UNITED
          STATES
 SECURITIES
        AND EXCHANGE COMMISSION




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,
                2006





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
              oAccelerated
                  Filer
              oNon-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
      February 19, 2007, 48,370,513 shares of common stock, $0.001 par value, were
      outstanding.










Table
      of Contents




Part
                IFinancial
                InformationItem
                1 Financial
                Statements
            2Consolidated
                Balance Sheets at December 31, 2006And
                June 30, 2006
            2Consolidated
                Statements of Operations for the three and six
                months ended December 31, 2006 and 2005
            3Consolidated
                Statements of Cash Flows for the six months ended
                December 31, 2006 and 2005
            4Notes
                to Consolidated Financial Statements
            6Item
                2 Management's
                Discussion and Analysis of Financial Condition and
                Results of Operations
            8Item
                3 Quantitative
                and Qualitative DisclosuresAbout
                Market Risk
            15Item
                4 Controls
                and Procedures
            15Part
                II Other
                InformationItem
                1 Legal
                Proceedings
            15Item
                2 Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            18Item
                6Exhibits
            19Signatures
            20


*Table
          of Contents*


HYPERDYNAMICS
      CORPORATION


Consolidated
      Balance Sheets


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


(Unaudited)





December
                31,
            
            June
                30,2006
            
            2006ASSETSCurrent
                assetsCash
            
            $
            2,908
            
            $
            3,435Restricted
                certificate of deposit
            
            
            75
            
            
            75Accounts
                receivable, net of allowance for doubtful accounts of $30 and
                $13
            
            
            181
            
            
            58Inventories,
                net
            
            
            13
            
            
            -Prepaid
                expenses and other current assets
            
            
            139
            
            
            202Total
                current assets
            
            
            3,316
            
            
            3,770Property
                and equipment, net of accumulated depreciation of $118 and
                $125
            
            
            268
            
            
            93Oil
                and gas properties, using full cost accounting, net of accumulated
                depreciation and depletion of $165 and $169
            
            
            4,446
            
            
            4,437Deposits
            
            
            9
            
            
            3Total
                assets
            
            $
            8,039
            
            $
            8,303LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilitiesCurrent
                portion of long-term debt
            
            $
            70
            
            $
            106Accounts
                payable and accrued expenses
            
            
            801
            
            
            637Accounts
                payable seismic data
            
            
            650
            
            
            650Asset
                retirement obligation
            
            
            12
            
            
            12Deferred
                gain
            
            
            159
            
            
            159Convertible
                debentures, net of discount of $1,996 and $2,444
            
            
            4
            
            
            1,556Dividends
                payable
            
            
            372
            
            
            372Dividends
                payable to related party
            
            
            191
            
            
            136Total
                current liabilities
            
            
            2,259
            
            
            3,628Deferred
                rent
            
            
            110
            
            
            67Total
                liabilities
            
            $
            2,369
            
            
            3,695Commitments
                and contingenciesShareholders'
                equityConvertible
                preferred stock, par value $0.001; 20,000,000 shares
                authorizedSeries
                A -1,945shares issued and outstanding
            
            
            -
            
            
            -Series
                B -2,725shares issued and outstanding
            
            
            -
            
            
            -Common
                stock, $0.001 par value, 250,000,000 shares authorized, 48,300,093
                and
                46,132,595 shares issued and outstanding
            
            
            48
            
            
            46Additional
                paid-in capital
            
            
            37,407
            
            
            31,627Accumulated
                deficit
            
            
            (31,785
            )
            
            (27,065
            )Total
                shareholders' equity
            
            
            5,670
            
            
            4,608Total
                liabilities and shareholders' equity
            
            $
            8,039
            
            $
            8,303




(See
      accompanying notes to consolidated financial statements)


2
 *Table
          of Contents*


HYPERDYNAMICS
      CORPORATION


Consolidated
      Statements of Operations


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


(Unaudited)




Three
                  Months Ended December 31,
              
              Six
                  Months Ended December 31,2006
              
              2005
              
              2006
              
              2005Revenues
              
              $
              342
              
              $
              108
              
              $
              667
              
              $
              195Operating
                  ExpensesLease
                  Operating Costs
              
              
              32
              
              
              237
              
              
              123
              
              
              453Severance
                  Taxes
              
              
              31
              
              
              7
              
              
              70
              
              
              16Other
                  operational costs
              
              
              228
              
              
              332
              
              
              401
              
              
              796Depreciation,
                  depletion and amortization - oil & gas properties
              
              
              23
              
              
              25
              
              
              45
              
              
              49Selling,
                  general & administrative, including depreciation expense of $15, $11,
                  $22 and $23
              
              
              1,491
              
              
              1,015
              
              
              3,487
              
              
              1,773Total
                  Operating Expenses
              
              
              1,805
              
              
              1,616
              
              
              4,126
              
              
              3,087LOSS
                  FROM OPERATIONS
              
              
              (1,463
              )
              
              (1,508
              )
              
              (3,459
              )
              
              (2,892
              )Other
                  Income (Expense)Interest
                  income
              
              
              35
              
              
              1
              
              
              58
              
              
              2Interest
                  expense
              
              
              (402
              )
              
              (105
              )
              
              (1,272
              )
              
              (164
              )Gain
                  on settlement
              
              
              -
              
              
              135
              
              
              -
              
              
              135Gain
                  from sale of asset
              
              
              -
              
              
              -
              
              
              8
              
              
              -NET
                  LOSS
              
              
              (1,830
              )
              
              (1,477
              )
              
              (4,665
              )
              
              (2,919
              )Preferred
                  stock dividend
              
              
              (28
              )
              
              (28
              )
              
              (55
              )
              
              (55
              )Net
                  loss chargeable to common shareholders
              
              $
              (1,858
              )
              $
              $
                  (1,505
              )
              $
              (4,720
              )
              $
              (2,974
              )Basic
                  and diluted loss per common share
              
