UNITED STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549






FORM
10-Q


x
                Quarterly
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934: For the quarterly period ended March 31,
  2009





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: 000-32490





HYPERDYNAMICS
CORPORATION


(Exact
name of registrant as specified in its charter)





Delaware
              87-0400335(State
      or other jurisdiction of incorporation or organization)
              (IRS
      Employer Identification No.)








One Sugar
Creek Center Blvd., # 125


Sugar
Land, Texas 77478





(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, a non-accelerated filer, or a smaller reporting company. See
the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer’’ and
‘‘smaller reporting company’’ in Rule 12b–2 of the Exchange Act. (Check
one):






Large
      Accelerated Filer
                
                oAccelerated
      Filer
                
                xNon-Accelerated
      Filer
                
                oSmaller
      Reporting Company
                
                o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)   YES o   NOx





APPLICABLE
ONLY TO CORPORATE ISSUERS


As of May 11, 2009, 66,370,293* shares
of common stock, $0.001 par value, were outstanding.* (includes
2,500,000 shares of our common stock issued to a vendor as a deposit, but which
are not considered outstanding for accounting purposes)










Table of
Contents








Part
      I. Financial InformationItem
      1.      Financial StatementsConsolidated Balance Sheets (unaudited) at March  31,
      2009 and June 30, 2008
                  2Consolidated
      Statements of Operations (unaudited) for the Three Months
      and  Nine Months Ended March 31, 2009 and
    2008
                  3Consolidated
      Statements of Cash Flows (unaudited) for the Nine Months EndedMarch
      31, 2009 and 2008
                  4Notes to Consolidated Financial Statements
      (unaudited)
                  6Item
      2.     Management’s Discussion and
      Analysis of Financial Condition and Results ofOperations
                  20Item
      3.     Quantitative and Qualitative
      Disclosures about Market Risks
                  24Item
      4.     Controls and
      Procedures
                  24Part
      II. Other InformationItem
      1.      Legal
      Proceedings
                  26Item
      1A.  Risk Factors
                  26Item
      2.     Unregistered Sales of
      Equity Securities and Use of Proceeds
                  27Item
      4      Submission of Matters to a
      Vote of Security Holders
                  27Item
      6.     Exhibits
                  28Signatures
                  28


Table of Contents




Item
1. Financial Statements


HYPERDYNAMICS
CORPORATION


CONSOLIDATED
BALANCE SHEETS (Unaudited)


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





March
      31,
                    
                    
                    June
      30,2009
                    
                    
                    2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                    
                    $
                    370
                    
                    
                    $
                    1,480Trade
      accounts receivable
                    
                    
                    127
                    
                    
                    
                    396Prepaid
      expenses and other current assets
                    
                    
                    112
                    
                    
                    
                    151Assets
      held for sale and discontinued operations
                    
                    
                    369
                    
                    
                    
                    3,232Total
      current assets
                    
                    
                    978
                    
                    
                    
                    5,259Property
      and equipment, net of accumulated depreciation of $341 and
      $235
                    
                    
                    263
                    
                    
                    
                    365Oil
      and gas properties:Unevaluated
      properties excluded from amortization
                    
                    
                    7,656
                    
                    
                    
                    7,314Other
      assets
                    
                    
                    11
                    
                    
                    
                    12Total
      assets
                    
                    $
                    8,908
                    
                    
                    $
                    12,950LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                    
                    $
                    1,363
                    
                    
                    $
                    2,393Accounts
      payable - seismic data
                    
                    
                    650
                    
                    
                    
                    650Variable
      share issuance obligation
                    
                    
                    585
                    
                    
                    
                    -Liabilities
      related to assets held for sale and discontinued
operations
                    
                    
                    31
                    
                    
                    
                    99Dividends
      payable
                    
                    
                    372
                    
                    
                    
                    372Dividends
      payable to related party
                    
                    
                    410
                    
                    
                    
                    343Short-term
      notes payable and current portion of long-term debt, net of discount
      of  $108 and $196
                    
                    
                    425
                    
                    
                    
                    401Total
      current liabilities
                    
                    
                    3,836
                    
                    
                    
                    4,258Long-term
      debt, net of discount of $447 and $206
                    
                    
                    1,732
                    
                    
                    
                    1,315Liabilities
      related to assets held for sale and discontinued operations
      noncurrent
                    
                    
                    673
                    
                    
                    
                    631Deferred
      rent
                    
                    
                    60
                    
                    
                    
