted loss per common share	$	(0.05	)	$	(0.06	)	$	(0.15	)	$	(0.14	)
Weighted average shares outstanding		48,323,566			43,880,008			47,422,094			42,468,964

(See accompanying notes to consolidated financial statements) 

3

HYPERDYNAMICS CORPORATION

Consolidated Statements of Cash Flows

(In thousands, except number of shares and per share amounts)

(Unaudited)

	Nine months ended March 31,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(6,774	)	$	(5,712	)
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, depletion and amortization		108			231
Shares issued for services		383			153
Options and warrants expense		1,618			651
(Gain)loss on disposition of assets		(8	)		361
Gain on settlement		(28	)		(135	)
Bad debt expense		31			202
Amortization of discount and financing costs on convertible debenture		1,081			1,110
Changes in operating assets and liabilities:
Accounts receivable		(9	)		(202	)
Accounts receivable - recovery from working interest		(31	)		(30	)
Inventories		(13	)		4
Prepaid expenses and other current assets		95			80
Accounts payable and accrued expenses		178			354
Deferred rent		42			-
Net cash provided in operating activities		(3,327	)		(2,933	)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in restricted cash		-			(10	)
Investment in oil and gas properties		(96	)		(385	)
Purchase of property and equipment		(182	)		(63	)
Proceeds from the sale of assets		36			-
(Payment) return of deposits		(5	)		20
Proceeds from sale working interest in oil and gas properties, net		-			726
Net cash provided by (used in) investing activities		(247	)		288
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock		-			940
Proceeds from warrant exercises, net		226			-
Proceeds from convertible notes		1,820			1,981
Proceeds from installment debt		58			78
Payments on short-term note payable		-			(187	)
Payments on installment debt		(150	)		(265	)
Net cash provided by financing activities		1,954			2,547
Net increase (decrease) in cash		(1,620	)		(98	)
Cash at beginning of period		3,435			259
Cash at end of period	$	1,815		$	161

(See accompanying notes to consolidated financial statements) 

4

HYPERDYNAMICS CORPORATION

Consolidated Statements of Cash Flows (Continued)

(In thousands, except number of shares and per share amounts)

(Unaudited)

	Nine months ended March 31,
	2007		2006
SUPPLEMENTAL DISCLOSURES
Interest paid in cash	$	408	$	112
Income taxes paid in cash		-		-
NON-CASH TRANSACTIONS
Conversion of notes payable to common stock	$	4,000	$	-
Payment of preferred stock dividends in common shares		82		82
Debt discount on convertible debt		450		1,465
Deemed dividend		333
Reclassification of downpayment made in prior year to property and equipment		30		-
Geological/Geophysical work on unproved properties paid with equity-based compensation		-		37

(See accompanying notes to consolidated financial statements) 

5

HYPERDYNAMICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The unaudited consolidated financial statements of Hyperdynamics Corporation ("Hyperdynamics") 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 Hyperdynamics' latest Annual Report filed with the SEC on Form 10-K. 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 2006 as reported in the Form 10-K, have been omitted.

2. Reclassifications.

Certain amounts in the 2006 financial statements have been reclassified to conform with the 2007 financial statement presentation.

3. Convertible Debentures

In June 2006, Hyperdynamics entered into a financing arrangement with Cornell Capital Partners, LP (“Cornell”) whereby Hyperdynamics received net proceeds of $5,440,000 in exchange for three debentures and warrants to purchase 955,000, 715,000 and 430,000 shares of our common stock at exercise prices of $2.50, $3.50 and $4.00 per share, respectively.

The first two debentures were funded at closing and upon the filing of a registration statement with the SEC, in June 2006. The third debenture of $1,800,000 was funded in August 2006 when the aforementioned registration statement became effective.

The debentures bear interest at an annual rate of 10% and are to be repaid in monthly installments of $175,000 plus interest. The debentures may be converted into shares of our common stock at the option of the holder. The debentures are secured by substantially all of the assets of the company, except for the assets of our subsidiaries SCS Corp and SCS Guinea SARL and our assets and operations in the Republic of Guinea.

Hyperdynamics analyzed the convertible debentures for derivative accounting consideration under SFAS 133 and EITF 00-19. Hyperdynamics determined the conversion feature met the criteria for classification in stockholders' equity under SFAS 133 and EITF 00-19. Therefore, derivative accounting is not applicable for the convertible instruments.

During the six months ended December 31, 2006, Cornell converted $4,000,000 of their debentures to 2,000,000 shares of Hyperdynamics common stock.

The carrying value of the debentures as of March 31, 2007 is as follows (in thousands):

Face value of debentures	$	6,000
Less:   discount related to warrants		(1,331	)
discount related to conversion feature		(1,219	)
financing costs		(560	)
Subtotal		2,890
Add: amortization of discount		1,117
Total principal		4,007
Less payments:
Conversion to common shares		(4,000	)
Carrying value of note at March 31, 2007	$	7

4. Deemed Dividend

In March 2007 the Company modified the terms of certain warrants previously issued between October 2003 and March 2004.  The term and price of the warrants, originally 3 years and $2.00, respectively, were changed to 5 years and $4.00, respectively.  The modification resulted in a deemed dividend which was calculated using the Black-Scholes method assuming volatility of between 110% and 135% and a risk adjusted interest rate of 5%.

6

5. Segment Information

Reportable segments

Hyperdynamics has two reportable segments: SCS Corporation ("SCS") and its Louisiana operations ("HYDR"). SCS is engaged in oil and gas exploration activities offshore Guinea, West Africa. Additionally, it provides seismic data transcription and management services to support its activities and to external customers. The seismic data work is performed in the USA. HYDR is engaged in oil and gas exploration and production activities in Louisiana, USA; it also provides oilfield services to external customers. Hyperdynamics evaluates performance based on profit or loss from operations. The reportable segments are managed by separate management teams who are evaluated based on their segment's performance.

The following tables summarize certain balance sheet data as of March 31, 2007 and June 30, 2006 and income statement data about Hyperdynamics' reportable segments and corporate overhead for the three and six months ended December 31, 2006 and 2005:

	SCS			HYDR			Corporate			Total
Segment assets
As of March 31, 2007	$	4,288,000		$	505,000		$	1,963,000		$	6,756,000
As of June 30, 2006		4,175,000			457,000			3,671,000			8,303,000
Nine months ended March 31, 2007
Revenues from external customers		-			780,000			-			780,000
Depreciation, depletion and amortization - oil and gas properties		-			68,000			-			68,000
Depreciation - administration		18,000			-			22,000			40,000
Loss from operations		(2,151,000	)		(493,000	)		(2,921,000	)		(5,565,000	)
Expenditures for long-lived assets		81,000			66,000			131,000			278,000
Three months ended March 31, 2007
Revenues from external customers		-			113,000			-			113,000
Depreciation, depletion and amortization - oil and gas properties		-			23,000			-			23,000
Depreciation - administration		8,000			-			10,000			18,000
Loss from operations		(896,000	)		(273,000	)		(937,000	)		(2,106,000	)
Expenditures for long-lived assets		5,000			11,000			13,000			29,000
Nine months ended March 31, 2006
Revenues from external customers		-			329,000			-			329,000.
Depreciation, depletion and amortization - oil and gas properties		-			192,000			-			192,000
Depreciation - administration		22,000			-			17,000			40,000
Loss from operations		(517,000	)		(1,636,000	)		(2,021,000	)		(4,174,000	)
Expenditures for long-lived assets		76,000			401,000			8,000			485,000
Three months ended March 31, 2006
Revenues from external customers		-			134,000			-			134,000
Depreciation, depletion and amortization - oil and gas properties		-			143,000			-			143,000
Depreciation - administration		8,000			-			8,000			16,000
Loss from operations		(181,000	)		(441,000	)		(660,000	)		(1,282,000	)
Expenditures for long-lived assets		3,000			50,000			4,000			57,000

7

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

The Company is including the following cautionary statement to make applicable and take advantage of the safe harbor provision of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company. This quarterly report on form 10Q contains forward-looking statements. 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. Certain statements contained herein are forward-looking statements and, accordingly, involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitations, management's examination of historical operating trends, data contained in the Company's records and other data available from third parties, but there can be no assurance that management's expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors and matters discussed elsewhere herein, the following are important factors that, in the view of the Company, could cause actual results to differ materially from those discussed in the forward-looking statements: the ability of the Company to respond to changes in the information system environment, competition, the availability of financing, and, if available, on terms and conditions acceptable to the Company, and the availability of personnel in the future.