              $
              (0.04
              )
              $
              (0.04
              )
              $
              (0.10
              )
              $
              (0.07
              )Weighted
                  average shares outstanding
              
              
              47,713,953
              
              
              42,212,977
              
              
              46,952,138
              
              
              42,190,694




(See
      accompanying notes to consolidated financial statements)




3
 *Table
            of Contents*





HYPERDYNAMICS
      CORPORATION


Consolidated
      Statements of Cash Flows


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


(Unaudited)




Six
                  Months ended
                December
                  31,2006
              
              2005CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (4,665
              )
              $
              (2,919
              )Adjustments
                  to reconcile net income to net cash provided by (used in) operating
                  activities)Depreciation,
                  depletion and amortization
              
              
              67
              
              
              72Shares
                  issued for services
              
              
              204
              
              
              56Options
                  and warrants expenses
              
              
              1,003
              
              
              577Gain
                  on sale of assets
              
              
              (8
              )
              
              -Gain
                  on settlement
              
              
              -
              
              
              (135
              )Bad
                  debt expense
              
              
              17
              
              
              -Amortization
                  of discount and financing costs on convertible debenture
              
              
              1,078
              
              
              52Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (140
              )
              
              6Inventories
              
              
              (13
              )
              
              4Prepaid
                  expenses and other current assets
              
              
              32
              
              
              68Accounts
                  payable and accrued expenses
              
              
              164
              
              
              247Deferred
                  rent
              
              
              43
              
              
              -Net
                  cash used in operating activities
              
              
              (2,218
              )
              
              (1,972
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESDecrease
                  in restricted cash
              
              
              -
              
              
              65Investment
                  in oil & gas properties
              
              
              (82
              )
              
              (344
              )Purchase
                  of property and equipment
              
              
              (167
              )
              
              (32
              )Proceeds
                  from the sale of assets
              
              
              36
              
              
              -(Payment)
                  return of deposits
              
              
              (6
              )
              
              20Net
                  cash used in investing activities
              
              
              (219
              )
              
              (291
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESProceeds
                  from sale working interest in oil and gas properties, net
              
              
              -
              
              
              726Proceeds
                  from sale of common stock
              
              
              -
              
              
              25Proceeds
                  from warrant exercises, net
              
              
              126Proceeds
                  from convertible notes
              
              
              1,820
              
              
              -Proceeds
                  from installment debt
              
              
              57
              
              
              50Proceeds
                  from sale of debentures, net
              
              
              -
              
              
              1,981Payments
                  on short-term note payable
              
              
              -
              
              
              (187
              )Payments
                  on installment debt
              
              
              (93
              )
              
              (192
              )Net
                  cash provided by financing activities
              
              
              1,910
              
              
              2,403Net
                  increase (decrease) in cash
              
              
              (527
              )
              
              140Cash
                  at beginning of period
              
              
              3,435
              
              
              259Cash
                  at end of period
              
              $
              2,908
              
              $
              399




(See
      accompanying notes to consolidated financial statements)


4
 *Table
          of Contents*


HYPERDYNAMICS
      CORPORATION


Consolidated
      Statements of Cash Flows (Continued)


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


(Unaudited)




Six
                  months ended
                December
                  31,2006
              
              2005SUPPLEMENTAL
                  DISCLOSURESInterest
                  paid in cash
              
              $
              353
              
              $
              109Income
                  taxes paid in cash
              
              
              -
              
              
              -NON-CASH
                  TRANSACTIONSConversion
                  of notes payable to common stock
              
              $
              4,000
              
              $
              -Issuance
                  of common stock for oil and gas properties
              
              
              -
              
              
              52Payment
                  of preferred stock dividends in common shares
              
              
              55
              
              
              55Debt
                  discount on convertible debt
              
              
              450
              
              
              1,614Reclassification
                  of downpayment made in prior year to property and
                  equipment
              
              
              30
              
              
              -


(See
        accompanying notes to consolidated financial statements)
  5
 *Table
            of Contents*




HYPERDYNAMICS
      CORPORATION


NOTES
      TO
      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 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.





The
      carrying value of the debentures as of December 31, 2006 is as follows (in
      thousands):





Face
                value of debentures
            
            $
            6,000Less:  
                discount related to warrants
            
            
            (1,331
            )discount
                related to conversion featureand
                financing costs
            
            
            (1,779
            )Subtotal
            
            
            2,890Add:
                amortization of discount
            
            
            1,114Total
                principal
            
            
            4,004Less
                payments:Conversion
                to common shares
            
            
            (4,000
            )Carrying
                value of note at December 31, 2006
            
            $
            4


6
 *Table
            of Contents*




**4.
      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 December 31, 2006
      and June 30, 2006 and income statement dataabout 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 December 31, 2006
            
            $
            4,298,000
            
            $
            629,000
            
            $
            3,112,000
            
            $
            8,039,000As
                of June 30, 2006
            
            
            4,175,000
            
            
            457,000
            
            
            3,671,000
            
            
            8,303,000Six
                months ended December 31, 2006Revenues
                from external customers
            
            
            -
            
            
            667,000
            
            
            -
            
            
            667,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            45,000
            
            
            -
            
            
            45,000Depreciation
                - administration
            
            
            10,000
            
            
            -
            
            
            12,000
            
            
            22,000Loss
                from operations
            
            
            (1,255,000
            )
            
            (220,000
            )
            
            (1,984,000
            )
            
            (3,459,000
            )Expenditures
                for long-lived assets
            
            
            76,000
            
            
            55,000
            
            
            118,000
            
            
            249,000Three
                months ended December 31, 2006Revenues
                from external customers
            
            
            -
            
            
            342,000
            
            
            -
            
            
            342,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            23,000
            
            
            -
            
            
            23,000Depreciation
                - administration
            
            
            7,000
            
            
            -
            
            
            8,000
            
            
            15,000Loss
                from operations
            
            
            (710,000
            )
            
            (83,000
            )
            
            (670,000
            )
            
            (1,463,000
            )Expenditures
                for long-lived assets
            
            
            68,000
            
            
            43,000
            
            
            13,000
            
            
            124,000Six
                months ended December 31, 2005Revenues
                from external customers
            
            
            -
            
            
            195,000
            
            
            -
            
            
            195,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            49,000
            
            
            -
            
            
            49,000Depreciation
                - administration
            
            
            14,000
            
            
            -
            
            
            9,000
            
            
            23,000Loss
                from operations
            
            
            (336,000
            )
            
            (1,195,000
            )
            
            (1,361,000
            )
            
            (2,892,000
            )Expenditures
                for long-lived assets
            
            
            73,000
            
            
            351,000
            
            
            4,000
            
            
            428,000Three
                months ended December 31, 2005Revenues
                from external customers
            
            
            -
            
            
            108,000
            
            
            -
            
            
            108,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            25,000
            
            
            -
            
            
            25,000Depreciation
                - administration
            
            
            7,000
            
            
            -
            
            
            4,000
            
            
            11,000Loss
                from operations
            
            
            (175,000
            )
            
            (507,000
            )
            
            (825,000
            )
            
            (1,508,000
            )Expenditures
                for long-lived assets
            
            
            44,000
            
            
            71,000
            
            
            -
            
            
            115,000


7
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            of Contents*




**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.





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





Overview





Our
      corporate mission is to explore for and develop new sources of energy worldwide.
      On September 22, 2006, our wholly owned subsidiary, SCS Corporation signed
      a new
      2006 Production Sharing Contract with the Republic of Guinea. This contract
      gives us exclusive rights across this largest remaining exploration block
      offshore West Africa, of approximately 31,000 square miles.





During
      the quarter ended December 31, 2006, we traveled to Germany at the invitation
      of
      the Ministry of Mines and Geology and made a presentation to numerous
      participants from various ministries of the Guinea government. At the meeting
      we
      notified the Ministry of Mines that we had begun our exploration work towards
      the goal to begin drilling exploration wells and making world class
      discoveries.





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. Thus, during the quarter, our reconnaissance team has
      been
      in Guinea surveying the facilities, ports, and capabilities there. We expect
      the
      reconnaissance team to submit an extensive report sometime during the current
      quarter. We feel this advance reconnaissance will shorten the time to begin
      drilling a well for us or any of our partners by at least six to nine months.





On
      November 1, 2006, the Central and South Africa Industry Forum inducted us as
      its
      newest member. This group consists of 37 members of oil and gas companies that
      have exploration and production operations on and offshore Africa. The members
      of the group are primarily “new ventures” professionals looking for new
      opportunities for oil and gas discoveries and production. Exxon Mobil leads
      the
      group, which meets monthly at a member sponsored luncheon. At the monthly
      luncheons, member companies provide status reports on their activities and
      members discuss and sometimes consummate ideas for mutually beneficial business
      ventures.





Also
      in
      November, we traveled to Guinea together with our lobbyist, former Secretary
      of
      State for African Affairs, Herman Cohen. We met with numerous ministers of
      the
      Guinea government in meetings whereby they publicly gave support for our
      contract. We addressed the National Assembly in the presence of the President
      of
      the National Assembly of Guinea, Mr. Aboubacar Somparé. Our trip was highly
      publicized in Guinea and was carried extensively on Guinea’s national RTG
      television.





While
      we
      were in Guinea, our geoscientists at our corporate offices prepared for the
      farm-out program, which was just announced in January 2007. We launched a
      program to provide the opportunity for oil companies to license and study our
      proprietary data and then submit proposals to us later this year. We have now
      begun presentations to companies under confidentiality agreements.


8
 *Table
          of Contents*


Domestically,
      we showed good progress once again in our production and cash flow from
      production. We have put work programs into place and expect to increase our
      production by the end of the quarter again by as much as 33%.





During
      the quarter ending March 31, 2007, we will be working both on domestic
      production strategies and at the same time, we will be working diligently on
      our
      farm-out program for offshore Guinea.





During
      the quarter ended December 2006, we realized increasing oil production and
      service revenues of $342,000 combined. The revenues consist of $278,000 in
      oil
      production revenue and $64,000 of service revenue. This compares to $87,000
      in
      oil production revenue and $0 service revenue for the quarter ended December
      31,
      2005. Cost of revenues decreased 48% or $287,000, down to $314,000 in 2006
      from
      $601,000 for the quarter ended December 2005. General and administrative
      expenses including depreciation of administrative properties significantly
      increased 47% or $476,000 for the quarter ended December 2006 to $1,491,000
      from
      $1,015,000 in 2005. The increase is due to salaries and payroll taxes, stock
      options for officers, directors and employees, professional, consulting, travel,
      public relations, insurance, reporting and registration fee, and interest
      expenses. Our net loss for the quarter ended December 31, 2006 was $1,830,000
      compared to $1,477,000 during the quarter ended December 31, 2005. The increase
      of $353,000 is due to the following factors: 1) increase in oil production
      revenue and decrease in well downtime;2) increase in general administrative
      cost
      and interest expense related to our convertible note debenture.