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

Overview of Accomplishments During Quarter

On September 22, 2006, our wholly owned subsidiary, SCS Corporation signed a new 2006 Production Sharing Contract (PSC) with the Republic of Guinea. This contract gives us exclusive rights for oil and gas exploration and production across this largest remaining exploration area offshore West Africa of approximately 31,000 square miles. Compared to last year at this time, management would like emphasize to our shareholders that our position with the new 2006 PSC is believed to be infinitely better now than before with the problem riddled 2002 agreement. This new contract is in full accordance with Guinea law known as the 1986 petroleum code, and it being considered by the National Assembly of Guinea for special action of being codified as a new law in and of itself.  Our position on the 2006 PSC has been affirmed by a legal opinion issued from our counsel in Guinea as we disclosed in our 8K filed on April 16, 2007. All of this is positive for Hyperdynamics Corporation. Additionally, the world demand for oil has remained strong and it appears to be in a multi-year mega trend. Also, the west coast of Africa is expected to remain one of the hottest areas in the world for exploration. For these reasons we believe that the value of the concession has greatly increased over the last several months. Thus, management is somewhat perplexed and is looking into possible reasons for the recent drop in our stock price.  

 As part of their political process the Guinea government has decided, as is entirely their prerogative, to send the 2006 PSC to the National Assembly to be considered for a special status of a “project of law”.  Concerning the actions of the government surrounding this political process, in early May, there was some propaganda generated in Guinea which found its way, unfortunately, into incorrect and misleading news articles. This triggered the Company to make a correcting news release and file an 8K on April 16, 2007. We felt we needed to do our best to correct this misinformation. The National Assembly’s working political process for this major contract status known as a “project of law” is a process whereby the Guinea government informs its people of the benefits of the government’s contracts. It also allows law makers to understand the major contracts themselves so that they can make new laws that can positively affect the people in the future. In our case, the 2006 PSC also has a special contract provision under article 5.1 whereby certain terms, conditions, and rights of the contract will change. Those changes are discussed thoroughly in our legal opinion filed in the 8K on April 16, 2007. For the National Assembly to pass or not pass a “project of law” on our contract has no bearing on the legality or enforceability of the contract. While the legality of the contract is not affected by passing a “project of law”, management may see a need to review the farm-out process and adopt to any changes that may be brought about if it indeed passes and other certain actions explained in previous filings occur as well.

During the quarter, the Government of Guinea changed their Ministers and the President appointed a new Prime Minister, Lansana Kouyaté.  Our Vice President of Guinea Affairs, Famourou Kourouma returned to Guinea to put the Company’s unique public relations plan into action.  In summary, this plan includes television commercials, news articles, educational seminars, radio advertising, press conferences, and being available to explain our exploration work as requested by each and every branch of government in Guinea. Based on our work including this extensive public relations campaign, we have been continually educating the Guinea people of the significant truths of the value that Hyperdynamics has brought to Guinea including the potential for discovering their offshore petroleum resources. All during this quarter, European sourced petro-politics has mounted an attack of misinformation and propaganda. Our organization has become quite experienced in working in Guinea and has successfully set the record straight on numerous occasions. On May 8, 2007, Famourou Kourouma reported to us that RTG television and radio in Guinea aired a press conference with the President of the National Assembly, his honorable, Aboubacar Somparé.  As reported by Mr. Kourouma, during the press conference, Mr. Somparé answered several direct questions, effectively setting the record straight regarding the 2006 PSC and at the same time he expressed strong support for Hyperdynamics and the benefits of our oil contract. He explained to the press that Hyperdynamics has been the only company in the last thirty years significantly working on oil exploration to the benefit of Guinea. He explained that we were the only company in the world willing to take the risk and do the necessary work, at a time when no one else would. He further explained, that because we were a public company and were required to disclose our progress publicly, many companies have come to Guinea and tried to sabotage and interfere with Hyperdynamics’ concession. He expressed his strong feeling that this was wrong and would not be allowed as it is against Guinea law. Finally, he mentioned that the propaganda emanating from various factions trying to get into the Hyperdynamics concession were promoting that it was time to divide the area into smaller blocks. His honorable Somparé pointed out that it was far too early to divide the area into smaller blocks and that when it was time to do that, because of the unselfish work we historically performed, he trusted Hyperdynamics to help Guinea accomplish that task.  Based on our work and the clear support of President of the National Assembly, we believe that there is a very good chance that the National Assembly will pass the 2006 PSC as a “project of law” designation.  We view this as extremely positive for the political process in Guinea and that this will bring Hyperdynamics closer even yet in working with Guinea and the people there. Regardless of the passage of a “project of law”, Hyperdynamics will continue its work stepping forward methodically to fulfill the requirements of the 2006 PSC.   

8

In January we implemented a farm-out procedure whereby oil companies under confidentiality agreements have been invited into our offices for private presentations.  While we established a general time line of expected participation resulting ultimately in farm-out proposals, we have realized a significant variance in the specific timing of each interested company. Early on, companies either moving out of Africa or not pursuing additional investment there came to light quickly and they were de-listed as possible farm-in partners. Other potential partners expressed significant interest in us contacting them for possible minority participation as we get further down the road with our exploration work.  Still again, several companies told us that they didn’t currently have the capacity to consider any new projects at this time due to prior budgetary and bandwidth restraints. These companies asked us to stay in touch and keep them apprised of our progress and check back with them towards the end of 2007.   Some of our prime candidates who declined meetings earlier this year are now scheduled to come in for presentations and just as many more have expressed a desire to schedule a meeting soon.  Finally, numerous companies have attended one or more meetings concerning our farm out opportunity and are in the process of making presentations to their top management about the Hyperdynamics’ farm-in opportunity. We believe there is a growing and significant chance that our opportunity fits the strategy of one or more of these oil companies. We will continue with this process as planned. In addition we have recently begun discussing the possibility for a joint venture with one or more financial partners.

In October, we engaged Global SanteFe's Applied Drilling Technologies to evaluate resources in the country of Guinea that can support the needs of offshore drilling operations. We have recently received their comprehensive study. The contents of the study will be revealed in the context of future related work and drilling programs and may be discussed in more detail in our next annual report. We feel this work will help shorten the time to begin drilling a well for us or any of our partners by at least six to nine months. This report is also part of the information that we are making available to potential partners that we have confidentiality agreements with.

During the fourth quarter to end June 30, 2007, we are evaluating the acquisition of additional production in Louisiana to add to our existing operations in a profitable manner.  As part of our business plan we are still working toward cash flow from operations domestically while we continue the major exploration project offshore Guinea internationally.  Also, management will continue to diligently pursue our farm-out program for offshore Guinea and simultaneously begin laying out the next work program. Finally, on a prospective note, we are considering programs to enhance shareholder value. Such ideas being discussed include the possibility of having a rights offering as well as giving consideration for creating a royalty trust pertaining to the Guinea concession for the benefit of our shareholders.

Results of Operations

Reportable segments

Hyperdynamics has two reportable segments: SCS Corporation ("SCS") and its Louisiana operations ("HYDR"). SCS is engaged in oil and gas exploration activities offshore Guinea, West Africa. Additionally, it provides seismic data transcription and management services to support its activities and to external customers. The seismic data work is performed in the USA. HYDR is engaged in oil and gas exploration and production activities in Louisiana, USA; it also provides oilfield services to external customers. Hyperdynamics evaluates performance based on profit or loss from operations. The reportable segments are managed by separate management teams, who are evaluated based on their segment's performance.

The following table summarizes certain balance sheet data as of March 31, 2007 and June 30, 2006 and income statement data about Hyperdynamics' reportable segments and corporate overhead for the three months and Nine months ended March 31, 2007 and 2006:

9

	SCS			HYDR			Corporate			Total
Segment assets
As of March 31, 2007	$	4,288,000		$	505,000		$	1,963,000		$	6,756,000
As of June 30, 2006		4,175,000			457,000			3,671,000			8,303,000
Nine months ended March 31, 2007
Revenues from external customers		-			780,000			-			780,000
Depreciation, depletion and amortization - oil and gas properties		-			68,000			-			68,000
Depreciation - administration		18,000			-			22,000			40,000
Loss from operations		(2,151,000	)		(493,000	)		(2,921,000	)		(5,565,000	)
Expenditures for long-lived assets		81,000			66,000			131,000			278,000
Three months ended March 31, 2007
Revenues from external customers		-			113,000			-			113,000
Depreciation, depletion and amortization - oil and gas properties		-			23,000			-			23,000
Depreciation - administration		8,000			-			10,000			18,000
Loss from operations		(896,000	)		(273,000	)		(937,000	)		(2,106,000	)
Expenditures for long-lived assets		5,000			11,000			13,000			29,000
Nine months ended March 31, 2006
Revenues from external customers		-			329,000			-			329,000.
Depreciation, depletion and amortization - oil and gas properties		-			192,000			-			192,000
Depreciation - administration		22,000			-			17,000			39,000
Loss from operations		(517,000	)		(1,636,000	)		(2,021,000	)		(4,174,000	)
Expenditures for long-lived assets		76,000			401,000			8,000			485,000
Three months ended March 31, 2006
Revenues from external customers		-			134,000			-			134,000
Depreciation, depletion and amortization - oil and gas properties		-			143,000			-			143,000
Depreciation - administration		8,000			-			8,000			16,000
Loss from operations		(181,000	)		(441,000	)		(660,000	)		(1,282,000	)
Expenditures for long-lived assets		3,000			50,000			4,000			57,000

Geographical Information

All revenues are currently derived from domestic sources. All long-lived assets are located in the USA and in Guinea.

Nine months ended March 31, 2007 compared to nine months ended March 31, 2006

Louisiana Operations ("HYDR")

Oil and Service Revenue totaled $780,000 for the nine months ended March 31, 2007. The breakdown consists of $716,000 in oil revenues and $64,000 in service revenues compared to $329,000 in oil revenue and $0 service revenue for the nine months ended in March 2006. The increase in oil revenue of 117% or $387,000 is attributable to rework of wells, equipment upgrades and better work control procedures, which resulted in less downtime and higher oil production. The increase in service revenue of $64,000 is attributable to service work performed for third parties.

Lease Operating Costs for the nine months ended March 31, 2007 and 2006 were $204,000 and $489,000, respectively. The decrease of 58% or $285,000 is due to an equipment upgrade which reduced costs, maintenance and more cost-efficient procedures.

Severance Taxes for the nine months ended March 31, 2007 and 2006 were $83,000 and $21,000 respectively. The increase of 295% or $62,000 is due to an increase in oil revenues.

Other Operational Costs for the nine months ended March 31, 2007 and 2006 were $559,000 and $932,000, respectively. The decrease of 40% or $373,000 is due to the improved efficiency and work control procedures, and decrease in well workover requirements.

Our depreciation, amortization and depletion expense for oil and gas properties for the nine months ended March 31, 2007 and March 2006 was $68,000 and $192,000, respectively.

Selling, General and Administrative expenses for the nine months ended March 31, 2007 and 2006 were $359,000 and $331,000, respectively, representing a increase of $28,000 or 8%. The main factors contributing to the increase are: 1) an increase in insurance expenses of $10,000; 2) an increase in salaries, payroll taxes and other taxes of $62,000; 3) a decrease in bad debt expense of $159,000 due to an lower of a reserve required against on our joint interest billing; 4) an increase in legal expenses of $98,000 related to the various lawsuits. We also experienced a net increase of $17,000 in rent, utilities and other administrative expenses.

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We realized a gain on sale of fixed assets of $8,000 for the nine months ended March 31, 2007 and $0 in 2006. We also realized gain on settlement of obligation of $28,000 in March 31, 2007 and $0 in March 2006.

Our Loss from operations for the nine months ended March 31, 2007 from this segment was ($493,000) in comparison to ($1,636,000) in March 31, 2006. The decrease of 70% or $1,143,000 is due to the factors discussed above.

Our expenditure for long-lived assets for the nine months ended March 31, 2007 was $66,000 compared to $401,000 in the nine months ended March 31, 2006. The net decrease of 83% or $335,000 is attributable to equipment upgrades and improvements on production facilities.

Guinea and Seismic Data Management ("SCS")

We had no revenues during the nine months ended March 31, 2007 and 2006. We signed a Production Sharing Contract (PSC) with the Republic of Guinea on September 22, 2006 and we are currently focusing on our drilling and exploration plans in the concession delineated in the PSC.

We have processed a portion of the data that we have the right to market in order to provide samples of the data to our prospects. When we sell the right to use this data, we will receive a fee and we will also be compensated for processing the data that we sell.

Other Operational Costs for the nine months ended March 31, 2007 and 2006 was $17,000 and $50,000 respectively. The decrease of $33,000 is due to a reduction in expenses related to data management.

Selling, General and Administrative expenses for the nine months ended March 31, 2007 and 2006 were $2,116,000 and $445,000, respectively. The increase of 375% or $1,671,000 is due to the following factors: 1) increase in employee salaries of $105,000; 2) an increase in office rent and utilities of $17,000; 3) an increase in insurance and auto expenses of $12,000; 4) an increase in travel expenses of $168,000; 5) an increase in consulting expenses related to the marketing farmout packet and professional expenses related to the Guinea concession as well as security for employees in Guinea of $845,000; 6) an increase in public relations, television, media and broadcast coverage in Guinea of $31,000; 7) an increase in office supplies and equipment expenses of $32,000, and 8) an increase of $461,000 in employee stock equity based compensation.

Depreciation and amortization on administrative properties for the nine months ended March 31, 2007 and 2006 was $18,000 and $22,000, respectively.

Based on the factors discussed above, our loss from operations for the nine months ended March 31, 2007 and 2006 from this segment was $2,151,000 and $517,000, an increase of 316% or $1,634,000.

Expenditures for long lived assets for the nine months ended March 31, 2007 and 2006 were $81,000 and $76,000, respectively. The increase is attributable to the addition of our new office in Guinea and purchases of office furniture, equipment and leasehold improvements.

Corporate Overhead

Selling, General and Administrative expense for the nine months ended March 31, 2007 and 2006 were $2,899,000 and $2,001,000, respectively. The increase of 44% or $898,000 is attributable to the following: 1) new employee hires and increase in employee salaries and payroll taxes of $218,000; 2) increase in public relations and investor relations of $161,000; 3) increase in stock based compensation expense of $1,013,000. 4) increase in fees related to SEC reporting and registration in the American Stock exchange of $7,000; and 5) an increase in office supplies and other administrative expenses of $101,000; 6) an increase in professional expense of $38,000 and 7) an increase in insurance and auto expense of $14,000. We also experienced a decrease of $654,000 based on 1) office rent and utilities of $83,000; 2) bank charge expenses of $4,000; 3) travel expenses of $70,000; 4) professional expenses of $16,000 and 5) consulting and other fees of $481,000.

Depreciation and amortization on administrative properties for the nine months ended March 31, 2007 and 2006 was $22,000 and $17,000, respectively.