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


9
 *Table
          of Contents*




**SCS**
            
            **HYDR**
            
            **Corporate**
            
            **Total****Segment
                assets**As
                of December 31, 2006
            
            $
            4,298,000
            
            $
            629,000
            
            $
            3,112,000
            
            $
            8,039,000As
                of June 30, 2006
            
            
            4,175,000
            
            
            457,000
            
            
            3,671,000
            
            
            8,303,000Six
                months ended December 31, 2006Revenues
                from external customers
            
            
            -
            
            
            667,000
            
            
            -
            
            
            667,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            45,000
            
            
            -
            
            
            45,000Depreciation
                - administration
            
            
            10,000
            
            
            -
            
            
            12,000
            
            
            22,000Loss
                from operations
            
            
            (1,255,000
            )
            
            (220,000
            )
            
            (1,984,000
            )
            
            (3,459,000
            )Expenditures
                for long-lived assets
            
            
            76,000
            
            
            55,000
            
            
            118,000
            
            
            249,000Three
                months ended December 31, 2006Revenues
                from external customers
            
            
            -
            
            
            342,000
            
            
            -
            
            
            342,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            23,000
            
            
            -
            
            
            23,000Depreciation
                - administration
            
            
            7,000
            
            
            -
            
            
            8,000
            
            
            15,000Loss
                from operations
            
            
            (710,000
            )
            
            (83,000
            )
            
            (670,000
            )
            
            (1,463,000
            )Expenditures
                for long-lived assets
            
            
            68,000
            
            
            43,000
            
            
            13,000
            
            
            124,000**As
                of December 31, 2005:**Segment
                assets
            
            $
            4,213,000
            
            $
            596,000
            
            $
            397,000
            
            $
            5,206,000Six
                months ended December 31, 2005Revenues
                from external customers
            
            
            -
            
            
            195,000
            
            
            -
            
            
            195,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            49,000
            
            
            -
            
            
            49,000Depreciation
                - administration
            
            
            14,000
            
            
            -
            
            
            9,000
            
            
            23,000Loss
                from operations
            
            
            (336,000
            )
            
            (1,195,000
            )
            
            (1,361,000
            )
            
            (2,892,000
            )Expenditures
                for long-lived assets
            
            
            73,000
            
            
            351,000
            
            
            4,000
            
            
            428,000Three
                months ended December 31, 2005Revenues
                from external customers
            
            
            -
            
            
            108,000
            
            
            -
            
            
            108,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            25,000
            
            
            -
            
            
            25,000Depreciation
                - administration
            
            
            7,000
            
            
            -
            
            
            4,000
            
            
            11,000Loss
                from operations
            
            
            (175,000
            )
            
            (507,000
            )
            
            (825,000
            )
            
            (1,508,000
            )Expenditures
                for long-lived assets
            
            
            44,000
            
            
            71,000
            
            
            -
            
            
            115,000




Geographical
      Information


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





**Six
      months ended December 31, 2006 compared to six months ended December 31,
      2005**





Louisiana
      Operations ("HYDR")





Oil
      and
      Service Revenue totaled $667,000 for the six months ended December 31, 2006.
      The
      breakdown consists of $603,000 in oil revenues and $64,000 in service revenues
      compared to $195,000 in oil revenue and $0 service revenue for the six months
      ended in December 2005. The increase of 242% or $472,000 is attributable to
      rework of wells, equipment upgrades and better work control procedures, which
      resulted in less downtime and higher oil production. $64,000 of the increase
      is
      attributable to service work performed for third parties.





Lease
      Operating Costs for the six months ended December 31, 2006 and 2005 were
      $123,000 and $453,000, respectively. The decrease of 73% or $330,000 is due
      to
      an upgrade of high maintenance equipment and more cost-efficient
      procedures.





Severance
      Taxes for the six months ended December 31, 2006 and 2005 were $70,000 and
      $16,000 respectively. The increase of 338% or $54,000 is due to an increase
      in
      oil revenues.





Other
      Operational Cost for the six months ended December 31, 2006 and 2005 was
      $388,000 and $728,000, respectively. The decrease of 47% or $340,000 is due
      to
      the improved efficiency and work control procedures, and decrease in well
      workover requirements.




Our
      depreciation, amortization and depletion for oil and gas properties for the
      six
      months ended December 2006 and December 2005 was $45,000 and $49,000,
      respectively.





Selling,
      General and Administrative expenses for the six months ended December 31, 2006
      and 2005 were $261,000 and $132,000, respectively, representing an increase
      of
      $129,000 or 98%. The main factors contributing to the increase are: 1) an
      increase in insurance expenses of $29,000; 2) an increase in salaries, payroll
      taxes and other taxes of $20,000; 3) an increase in bad debt expense of $16,000
      due to an establishment of a reserve on our joint interest billing; 4) an
      increase in other administrative cost of $3,000; 4) an increase in legal
      expenses of $91,000 related to the various lawsuits. We also experienced a
      decrease of $30,000 in rent, utilities and other administrative
      expenses.


10
 *Table
          of Contents*


We
      realized a gain on sale of fixed assets of $8,000 for the six months ended
      December 31, 2006 and $0 in December 2005.





Our
      Loss
      from operations for the six months ended December 31, 2006 from this segment
      was
      ($220,000) in comparison to ($1,195,000) in December 31, 2005. The decrease
      of
      82% or $975,000 is due to the factors discussed above.





Our
      expenditure for long-lived assets for the six months ended December 31 2006
      was
      $55,000 compared to $351,000 in December 2005. The net decrease of 84% or
      $296,000 is attributable to equipment upgrades and improvements on production
      facilities in 2005.





Guinea
      and Seismic Data Management ("SCS")





We
      had no
      revenues during the six months ended December 31, 2006 and 2005. We signed
      a
      Production Sharing Contract (PSC) with the Republic of Guinea on September
      22,
      2006 and are currently focusing on our drilling and exploration plans in the
      concession delineated in the PSC.





We
      have
      processed a portion of some 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 Cost for the three months ended December 31, 2006 and 2005 was
      $12,000 and $18,000 respectively. The decrease of $6,000 is due to reduction
      in
      expenses related to data management.





Selling,
      General and Administrative expenses for the six months ended December 31, 2006
      and 2005 were $1,233,000 and $304,000, respectively. The increase of 306% or
      $929,000 is due to the following factors: 1) increase in employee salaries
      of
      $76,000; 2) an increase insurance of $6,000; 3) an increase in auto expenses
      of
      $17,000; 4) an increase in travel expenses of $204,000; 5) an increase in
      consulting and professional expenses related to the Guinea concession and
      security for employees in Guinea of $578,000; 6) an increase in public
      relations, television, media and broadcast coverage in Guinea for $31,000;
      7) an
      increase in office supplies and equipment expenses of $23,000. We also
      experienced a slight decrease of $7,000 resulting from reduction in rent,
      utilities and bank charges.





Depreciation
      and amortization on administrative properties for the six months ended December
      2006 and 2005 was $10,000 and $14,000, respectively.





Based
      on
      the factors discussed above, our loss from operations for the six months ended
      December 2006 and 2005 from this segment was ($1,255,000) and ($336,000), an
      increase of 274% or $919,000.





Expenditures
      for long lived assets for the six months ended December 2006 and 2005 were
      $76,000 and $73,000, 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 six months ended December 31, 2006
      and 2005 was $1,972,000 and $1,349,000, respectively. The increase of 46% or
      $623,000 is attributable to the following: 1) new employee hires and increase
      in
      officer salaries and payroll taxes and other taxes of $167,000; 2) increase
      in
      public relations and investor relations of $87,000; 3) increase in stock based
      compensation expense of $940,000. 4) increase in fees related to SEC reporting
      and registration in the American Stock exchange of $58,000; and 5) an increase
      in office supplies and other administrative expenses of $63,000. We also
      experienced a decrease of $689,000 based on 1) office rent and utilities of
      $59,000; 2) insurance and other tax expenses of $5,000; 3) travel expenses
      of
      $66,000; 4) professional expenses of $80,000 and 5) consulting and other fees
      of
      $479,000.





Depreciation
      and amortization on administrative properties for the six months ended December
      2006 and 2005 was $12,000 and $9,000, respectively.


11
 *Table
          of Contents*


Based
      on
      the factors discussed above, our loss from operations for the six months ended
      December 31, 2006 and 2005 was ($1,984,000) and ($1,361,000), respectively,
      an
      increase of 46% or $623,000.





Gain
      on
      settlement of lease for the six months ended December 31 2006 and 2005 is $0
      and
      $135,000, respectively.





Interest
      Expense for the six months ended December 31, 2006 and 2005 is $1,270,000 and
      $164,000, respectively. The increase of $1,107,000 arises from the convertible
      note debenture financing in 2006.





Our
      expenditures for long lived assets for the six months ended December 31, 2006
      and 2005 were $118,000 and $4,000 respectively. The increase is due to
      acquisitions of fixed assets and leasehold improvements in our new
      office.






**Three
      months ended December 31, 2006 compared to three months ended December 31,
      2005**





Louisiana
      Operations ("HYDR")





Oil
      and
      Service Revenue totaled $342,000 for the three months ended December 31, 2006.
      The revenue consists of $278,000 in oil revenues and $64,000 in service
      revenues, compared to $108,000 in oil revenue and $0 service revenue for the
      three months ended in December 2005. The increase of 217% or $234,000 is
      attributable to rework of wells, equipment upgrades and better work control
      procedures, which resulted in less downtime and higher oil production. We also
      performed service work for third parties in 2006 but not in 2005.





Lease
      Operating Costs for the three months ended December 31, 2006 and 2005 were
      $32,000 and $237,000, respectively. The decrease of 86%, or $205,000, is due
      to
      an upgrade of high maintenance equipment and better work control
      procedures.





Severance
      Taxes for the three months ended December 31, 2006 and 2005 were $31,000 and
      $$7,000 respectively. The increase of 343% or $24,000 is due to an increase
      in
      oil revenues.





Other
      Operational Cost for the three months ended December 31, 2006 and 2005 was
      $228,000 and $332,000, respectively. The decrease of 31% or $104,000 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 December 2006 and December 2005 was $23,000 and $25,000,
      respectively.





Selling,
      General and Administrative expenses for the three months ended December 31,
      2006
      and 2005 were $116,000 and $40,000, respectively, representing an increase
      of
      $76,000 or 190%. The main factors contributing to the increase are: 1) an
      increase in insurance expenses of $28,000; 2) an increase in legal expenses
      of
      $44,000 stemming from various lawsuits; 3) an increase in office and other
      administrative costs including other taxes of $37,000. We also experienced
      a
      decrease of $32,000 in salaries and payroll taxes, rent and utilities, bad
      debts, travel and bank charges all due to lower lease allocations on our new
      office and increase in revenues.





Based
      on
      the factors discussed above, our loss from operations for the three months
      ended
      December 31, 2006 from this segment was ($83,000) in comparison to ($507,000)
      in
      December 31, 2005, a decrease of 84% or $424,000.





Our
      expenditure for long-lived assets in the three months ended December 2006 was
      $43,000 compared to $71,000 in December 2005. The net increase of $28,000 is
      attributable to an equipment upgrade and improvements on production facilities
      in 2005.






Guinea
      and Seismic Data Management ("SCS")





We
      had no
      revenues during the three months ended December 31, 2006 and 2005





Other
      Operation Cost for the three months ended December 31, 2006 and 2005 was $4,000
      and $9,000 respectively. The decrease of $5,000 is due to reduction in expenses
      related to data management.


12
 *Table
          of Contents*


Selling,
      General and Administrative expenses for the three months ended December 31,
      2006
      and 2005 were $700,000 and $159,000. The increase of 340% or $541,000 is due
      to
      the following factors: 1) an increase of $57,000 in employee expenses up $90,000
      compared to $33,000 in 2005 due to addition of employees in Guinea; 2) an
      increase of 489% or $308,000 in public relations, professional and consulting
      expenses related an extensive media and journalistic coverage, banquet hosted
      for U.S. and Guinean dignitaries and officials, security for office personnel
      in
      Guinea from $63,000 in 2005. 3) an increase in travel expenses of $173,000
      resulting from frequent travel to Guinea from $0 in 2005; 3) an increase of
      $18,000 in other administrative cost. We realized a decrease of $14,000 due
      to
      lower corporate rent and utilities expenses.