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Based on the factors discussed above, our loss from operations for the nine months ended March 31, 2007 and 2006 was $2,921,000 and $2,021,000, respectively, a decrease of 44% or $900,000.

Gain on settlement of lease for the nine months ended March 31, 2007 and 2006 is $28,000 and $135,000, respectively.

Interest Expense for the nine months ended March 31, 2007 and 2006 is $1,326,000 and $1,314,000, respectively. The increase of $12,000 arises from the convertible note debenture financing in 2006.

Our expenditures for long lived assets for the nine months ended March 31, 2007 and 2006 were $131,000 and $8,000, respectively. The increase is due to acquisitions of fixed assets and leasehold improvements in our new office.

Three months ended March 31, 2007 compared to three months ended March 31, 2006

Louisiana Operations ("HYDR")

Oil Revenue for the three months ended March 2007 and 2006, were $113,000 and $134,000, respectively. The decrease of 15% or $21,000 is attributable toa mechanical failure and subsequent crude oil spill on two properties, and an extensive rework program was performed further reducing the number of wells producing at consistent levels.

Lease Operating Costs for the three months ended March 31, 2007 and 2006 were $81,000 and $36,000, respectively. An increase of 126%, or $45,000, is due to the well rework costs and a crude oil spill and cleanup.

Severance Taxes for the three months ended March 31, 2007 and 2006 were $13,000 and $5,000 respectively.

Other Operational Costs for the three months ended March 31, 2007 and 2006 was $170,000 and $195,000, respectively. The decrease of 13% or $25,000 is attributable to the improved efficiency in other operational costs and a decrease in well work-over requirements.

Our depreciation, amortization and depletion for oil and gas properties for the three months ended March 2007 and 2006 was $23,000 and $143,000, respectively.

Selling, General and Administrative expenses for the three months ended March 31, 2007 and 2006 were $99,000 and $196,000 respectively, a decrease of $97,000 or 40%. The change includes a decrease in bad debts of $177,000, a decrease in insurance expenses of $19,000, and an increase in other expenses of $44,000. We also experienced an increase of $55,000 in salaries and payroll taxes, professional fees, office and other administrative expenses.

Based on the factors discussed above, our loss from operations for the three months ended March 31, 2007 from this segment was $273,000 in comparison to $441,000 in March 31, 2006, a decrease of $168,000 or 38%.

Our expenditure for long-lived assets in the three months ended March 2007 was $11,000 compared to $50,000 in March 2006. The decrease of $39,000 or 78%. 

Guinea and Seismic Data Management ("SCS")

We had no revenues during the three months ended March 31, 2007and 2006.

Other Operational Cost for the three months ended March 31, 2007 and 2006 was $5,000 and $32,000, respectively. The decrease of $27,000 or 85% is due to a reduction in expenses related to data management.

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Selling, General and Administrative expenses for the three months ended March 31, 2007 and 2006 were $883,000 and $141,000, respectively. The increase of 528% or $742,000 is due to the following factors: 1) an increase of $762,000 in salaries, payroll taxes and equity based compensation, increase in public relations, professional and consulting expenses related an extensive media and journalistic coverage, 2) an increase of $29,000 in rent and utilities, property taxes, office supplies and other administrative costs and 3) a decrease in travel and insurance expenses of $49,000.

Depreciation and amortization of administrative properties for each of the three months ended March 31, 2007 and 2006 was $8,000.

Based on the factors discussed above, our loss from operations for the periods ended March 31, 2007 and 2006 from this segment was ($896,000) and ($181,000), respectively, an increase of 395% or $715,000.

Expenditures for long lived assets for the three months ended March 31, 2007 and 2006 was $5,000 and $3,000, respectively. The increase is attributable to the addition of our new office in Guinea and purchases of office furniture, equipment and leasehold improvements.

Corporate Overhead

Selling, General and Administrative expenses for the three months ended March 31, 2007 and 2006 were $928,000 and $654,000, respectively. An increase of 42% or $274,000 is attributable to the following: 1) new employee hires and increases in officer salaries and payroll taxes and other taxes of $50,000; 2) insurance and other taxes $14,000; 2) increase in public relations and investor relations and professional expenses of $168,000; 3) increase in stock based compensation expense of $73,000, and 4) increase in auto expenses, office expenses, postage and other administrative costs of $54,000. We also experienced a decrease of $85,000 in office rent and utilities expenses, travel expenses, bank charges and consulting expenses.

Depreciation and amortization on administrative properties for the three months ended March 31, 2007 and 2006 was $10,000 and $8,000, respectively.

Based on the factors discussed above, our loss from operations for the three months ended March 31, 2007 and 2006 was $937,000 and $660,000, respectively, an increase of 42% or $277,000.

Our expenditures for long lived assets for the three months ended March 31, 2007 and 2006 was $13,000 and $4,000 respectively. The increase is due to acquisitions of fixed assets and leasehold improvements in our new office.

Liquidity and Capital Resources

Our ratio of current assets to current liabilities (current ratio) was .92 to 1 at March 31, 2007, 1.04 to 1 at March 31, 2006. Our current ratio improves and declines historically with financings completed as we raise capital and fund our ongoing exploration operations. Overall our ratios improve as we are continuing to gradually reduce our net cash used in operating activities with goals in the future to cash flow the company from domestic operations except for the major exploration investment offshore Guinea. Historically we have raised capital to continue to finance the work required by our oil and gas exploration contract in Guinea and also to fund any operating deficits. It is the operating deficits that we are working to reduce and turn into a positive. While we dropped in our Louisiana revenues during the quarter due to having wells shut down for required work over, we expect revenues to be back up this quarter and as such, our cash operating deficit is expected to be reduced going forward.

Our new Production Sharing Contract signed on September 22, 2006, requires that we acquire additional seismic in the first exploration period. The first exploration period started on September 22, 2006 and with automatic extensions available to us upon our notice, would end September 22, 2010. The estimate for expenditure in the first exploration period is $10,000,000, but the contract does not require this specific amount of expenditure as long as the work is done. In the second exploration period, which begins officially on September 23, 2010, our contract requires us to drill two exploration wells by September 22, 2018. At current costs, these wells could cost an estimated $10 million to $35 million each to drill.

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Although we have several years to complete this work, we wish to initiate a successful drilling program as soon as possible. Thus, we are considering all of our options or any combination of these options to; a) increase revenues from operations; b) raise additional capital on a conventional equity financing basis; c) negotiate one or more transactions with oil company partners who share in the required work and financing risk; and d) negotiate work program related deals with oil industry vendors such as seismic acquisition companies. We believe that our ability to manage and affect one or more of these options will determine our significant current ratio and financial position in the future.

We own a very unique offshore oil and gas asset and are continuing to invest in exploring the largest oil and gas concession of 31,000 square miles. Our cash from operations was a deficit this last year and quarter based on our asset appreciation based plan. We are continuing overhead reduction steps to minimize non productive expenditures. We are spending the bulk of the capital raised directly or indirectly on enhancing the value of our offshore oil and gas concession. These expenditures, however, do not improve cash flow from operations in the short term. In order to improve our operating cash flow situation for future periods, management has budgeted certain amounts of capital and has started to build up our domestic production and service revenues.

In November 2005 we executed an investment agreement and received a commitment from Dutchess Private Equities Fund II, LP (Dutchess) to fund up to $20,000,000 in equity at 95% of the market price. We have approximately 6 million shares remaining that we can issue to raise capital from this equity line. The amount ultimately raised by the financing will be determined strictly by the stock price at each point in time the equity line is used. We have not used our equity line since May of 2006 when we closed three convertible debentures totaling $6 million in financing with Cornell Capital. As of the date of this filing, all but $2 million of this Cornell financing has been converted to equity at a fixed floor price of $2 per share. Should the stock price not be over $2 per share, we could be required to pay approximately $175,000 plus 10% per annum interest, per month in debt service. To date, we have not had to pay any debt service on this financing other than interest.