Depreciation
      and amortization of administrative properties for each of the three months
      ended
      December 2006 and 2005 was $7,000.




Based
      on
      the factors discussed above, our loss from operations for the three months
      ended
      December 2006 from this segment was ($710,000) and ($175,000) at the end of
      December 2005, an increase of 306% or $535,000.





Expenditures
      for long lived assets for the three months ended December 2006 and 2005 was
      $68,000 and $44,000 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 three months ended December 31,
      2006
      and 2005 was $661,000 and $819,000 respectively. The decrease of 19% or $158,000
      is attributable to the following: 1) new employee hire and increase in officer
      salaries and payroll taxes and other taxes of $118,000; 2) increase in public
      relations and investor relations of $55,000; 3) increase in stock based
      compensation expense of $98,000. 4) Increase in fees related to SEC reporting
      of
      $5,000; and 7) an increase in office supplies and other administrative expenses
      of $39,000. We also experienced a decrease of $469,000 based on 1) office rent
      and utilities of $27,000; 2) insurance and other taxes $12,000; 3) travel
      expenses of $63,000; 4) professional expenses of $76,000 and 5) consulting
      and
      other fees of $291,000.





Depreciation
      and amortization on administrative properties for the three months ended
      December 2006 and 2005 was $8,000 and $4,000 respectively.





Based
      on
      the factors discussed above, our loss from operations for the three months
      ended
      December 31, 2006 and 2005 was ($670,000) and ($825,000), respectively, a
      decrease of 19% or $155,000.





Gain
      on
      settlement of lease for the three months ended December 31 2006 and 2005 is
      $0
      and $135,000, respectively.





Our
      expenditures for long lived assets for the three months ended December 31,
      2006
      and 2005 was $13,000 and $0, 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 1.47 to 1 at
      December 31, 2006, 1.04
      to
      1 at June
      30, 2006 and 1.47 to 1 at December 31, 2005. Our current ratio continues to
      improve as we raise capital to fund our ongoing operations and reduce our net
      cash used in operating activities. 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. Our cash operating deficit
      continues to be reduced and our Louisiana operations have recently reported
      positive EBITDA.





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.


13
 *Table
          of Contents*


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 6MM 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 last year when we closed three convertible debentures totaling $6MM
      in
      financing with Cornell Capital. As of the date of this filing, all but $2MM
      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 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.


14
 *Table
          of Contents*




**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. A lso
      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 no significant changes in the our internal
      controls or in other factors that could significantly affect these controls
      subsequent to the date of their evaluation, including any corrective actions
      with regard to significant deficiencies and material weaknesses.





There
      have been no changes in our internal control over financial reporting identified
      in connection with the evaluation required by Rule 13a-14(b) or Rule 15d-14(b)
      that occurred during our last fiscal quarter that has materially affected,
      or is
      reasonably likely to materially affect, our internal control over financial
      reporting






**Part
      IIOther Information**





**Item
      1. Legal Proceedings**





**Dixon
      Financial Services.**





In
      2001,
      we were named as a defendant in a lawsuit styled Dixon Financial Services,
      Ltd.
      v. Fidelity Transfer Company, Erin Oil Exploration, Inc., Bill Knollenberg,
      Ron
      Bearden, R.F. Bearden Associates, Inc., James Chang, Nick H. Johnson, Riley
      L.
      Burnett, Jr., Johnson, Burnett & Chang, L.L.P., Greenberg, Peden, Siegmyer
& Oshman, P.C., George Siegmyer and Hyperdynamics Corporation; Cause No.
      2001-06263; In the 215th Judicial District Court of Harris County, Texas. This
      suit alleged breach of contract for failure to deliver share certificates in
      the
      name of Dixon Financial Services for 574,500 shares of our stock which were
      held
      in a nominee name. Earlier, in 2000, The Erin Oil Exploration parties, including
      their attorneys, brought suit against us, wrongfully claiming that the shares
      were subject to their claims against other persons and obtained a temporary
      restraining order preventing the transfer of the shares. Fidelity Transfer,
      as
      our transfer agent, refused to transfer the shares to Dixon because of the
      restraining order. We set aside the temporary restraining order as to the shares
      and the shares were not subject to a later temporary injunction. However, legal
      counsel for the Erin Oil parties wrongfully asserted to Fidelity Transfer that
      the shares were subject to the injunction and Fidelity Transfer refused to
      transfer the shares to Dixon Financial for a period of at least three months
      during which the share price dropped from more than $6.00 a share to slightly
      more than $1.00 per share. We and Dixon Financial brought claims against the
      Erin Oil parties and their legal counsel for their wrongful conduct. The Erin
      Oil legal counsel asserted a litigation privilege under Texas law. The Erin
      Oil
      parties and their legal counsel filed motions for summary judgment asserting
      the
      litigation privilege as a bar to liability. The trial court granted all such
      motions for summary judgment. Fidelity Transfer asserted that it was not subject
      to jurisdiction in Texas and we determined that Fidelity Transfer was not
      currently solvent for purposes of any judgment against it in this matter.
      Fidelity Transfer is no longer a party to this lawsuit at this time, but we
      have
      a formal agreement allowing us to pursue recovery against Fidelity Transfer
      at a
      later time. At the end of April 2005, we and Dixon Financial entered into an
      agreement to settle and resolve this litigation. The agreement provides, among
      other things, that since the claims of both Dixon Financial and us against
      the
      Erin Oil parties and their legal counsel are similar, that we will bear the
      cost
      of appealing the summary judgments granted to the Erin Oil parties on the
      litigation privilege defense to liability. The agreement further provides that
      we agree to a judgment in the amount of $2,015,264 for the failure to deliver
      the shares into the name of Dixon Financial. However, Dixon Financial has agreed
      that it will not abstract or otherwise seek to enforce the agreed judgment,
      except in the event that the appeal is unsuccessful or the Erin Oil parties
      are
      determined not to be liable for any other reason. If the appeal is unsuccessful,
      we and Dixon Financial have agreed that we will pay the sum of $240,000 payable
      in the amount of $10,000 per month for a period of 24 months. This agreement
      required court approval for entry of the agreed judgment. In the event that
      the
      appeal is successful, we will not be obligated to pay any amount of money other
      than legal fees and expenses. If the appeal is successful, we will seek to
      recover our damages and costs from the Erin Oil parties and their legal counsel.
      The Erin Oil parties's legal counsel has insurance which has been providing
      a
      defense and which may pay for any liability awarded against the Erin Oil
      parties' counsel. The proposed agreed judgment described above was first
      submitted to the court in May 2005. However, the court, without explanation,
      refused to enter an agreed judgment containing the agreement reached between
      Dixon and us. The court entered an order in June 2006 severing some of the
      Erin
      Oil parties from the main case so that the summary judgments entered in favor
      of
      those parties could be appealed. That appeal is proceeding pursuant to our
      agreement with Dixon.