Because SCS has significant work requirements to accomplish in the future we have put a multiple strategy in place including our recently announced farm-out program to attract oil company partners to join our exploration efforts. Our strategy includes that each prospective partner would pay a license fee to get the opportunity to study our proprietary data offshore Guinea. These license fees are expected to be material to us and could enhance our liquidity and capital resources significantly.

In addition, we expect to exploit our leases increasingly in Louisiana. We have work programs to economically maximize the production we have built up. We believe the relatively high price of oil will help make these wells more economically viable. We are also evaluating niche acquisitions in the Northeast Louisiana area to bolster our production and to drill additional wells on our leases there.

Management is confident in its ability to raise additional capital under more conventional financing structures, but we also believe that ultimately we will be able to secure oil and gas working interest partners to fund and carry significant portions of the capital investment burden. As we have discussed in the press, we have implemented a farm-out program offshore West Africa. This program is expected to provide material license fees to the company. Also, with or without partners, we feel that we can successfully finance our required work programs through an equity financing plan, through 3 ^rd party royalty or working interest partners, or a combination of both.

Thus, management believes that additional capital funds raised has and will continue to substantially enhance our asset value in our oil and gas concession. This will yield greatly enhanced shareholder value, and make additional capital easier to come by at ever increasing stock prices.

Depending on the price of our stock, we could obtain additional capital also upon the exercise of other previously issued outstanding warrants and options for common stock.

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Off-Balance Sheet Arrangements

We have a contractual arrangement and now a lawsuit against USOil Corporation. The original agreements provide for us to pay USOil $1,600,000 if SCS obtains third party financing for the Guinea development project. Also USOil will receive a 3% royalty if oil and gas is produced on this project and depending on the outcome of our legal claims against them. We also have a contingent $350,000 note payable that is only payable with 25% of the profits of SCS Corporation. We have the right to pay this note off using common stock. In conjunction with our purchase of HYD Resources Corporation in April 2004, we have two contingent obligations to pay $506,000. These obligations are payable over the five years ending in April 2009 and they are payable only in the event that HYD Resources is profitable. The determination of net income will be made quarterly and the pay down of the obligations is 25% of the net income per quarter. We do not plan on using significant debt financing except for the possibility of financing income-producing assets in the future.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our functional currency is the US dollar. Our revenue is directly related to the price of oil and gas. Assuming that we sell one barrel of oil, then a one dollar decrease in the price that we get for that barrel of oil will lower our revenue by one dollar, and correspondingly so for a one dollar increase in price. The same is true for changes in the price of natural gas. We intend to sell oil and gas immediately upon lifting to the wellhead. We do not contemplate retaining any oil and gas inventory. We do not hedge any market risk. Although the prices of oil and gas have recently increased substantially, there is no assurance that the price of oil and gas will not fall dramatically in the future.

Item 4. Controls and procedures

Our Chief Executive Officer and our Chief Financial Officer, have concluded that our disclosure controls and procedures are appropriate and effective. They have evaluated these controls and procedures as of the end of the period covered by this report on Form 10-Q. There were not any changes in the our internal controls or in other factors that could affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to deficiencies and material weaknesses.

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by of Rule 13a-15 or Rule 15d-15 of the Exchange Act that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

ITEM 1. Legal Proceedings

Dixon Financial Services

We included a disclosure for this case in our 10-Q for the period ended December 31, 2006. In the current period, we report the following clarification regarding our financial exposure and potential for recovery of damages upon completion of the appeal process: Pursuant to the agreement between Dixon and Hyperdynamics, a judgment was entered in Dixon's favor against Hyperdynamics (See “contractual limitation” below). The amount of this judgment may be sought by Hyperdynamics against Knollenberg, in addition to Hyperdynamics' damages as found by the jury and it attorneys fees. While proceeding with an appeal of the case, Hyperdynamics and Dixon will be working cooperatively to collect such monies as may be available from or through Knollenberg on the jury verdict and judgment. However, there remains a “contractual limitation’ for any possible required payment from Hyperdynamics to Dixon whereby Dixon Financial has agreed that it will not abstract or otherwise seek to enforce the judgment, except in the event that the appeal is unsuccessful. In that case though, as long as the appeal process is completed, and if the appeal is unsuccessful, we and Dixon Financial have agreed that we will pay only the sum of $240,000 payable in the amount of $10,000 per month for a period of 24 months. Should the appeal be successful, Hyperdynamics would expect to receive damages including but may not be limited to all of its legal expenses since this case began which could be as easily much or more than $500,000 in recovery for Hyperdynamics. Thus, the potential financial downside for Hyperdynamics regarding this litigation is to pay the cost of the appeal and if the appeal is unsuccessful, we would be required to pay $10,000 per month to Dixon for 24 months and then our total obligation would be completed at that point. If we win the appeal, we owe nothing more to Dixon and could receive substantial damages and attorney’s fees paid back to us.

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USOil Corporation.

We included a disclosure for this case in our 10-Q for the period ended December 31, 2006. In the current period, we report the following material development: it is anticipated that based upon recent discovery responses by the Defendant and soon to be completed additional discovery that this case will be resolved in our favor in light of the new agreement signed by us directly with the Republic of Guinea.

Trendsetter Investors, LLC

We included a disclosure for this case in our 10-Q for the period ended December 31, 2006. In the current period, we have several material developments. The Court has ruled on our Motion to Dismiss and dismissed Christopher Watts as a defendant and dismissed several of the Plaintiffs’ causes of action narrowing the focus of the case. Discovery has begun including the production of documents and the beginning of depositions. The case has been put on the trial docket for February 29, 2008. Counterclaims have been filed. It is anticipated the case will be sent to mediation per the standard procedures in Federal Court.

Manning, Moore, Long

We included a disclosure for this case in our 10-Q for the period ended December 31, 2006. In the current period, we have several material developments. Key party depositions have been completed and additional witness depositions are anticipated. A Motion for Summary Judgment was filed and at the hearing the judge put the motions on hold being of the opinion they were premature pending further discovery. It is anticipated the case will be sent to mediation per the rules of the court.

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ITEM 1A. Risk Factors

You should carefully consider the following risk factors before purchasing our common stock. The risks and uncertainties described below are not the only ones we face. There may be additional risks and uncertainties that are not known to us or that we do not consider to be material at this time. If the events described in these risks occur, our business, financial condition and results of operations would likely suffer. This prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements. This section discusses the risk factors that might cause those differences.

Risks about the Oil and Gas Industry

OIL AND GAS PRICES ARE VOLATILE.

Our revenues, cash flow, operating results, financial condition and ability to borrow funds or obtain additional capital depend substantially on the prices that we receive for oil and gas production. Declines in oil and gas prices may adversely affect our financial condition, liquidity, ability to obtain financing and operating results. Lower oil and gas prices also may reduce the amount of oil and gas that we can produce economically. High oil and gas prices could preclude acceptance of our business model. Depressed prices in the future could have a negative effect on our future financial results. Historically, oil and gas prices and markets have been volatile, with prices fluctuating widely, and they are likely to continue to be volatile. Prices for oil and gas are subject to wide fluctuations in response to relatively minor changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control. These factors include:

- the domestic and foreign supplies of oil;

- the level of consumer product demand;

- weather conditions;

- political conditions in oil producing regions, including the Middle East.

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- the ability of the members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;

- the price of the foreign imports;

- actions of the governmental authorities;

- domestic and foreign governmental regulations;

- the price, availability and acceptance of alternative fuels;

- overall economic conditions.

These factors and the volatile nature of the energy markets make it impossible to predict with any certainty future oil and gas prices. Our inability to respond appropriately to changes in these factors could negatively affect our profitability.

INVESTMENT IN THE OIL AND GAS BUSINESS IS RISKY.

Oil and gas exploration and development are inherently speculative activities. There is no certain method to determine whether or not a given lease will produce oil or gas or yield oil or gas in sufficient quantities and quality to result in commercial production. There is always the risk that development of a lease may result in dry holes or in the discovery of oil or gas that is not commercially feasible to produce. There is no guarantee that a producing asset will continue to produce. Because of the high degree of risk involved, there can be no assurance that we will recover any portion of our investment or that our investment in leases will be profitable.

THERE ARE DRILLING AND OPERATIONAL HAZARDS.

The oil and gas business involves a variety of operating risks, including:

- blowouts, cratering and explosions;

- mechanical and equipment problems;

- uncontrolled flows of oil and gas or well fluids;

- fires;

- marine hazards with respect to offshore operations;

- formations with abnormal pressures;

- pollution and other environmental risks;

- natural disasters.

Any of these events could result in loss of human life, significant damage to property, environmental pollution, impairment of our operations and substantial losses. Locating pipelines near populated areas, including residential areas, commercial business centers and industrial sites, could increase these risks. In accordance with customary industry practice, we will maintain insurance against some, but not all, of these risks and losses. The occurrence of any of these events not fully covered by insurance could have an adverse effect on our financial position and results of operations.

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WE ARE SUBJECT TO GOVERNMENTAL REGULATIONS.

Oil and gas operations in the United States are subject to extensive government regulation and to interruption or termination by governmental authorities on account of ecological and other considerations. The Environmental Protection Agency of the United States and the various state departments of environmental affairs closely regulate gas and oil production effects on air, water and surface resources. Furthermore, proposals concerning regulation and taxation of the gas and oil industry are constantly before Congress. It is impossible to predict future proposals that might be enacted into law and the effect they might have on us. Thus, restrictions on gas and oil activities, such as production restrictions, price controls, tax increases and pollution and environmental controls may have an adverse effect on us.

THE OIL AND GAS INDUSTRY IS SUBJECT TO HAZARDS RELATED TO POLLUTION AND ENVIRONMENTAL ISSUES.

Hazards in the drilling and/or the operation of gas and oil properties, such as accidental leakage or spillage, are sometimes encountered. Such hazards may cause substantial liabilities to third parties or governmental entities, the payment of which could reduce distributions or result in the loss of our leases. Although it is anticipated that insurance will be obtained by third party operators for our benefit, we may be subject to liability for pollution and other damages due to environmental events which cannot be insured against due to prohibitive premium costs, or for other reasons. Environmental regulatory matters also could increase substantially the cost of doing business, may cause delays in producing oil and gas or require the modification of operations in certain areas.

Our operations are subject to numerous stringent and complex laws and regulations at the Federal, state and local levels governing the discharge of materials into the environment or otherwise relating to environmental protection. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements, and the imposition of injunctions to force future compliance.

The Oil Pollution Act of 1990 and its implementing regulations impose a variety of requirements related to the prevention of oil spills, and liability for damages resulting from such spills in United States waters. OPA 90 imposes strict joint and several liability on responsible parties for oil removal costs and a variety of public and private damages, including natural resource damages. While liability limits apply in some circumstances, a party cannot take advantage of liability limits if the spill was caused by gross negligence or willful misconduct or resulted from violation of a Federal safety, construction or operation regulation. If a party fails to report a spill or to cooperate fully in a cleanup, liability limits likewise do not apply. Even if applicable, the liability limits for offshore facilities require the responsible party to pay all removal costs, plus up to $75 million in other damages. For onshore facilities, the total liability limit is $350 million. OPA 90 also requires a responsible party at an offshore facility to submit proof of its financial ability to cover environmental cleanup and restoration costs that could be incurred in connection with an oil spill.

The Comprehensive Environmental Response, Compensation, and Liability Act, also known as the “Superfund” law, and analogous state laws impose joint and several liability on certain classes of persons that are considered to have contributed to the release of a “hazardous substance” into the environment. These parties include the owner or operator of the site where the release occurred, and those that disposed or arranged for the disposal of hazardous substances found at the site. Responsible parties under CERCLA may be subject to joint and several liability for remediation costs at the site, and may also be liable for natural resource damages. Additionally, it is not uncommon for neighboring landowners and other third parties to file tort claims for personal injury and property damage allegedly caused by hazardous substances released into the environment.

State and local statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations. In addition, there are state statutes, rules and regulations governing conservation matters, including the unitization or pooling of oil and gas properties, establishment of maximum rates of production from oil and gas wells and the spacing, plugging and abandonment of such wells. Such statutes and regulations may limit the rate at which oil and gas could otherwise be produced from our properties and may restrict the number of wells that may be drilled on a particular lease or in a particular field.

Risks About Our Business

GEOPOLITICAL INSTABILITY.

We conduct business in Guinea, which is in a region of the world where there have been recent civil wars, revolutionary wars, and internecine conflicts. Although Guinea is a peaceful nation, external or internal political forces could potentially create a political or military climate that might cause a change in political leadership or the outbreak of hostilities. Such a change could result in our having to cease our Guinea operations and result in the loss or delay of our rights under the PSA.

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GEOPOLITICAL POLITICS.

We recently entered into a 2006 Production Sharing Contract with the Republic of Guinea. The government of the Republic of Guinea could unlawfully terminate this new contract.

WE MAY HAVE WRITE DOWNS OF OUR ASSETS DUE TO PRICE VOLATILITY.

accounting rules require us to review the carrying value of our oil and gas properties on a quarterly basis for possible write down or impairment. Under these rules, capitalized costs of proved reserves may not exceed a ceiling calculated at the present value of estimated future net revenues from those proved reserves. Capital costs in excess of the ceiling must be permanently written down. A decline in oil and natural gas prices could cause a write down which would negatively affect our net income.

ESTIMATES OF OIL AND GAS RESERVES ARE UNCERTAIN AND MAY VARY SUBSTANTIALLY FROM ACTUAL PRODUCTION.

We do not have any reserve reports or geology or petroleum engineering reports related to our foreign property. We do have a third-party reserve report for our Louisiana properties. There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of expenditures, including many factors beyond our control. A reserve report is the estimated quantities of oil and gas based on reports prepared by third party reserve engineers. Reserve reporting is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of available geological, geophysical, engineering and economic data and the precision of engineering and judgment. As a result, estimates of different engineers often vary. The estimates of reserves, future cash flows and present value are based on various assumptions, including those prescribed by the SEC relating to oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds, and are inherently imprecise.

THE UNAVAILABILITY OR HIGH COST OF DRILLING RIGS, EQUIPMENT, SUPPLIES, PERSONNEL AND OILFIELD SERVICES COULD ADVERSELY IMPACT US.

Drilling activity offshore Guinea will require that we have access to an offshore drilling rig. Either unavailability, shortages or increases in the cost of drilling rigs, equipment, supplies or personnel could delay or adversely affect our Guinea operations. There can be no assurance that we will be able to obtain the necessary equipment or that services will be available at economical prices.

FAILURE TO FIND OIL AND GAS.

We may not be able to find oil and gas in commercial quantities, and if not, our future revenue potential would be substantially reduced.

WE MAY BE UNABLE TO ACQUIRE OIL AND GAS LEASES.

To engage in oil and gas exploration, we must first acquire rights to conduct exploration and recovery activities on identified prospects. We may not be successful in acquiring farmouts, permits, lease options, leases or other rights to explore for or recover oil and gas. Other major and independent oil and gas companies with financial resources significantly greater than ours may bid against us for the purchase of oil and gas leases. If we or our subsidiaries are unsuccessful in acquiring these leases, permits, options and other interests, our prospect inventory for exploration and drilling could be significantly reduced, and our business, results of operations and financial condition could be substantially harmed.

EXPANSION OF OUR EXPLORATION PROGRAM WILL REQUIRE CAPITAL FROM OUTSIDE SOURCES.