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The
          remainder of the case continued with Dixon, Hyperdynamics, Erin Oil Exploration
          and Bill Knollenberg as parties with active claims to be resolved.  The law
          firm of Johnson, Burnett & Chang, L.L.P., and the individual partners in
          that firm remained in the case pending finalization of the interlocutory
          summary
          judgments in their favor.  The court set the remaining issues for trial to
          a jury, which resulted in a jury verdict on February 1, 2007. The jury
          determined that Bill Knollenberg was personally liable to Dixon and
          Hyperdynamics in the amount of at least $3,500,000.00, each.  That damage
          amount was also determined against Erin Oil Exploration (a non-answering
          defendant) in favor of Dixon.  The jury determined that Knollenberg, in
          conspiracy with his attorneys and the other attorneys and their clients,
          committed breach of contract, fraud, misrepresentation and abuse of
          process.  As a result of the fraud, the jury awarded punitive damages to
          both Dixon and Hyperdynamics in the amount of $500,000.00 each.  Pursuant
          to the agreement between Dixon and Hyperdynamics, a judgment will be entered
          in
          Dixon’s favor against Hyperdynamics in the amount of $3,500,000.00 plus
          attorneys fees.  That amount is also the amount of contribution damages
          sought by Hyperdynamics against Knollenberg, in addition to Hyperdynamics’
damages as found by the jury and it attorneys fees.
  The
          judgment proposed by Hyperdynamics will seek to confirm the jury verdict
          and
          finalize the prior rulings of the court so that those matters may be
          appealed.  Hyperdynamics will seek to consolidate the two appeals so that
          the issues are resolved in one proceeding.





Hyperdynamics
      and Dixon will also be working cooperatively to collect such monies as may
      be
      available from or through Knollenberg on the jury verdict and
      judgment.





**Wellington,
      LLC.**





On
      April
      9, 2001, we were named as a defendant in a lawsuit styled Wellington, LLC vs.
      Hyperdynamics Corporation et al. Civil Action# 18811-NC, The Court of Chancery
      of Delaware.




The
      Plaintiff claims that we did not carry out conversion of Series A preferred
      stock to common stock. On August 9, 2002 Plaintiff, Defendant, and their
      respective counsels executed an “Agreement for Transfer of Claims in Delaware
      Action to Georgia. Subsequently, the lawsuit was moved in its entirety to
      Atlanta, Georgia to be litigated under the lawsuit discussed below. Under the
      agreement, the Plaintiff in the Delaware action, Wellington, LLC. would become
      the Defendant in Atlanta. During the fiscal year ended June 30, 2004, the Court
      of Chancery of Delaware dismissed the Delaware case.




On
      November 5, 2001, we filed a lawsuit styled Hyperdynamics Corporation,
      Plaintiff, v. J.P. Carey Securities, Inc., J.P. Carey Asset Management LLC,
      Joseph C. Canouse, John C. Canouse, James P. Canouse, Jeffrey Canouse,
      Southridge Capital Management LLC, Stephen Hicks a/k/a Steve Hicks, Thomson
      Kernaghan & Co., Limited, Mark Valentine, Talya Davies, Cache Capital (USA),
      L.P., Carpe Diem, Carpe Diem LTD., Wellington, LLC, Minglewood Capital, LLC,
      Falcon Securities, LTD, Navigator Management LTD., David Sims, and Citco
      Trustees (Cayman) Limited, Defendants; and Wellington LLC,
      Counterclaim/Third-Party Plaintiff, v. Hyperdynamics Corporation, a Delaware
      corporation, Kent Watts, Michael Watts, Robert Hill, Harry J. Briers, DJX,
      Ltd.,
      a Belize corporation, and Does 1-10, Counterclaim/Third-Party Defendants, Civil
      Action File No. 2001CV44988, In The Superior Court of Fulton County, State
      of
      Georgia.


16
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We
      filed
      our First Amended Complaint against Defendants on September 12, 2002 in which
      we
      presented thirteen counts for Causes of Action against defendants including
      “Violations of Georgia Racketeer Influenced and Corrupt Organizations” (RICO)
      Act (O.C.G.A. SS 16-14-1, ET SEO).




We
      believe that more than one of the Defendants worked together to create the
      appearance of providing initial long term financing ($3,000,000) and additional
      financing commitments (up to additional $5,000,000), all from reputable sources,
      while the Defendants' real plan was to manipulate our stock through
      contractually prohibited short selling and multiple breaches of the
      contractually agreed to selling covenants.