We do not currently have the financial resources to explore and drill all of our currently identified prospects. Absent raising additional capital or entering into joint venture agreements, we will not be able to increase our exploration and drilling operations at the projected rate. This could limit the size of our business. There is no assurance that capital will be available in the future to us or that capital will be available under terms acceptable to us. We will need to raise additional money, either through the sale of equity securities (which could dilute the existing stockholders' interest), through the entering of joint venture agreements (which, while limiting our risk, could reduce our ownership interest in particular assets), or from borrowings from third parties (which could result in additional assets being pledged as collateral and which would increase our debt service requirements).

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Additional capital could be obtained from a combination of funding sources, many of which could have an adverse effect on our business, results of operations and financial condition. These potential funding sources, and the potential adverse effects attributable thereto, include:

- cash flow from operating activities, which is sensitive to prices we receive for oil and natural gas and the success of current and future operations;

- borrowings from financial institutions, which may subject us to certain restrictive covenants, including covenants restricting our ability to raise additional capital or pay dividends;

- debt offerings, which would increase our leverage and add to our need for cash to service such debt (which could result in additional assets being pledged as collateral and which could increase our debt service requirements);

- additional offerings of equity securities, which would cause dilution of our common stock;

- sales of prospects generated by the exploration program, which would reduce future revenues from that program;

- additional sales of interests in our projects, which could reduce future revenues.

Our ability to raise additional capital will depend on the results of operations and the status of various capital and industry markets at the time such additional capital is sought. Capital may not become available to us from any particular source or at all. Even if additional capital becomes available, it may not be on terms acceptable to us. Failure to obtain additional financing on acceptable terms may have an adverse effect on our business, results of operations and financial condition.

WE HAVE COMPETITION FROM OTHER COMPANIES.

A large number of companies and individuals engage in drilling for gas and oil, and there is competition for the most desirable prospects. We will encounter intense competition from other companies and other entities in the sale of our gas and oil production. We could be competing with numerous gas and oil companies which may have financial resources significantly greater than ours. Further, the quantities of gas and oil to be delivered by us may be affected by factors beyond our control, such as the inability of the wells to deliver at the necessary quality and pressure, premature exhaustion of reserves, changes in governmental regulations affecting allowable production and priority allocations, and price limitations imposed by Federal and state regulatory agencies.

WE DEPEND ON INDUSTRY VENDORS AND MAY NOT BE ABLE TO OBTAIN ADEQUATE SERVICES.

We are and will continue to be dependent on industry vendors for the success of our oil and gas exploration projects. These contracted services include, but are not limited to, accounting, drilling, completion, workovers (remedial down hole work on a well) and reentries (entering an existing well and changing the direction and/or depth of a well), geological evaluations, engineering, leasehold acquisition (landmen), operations, legal, investor relations/public relations, and prospect generation. We could be harmed if we fail to attract quality industry vendors to participate in the drilling of prospects which we identify or if our industry vendors do not perform satisfactorily. We often have, and will continue to have, little control over factors that would influence the performance of our vendors.

WE RELY ON THIRD PARTIES FOR PRODUCTION SERVICES AND PROCESSING FACILITIES.

The marketability of our production depends upon the proximity of our reserves to, and the capacity of, facilities and third party services, including oil and natural gas gathering systems, pipelines, trucking or terminal facilities, and processing facilities. The unavailability or lack of capacity of such services and facilities could result in the shut-in of producing wells or the delay or discontinuance of development plans for properties. A shut-in or delay or discontinuance could adversely affect our financial condition. In addition, Federal and state regulation of oil and natural gas production and transportation affect our ability to produce and market oil and natural gas on a profitable basis.

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OUR APPROACH TO TITLE ASSURANCE COULD ADVERSELY AFFECT OUR BUSINESS AND OPERATIONS.

We intend to purchase oil and gas interests and leases from third parties or directly from the mineral fee owners as the inventory upon which we will perform our exploration activities. The existence of a title deficiency can render a lease worthless and can result in a large expense to us. Title insurance covering the mineral leaseholds is not generally available and in all instances, we forego the expense of retaining lawyers to examine the title to the mineral interest to be placed under lease or already placed under lease until the drilling block is assembled and ready to be drilled. We rely upon the judgment of oil and gas lease brokers or experienced landmen who perform the field work in examining records in the appropriate governmental office before attempting to acquire or place under lease a specific mineral interest. This is customary practice in the oil and gas industry. However, if there is a defect in title, the amount that we paid for such oil and gas leases or interests is generally lost. If the defective lease covers acreage which is critical to the success of a particular project, the loss could have an adverse effect by making the target area potentially not drillable.

RISKS RELATED TO OUR FINANCIAL OPERATIONS

WE HAVE A HISTORY OF LOSSES.

We have experienced substantial operating losses. We expect to incur significant operating losses until sales increase. We will also need to raise sufficient funds to finance our activities. We may be unable to achieve or sustain profitability.

WE HAVE AN ACCUMULATED DEFICIT AND MAY INCUR ADDITIONAL LOSSES.

We have a substantial accumulated deficit. We may not be able to meet our debts as they become due. If we are unable to generate sufficient cash flow or obtain funds to pay debt, we will be in default.

WE MAY EXPERIENCE POTENTIAL FLUCTUATIONS IN RESULTS OF OPERATIONS.

Our future revenues may be affected by a variety of factors, many of which are outside our control, including (a) the success of project results; (b) swings in availability of drilling services needed to implement projects and the pricing of such services; (c) a volatile oil and gas pricing market which may make certain projects that we undertake uneconomic; (d) the ability to attract new independent professionals with prospects in a timely and effective manner; and (e) the amount and timing of operating costs and capital expenditures relating to conducting our business operations and infrastructure. As a result of our limited operating history and the emerging nature of our business plan, it is difficult to forecast revenues or earnings accurately, which may fluctuate significantly from quarter to quarter.

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IF WE CANNOT OBTAIN ADDITIONAL FINANCING, WE MAY HAVE TO CURTAIL OPERATIONS AND MAY ULTIMATELY CEASE TO EXIST.

Our financial statements reflect recurring, ongoing and substantial yearly net losses, and negative cash flows from operations. These conditions require sufficient additional funding or alternative sources of capital to meet our working capital needs. We have raised capital by selling common stock, issuing convertible debentures and our equity line of credit which will also requires us to issue common stock. However, future financing may not be available in amounts or on terms acceptable to us, if at all. If we cannot raise funds on acceptable terms, or achieve positive cash flow, we may be forced to curtail operations or may ultimately cease to exist.

WE MAY NOT BE ABLE TO RAISE THE REQUIRED CAPITAL TO CONDUCT OUR OPERATIONS; EQUITY LINE OF CREDIT.

We may require additional capital resources in order to conduct our operations. If we cannot obtain additional funding, we may make reductions in the scope and size of our operations. In order to grow and expand our business, and to introduce our services to the marketplace, we will need to raise additional funds. We have an equity line of credit. We have made 5 puts on the equity line of credit since February 2006 in the aggregate amount of $967,000. At October 10, 2006, the remaining amount available for us to draw down on the equity line of credit is $19,032,900. The equity line of credit expires in February 2009, after which we will not be able to draw down on the equity line of credit even if has not been fully utilized by us. The Cornell agreements limit our use of the equity line of credit. Whether as a result of the Cornell Agreements or as a result of our discretion, between now and February 2009, we may not have drawn down the full $19,032,900 currently available in the equity line of credit.

RISKS ABOUT OUR SECURITIES

WE MAY ISSUE ADDITIONAL SHARES OF COMMON STOCK IN THE FUTURE, WHICH COULD CAUSE DILUTION TO ALL SHAREHOLDERS.

We may seek to raise additional equity capital in the future. Any issuance of additional shares of our common stock will dilute the percentage ownership interest of all shareholders and may dilute the book value per share of our common stock.

SHAREHOLDERS COULD INCUR NEGATIVE IMPACT DUE TO THE REMOVAL OF THE LEGEND ON A SIGNIFICANT PERCENTAGE OF OUR OUTSTANDING SHARES OF COMMON STOCK, OR THE EXERCISE OF OPTIONS AND WARRANTS.

As of June 30, 2006, approximately 9,225,938 shares of our common stock was restricted stock, some of which was eligible to be sold immediately pursuant Rule 144 of the Securities Act of 1933, as amended. We have outstanding warrants and options to purchase 8,421,902 shares of our common stock. If these options and warrants are exercised, the underlying shares will ultimately become subject to resale pursuant to Rule 144. We do not know when or if these options will be exercised. In the event that a substantial number of these shares are offered for sale in the market by several holders, the market price of our common stock could be adversely affected.

OUR MANAGEMENT CONTROLS A SIGNIFICANT PERCENTAGE OF OUR CURRENT OUTSTANDING COMMON STOCK; THEIR INTERESTS MAY CONFLICT WITH THOSE OF OUR SHAREHOLDERS.

Our Directors and Executive Officers and their affiliates collectively and beneficially owned approximately 35 % of our outstanding common stock voting control (including voting Series B Preferred Stock. This concentration of voting control gives our Directors and Executive Officers and their respective affiliates substantial influence over any matters which require a shareholder vote, including, without limitation, the election of Directors, even if their interests may conflict with those of other shareholders. It could also have the effect of delaying or preventing a change in control of or otherwise discouraging a potential acquirer from attempting to obtain control of us. This could have an adverse effect on the market price of our common stock or prevent our shareholders from realizing a premium over the then prevailing market prices for their shares of common stock.

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IF WE ISSUE COMMON STOCK PURSUANT TO THE EQUITY LINE OF CREDIT, THEN EXISTING STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION.

We utilize an equity line of credit. The sale of shares pursuant to equity line of credit will have a dilutive impact on our stockholders. As a result, our net income per share could decrease in future periods, and the market price of our common stock could decline. In addition, the lower our stock price at the time we exercise draw down on the equity line of credit, the more shares we will have to issue. If our stock price decreases, then our existing stockholders would experience greater dilution.

IMPACT OF THE EQUITY LINE OF CREDIT

As we draw down on the equity line of credit, our common stock will be purchased at or less than the then market price. Sales of such common stock could cause the market price of our common stock to decline.

IF WE ISSUE COMMON STOCK PURSUANT TO CORNELL'S CONVERSION OF DEBENTURES OR EXERCISE OF WARRANT, THEN EXISTING STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION.

The conversion into shares pursuant to Cornell debentures and warrants will have a dilutive impact on our stockholders. As a result, our net income per share could decrease in future periods, and the market price of our common stock could decline. In addition, the lower our stock price at the time we exercise draw down on the equity line of credit, the more shares we will have to issue. If our stock price decreases, then our existing stockholders would experience greater dilution.

OUR STOCK PRICE IS HIGHLY VOLATILE AND YOU MAY LOSE SOME OR ALL OF YOUR INVESTMENT.

Trading prices of our common stock may fluctuate in response to a number of events and factors, such as:

- general economic conditions changes in interest rates;

- conditions or trends in the oil and gas business;

- fluctuations in the stock market in general and market prices for oil and gas companies in particular;

- quarterly variations in our operating results;

- new products, services, innovations, and strategic developments by our competitors or us, or business combinations and investments by our competitors or us;

- changes in environmental regulation;

- changes in our capital structure, including issuance of additional debt or equity to the public;

- additions or departures of our key personnel;

- corporate restructurings, including layoffs or closures of facilities;

- certain analyst reports, news and speculation.

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WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE; THEREFORE, YOU MAY NEVER SEE A RETURN ON YOUR INVESTMENT.

We do not anticipate the payment of cash dividends on our common stock in the foreseeable future. We anticipate that any profits from our operations will be devoted to our future operations. Any decision to pay dividends will depend upon our profitability at the time, cash available and other factors.

SINCE WE HAVE NOT PAID ANY DIVIDENDS ON OUR COMMON STOCK AND DO NOT INTEND TO DO SO IN THE FUTURE, A PURCHASER OF OUR COMMON STOCK WILL ONLY REALIZE A GAIN ON THEIR INVESTMENT IF THE MARKET PRICE OF OUR COMMON STOCK INCREASES.

We have never paid, and do not intend to pay, any cash dividends on our common Stock for the foreseeable future. An investor in this offering, in all likelihood, will only realize a profit on their investment if the market price of our common stock increases in value.

MATERIAL RISKS RELATED TO OUR CORPORATE GOVERNANCE

OUR DIRECTORS AND OFFICERS HAVE RIGHTS TO INDEMNIFICATION.

The Delaware General Corporation Law provides that we will indemnify our directors and officers if they are a party to any civil or criminal action. This may discourage claimants from making claims against the directors and officers even if the claims have merit. The cost of indemnification could be high.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

In April 2007, we issued 25,000 shares of restricted common stock to a consultant for services rendered. The services were valued at $40,000. This transaction was made in reliance upon exemptions from registration under Section4(2) of the Securities Act. Each certificate issued for unregistered securities contained a legend stating that the securities have not been registered under the Securities Act and setting forth the restrictions on the transferability and the sale of the securities. No underwriter participated in, nor did we pay any commissions or fees to any underwriter, in this transaction. This transaction did not involve a public offering. The investor had knowledge and experience in financial and business matters that allowed them to evaluate the merits and risk of receipt of these securities. The investor was knowledgeable about our operations and financial condition.

In April 2007, we issued options to purchase 50,000 shares of common stock to a consultant as compensation. These options have an exercise price of $5.00 per share and expire three years from the vesting date. These transactions were made in reliance upon exemptions from registration under Section 4(2) of the Securities Act. Each certificate issued for unregistered securities contained a legend stating that the securities have not been registered under the Securities Act and setting forth the restrictions on the transferability and the sale of the securities. No underwriter participated in, nor did we pay any commissions or fees to any underwriter, in these transactions. These transactions did not involve a public offering. The investors had knowledge and experience in financial and business matters that allowed them to evaluate the merits and risk of receipt of these securities. The investors were knowledgeable about our operations and financial condition

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ITEM 4 Submission of Matters to a Vote of Security Holders

On March 6, 2007, the company held its annual shareholder meeting (1) to elect five members of the Board of Directors to serve for one-year terms and (2) to ratify the selection of Malone and Bailey, PC as our Independent Auditor for the fiscal year ended June 30, 2007. The directors who were elected are Kent Watts, Harry James Briers, Harold A. Poling, Albert F Young, and L. Gene Stohler.

The results of the voting by Item are as follows:

ITEM 1:

With respect to election of Directors of the Company:

Director Name	Number of Affirmative Votes	Number of Votes Withheld
Kent Watts	60,462,854	326,132
Harry James Briers	60,458,214	330,772
Harold A. Poling	60,436,664	352,322
Albert F. Young	60,478,764	310,222
L. Gene Stohler	60,475,144	313,842

ITEM 2:

With respect to Ratification of Selection of Malone & Bailey, PC as the Company's Independent Auditors for the Fiscal Year ended June 30, 2007

Number of Affirmative Votes	Number of Negative Votes	Abstentions
60,552,043	150,769	83,993

ITEM 6 Exhibits

- Certification of Chief Executive Officer of Hyperdynamics Corporation required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

- Certification of Chief Financial Officer of Hyperdynamics Corporation required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

- Certification of Chief Executive Officer of Hyperdynamics Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.

- Certification of Chief Financial Officer of Hyperdynamics Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.

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Signature

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

Hyperdynamics Corporation

(Registrant)

By: /s/ Kent Watts

Kent Watts, Chairman of the Board,

Chief Executive Officer

Dated: May 22, 2007

By: /s/ Steven M. Plumb

Steven M. Plumb,

Chief Financial Officer and

 Principal Accounting Officer

Dated: May 22, 2007

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