We
      are
      subject to counterclaims in this Georgia litigation. The counterclaimants allege
      that Hyperdynamics and its Officers and Directors breached their fiduciary
      duties to shareholders and committed other tortuous acts. We intend to continue
      to vigorously pursue damages and defend all counterclaims. Discovery is being
      primarily focused on jurisdictional issues at this time. During the litigation
      we have made numerous claims of discovery abuse resulting in certain defendants
      and defense attorney's involved being sanctioned by the court. They have filed
      for sanctions against us as well. The court dismissed all non-Georgia
      defendants. We have filed a notice of appeal of that ruling. **** As
      of
      September 30, 2006, no ruling has occurred.





**USOil
      Corporation.**





On
      July
      29, 2005, our wholly owned subsidiary filed a lawsuit styled SCS Corporation,
      Plaintiff v. USOil Corporation, Defendant; Cause No. 2005-49205; in the 333rd
      Judicial District Court of Harris County, Texas. With regard to our contract
      with USOil for a 100% farmout of the December 2002 Production Sharing Agreement
      between USOil and the Republic of Guinea, we allege breach of contract, fraud,
      negligent misrepresentation, and we seek a declaratory judgment and damages
      of
      over $12,000,000 and lost profits which we believe can easily exceed hundreds
      of
      millions of dollars. Early responses from the defendant indicated a general
      denial, that the 2002 PSA had been terminated by the government of Guinea,
      and a
      claim that we owe them $1,600,000. We have added two defendants, Dinesh Shukla
      and Joseph R. Delawa.  The suit remains in discovery at the date of
      filing this 10Q, and has been set for trial in August 2007.





**Trendsetter
      Investors, LLC**





On
      March
      8, 2006, a lawsuit was filed against us styled Trendsetter Investors, LLC,
      Plaintiff vs. Hyperdynamics Corporation, Trendsetter Production Co., Kent Watts,
      Michael Watts, Christopher Watts and Harry Briers, Defendants; Civil Action
      No.
      H 06-0746; in the United States District Court for the Southern District of
      Texas, Houston Division.





The
      Plaintiff alleges Fraud or Deceit in the Sale of Securities, Common Law Fraud,
      Fraud by Omission and Control Person Liability. Plaintiff seeks unspecified
      monetary damages. We deny all their allegations and are vigorously defending
      ourselves. We have filed a motion to dismiss on behalf of all defendants. The
      case is currently stayed by the Court pending a ruling on these motions to
      dismiss. We believe this plaintiff's shareholders are one and the same as the
      members of a control group (the "Manning Group") led by Mr. Jack Manning.
      Manning is a Houston based attorney and has been a supporter of Hyperdynamics
      Corporation in the past. In private equity deals since April of 2003, he and
      his
      group have purchased common stock in the price range of $.15 to $.80 per share.
      We believe that the Manning Group through the circumstances surrounding the
      Trendsetter LLC working interest investment, has an agenda to unjustly enrich
      themselves through our securities. We are considering counter claims against
      Trendsetter LLC and each member of the Manning Group. We have significant
      concerns that they collectively have or have had over 10% of our common stock
      and they have been acting in concert, making them an undisclosed affiliate
      group. As of December 31,2006, the suit is in discovery.





**Manning,
      Moore, Long**





On
      May 5,
      2006 a lawsuit was served styled Jack Manning, Sue Manning, Stephen Moore and
      Geoffrey Long, Plaintiffs versus Hyperdynamics Corporation and Kent Watts,
      defendants. The suit was filed in the 189th District Court of Harris County,
      Texas with cause no. 2006-22135. The Plaintiff alleges they had the pre-emptive
      right to invest in Hyperdynamics Corporation's common stock. We deny all their
      allegations and will vigorously defend ourselves and are evaluating all possible
      counter claim actions. We believe this lawsuit is tied to the Trendsetter LLC
      litigation discussed above, and is a part of their groups' concerted attack
      on
      the company as a strategy to receive undue enrichment in the form of our common
      stock. We have exchanged the first round of written discovery and intend to
      conduct additional discovery, including
      depositions.


17
 *Table
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Of
      far
      more importance to us is that this group may have been or is now acting together
      in concert since as far back as April 2003 when they funded a bridge loan and
      collectively invested and purchased 2,878,969 shares of common stock. At that
      time there was approximately 27,000,000 shares of common stock outstanding.
      This
      would have given them greater than 10% of the outstanding common stock of the
      company. In review of our records, during the period of time between October
      of
      2003 through approximately the end of March of 2004, this group dramatically
      increased their holdings of Hyperdynamics Corporation's common stock. Based
      on
      concerted actions since then, we are seriously evaluating all corroborating
      information concerning the possibility that their group is an undisclosed
      affiliate of Hyperdynamics Corporation. As of December 31,2006, the suit is
      in
      discovery.





**Item2.
      Unregistered Sales of Equity Securities and Use of
      Proceeds**





In
      January 2007, we issued options to purchase 65,000 shares of common stock to
      two
      employees as compensation. These options have an exercise price of $2.23 per
      share and expire in three years. 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.





In
      January 2007, we issued options to purchase 40,000 shares of common stock to
      three directors as compensation. These options have an exercise price of $2.23
      per share and expire in two years. 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.





In
      January 2007, we issued 41,400 shares of common stock to one investor who
      exercised warrants for $82,800. 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 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
      January 2007, we issued 80,669 shares of common stock to a consultant upon
      cashless exercise of warrants. This transaction was 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 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
      February 2007, we issued 31,778 shares of of
      restricted common stock to a consultant for services rendered. The services
      were
      valued at $63,000 .
      This
      transaction was 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 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.


18
 *Table
          of Contents*


**Item
      6 Exhibits**





Exhibit
      31.1 - 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.





Exhibit
      31.2 - 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.





Exhibit
      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 18 U.S.C. 63.





Exhibit
      32.2 - 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.





19
 *Table
          of Contents*


**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 WattsKent
                Watts, Chairman of the Board,Chief
                Executive OfficerDated:
                February 20, 2007By:
                /s/ Steven M. PlumbSteven
                M. Plumb,Chief
                Financial OfficerDated:February
                20, 2007






20