                    73Total
      liabilities
                    
                    
                    6,301
                    
                    
                    
                    6,277Commitments
      and contingenciesShareholders'
      equity:Convertible
      preferred stock, par value $0.001; stated value $1,000; 20,000,000
      authorizedSeries
      A – 3,000 shares issued and 1,945 shares issued and
      outstanding
                    
                    
                    -
                    
                    
                    
                    -Series
      B - 2,725 shares issued and 2,446 shares outstanding
                    
                    
                    -
                    
                    
                    
                    -Common
      stock, $0.001 par value, 250,000,000 shares authorized; 63,513,362 and
      59,339,481 shares issued and outstanding
                    
                    
                    64
                    
                    
                    
                    59Additional
      paid-in capital
                    
                    
                    71,570
                    
                    
                    
                    65,443Accumulated
      deficit
                    
                    
                    (69,027
                    )
                    
                    
                    (58,829
                    )Total
      shareholders' equity
                    
                    
                    2,607
                    
                    
                    
                    6,673Total
      liabilities and shareholders' equity
                    
                    $
                    8,908
                    
                    
                    $
                    12,950




See
accompanying notes to consolidated financial statements


2
 Table of Contents


HYPERDYNAMICS
CORPORATION


CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)


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





Three Months Ended March
31,
                  
                  
                  Nine Months Ended March 31,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Costs
      and expenses:Selling,
      general and administrative
                  
                  $
                  1,023
                  
                  
                  $
                  1,517
                  
                  
                  $
                  5,251
                  
                  
                  $
                  5,710Depreciation,
      depletion and amortization
                  
                  
                  33
                  
                  
                  
                  37
                  
                  
                  
                  100
                  
                  
                  
                  92Total
      costs and expenses
                  
                  
                  1,056
                  
                  
                  
                  1,554
                  
                  
                  
                  5,351
                  
                  
                  
                  5,802Loss
      from operations
                  
                  
                  (1,056
                  )
                  
                  
                  (1,554
                  )
                  
                  
                  (5,351
                  )
                  
                  
                  (5,802
                  )Other
      income (expense):Interest
      (expense) income, net
                  
                  
                  (160
                  )
                  
                  
                  (110
                  )
                  
                  
                  (2,379
                  )
                  
                  
                  (62
                  )Loss
      on debt extinguishment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (579
                  )
                  
                  
                  -Total
      other income (expense)
                  
                  
                  (160
                  )
                  
                  
                  (110
                  )
                  
                  
                  (2,958
                  )
                  
                  
                  (62
                  )Loss
      from continuing operations
                  
                  
                  (1,216
                  )
                  
                  
                  (1,664
                  )
                  
                  
                  (8,309
                  )
                  
                  
                  (5,864
                  )Loss
      from discontinued operations
                  
                  
                  (37
                  )
                  
                  
                  (191
                  )
                  
                  
                  (1,889
                  )
                  
                  
                  (1,354
                  )Net
      loss
                  
                  
                  (1,253
                  )
                  
                  
                  (1,855
                  )
                  
                  
                  (10,198
                  )
                  
                  
                  (7,218
                  )Preferred
      stock dividend to related party
                  
                  
                  (24
                  )
                  
                  
                  (25
                  )
                  
                  
                  (73
                  )
                  
                  
                  (75
                  )Net
      loss attributable to common shareholders
                  
                  $
                  (1,277
                  )
                  
                  $
                  (1,880
                  )
                  
                  $
                  (10,271
                  )
                  
                  $
                  (7,293
                  )Basic
      and diluted loss per common shareFrom
      continuing operations
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.03
                  )
                  
                  $
                  (0.14
                  )
                  
                  $
                  (0.11
                  )From
      discontinued operations
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  (0.03
                  )
                  
                  $
                  (0.02
                  )Net
      loss attributable to common shareholders
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.03
                  )
                  
                  $
                  (0.17
                  )
                  
                  $
                  (0.13
                  )Weighted
      average shares outstanding  (basic and diluted)
                  
                  
                  62,785,827
                  
                  
                  
                  56,286,798
                  
                  
                  
                  61,187,304
                  
                  
                  
                  55,762,174




See
accompanying notes to consolidated financial statements


3
 Table of Contents


HYPERDYNAMICS
CORPORATION


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)


(In
Thousands)








Nine
      Months Ended
                              March
      31,2009
                            
                            
                            2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                            
                            $
                            (10,198
                            )
                            
                            $
                            (7,218
                            )Loss
      from discontinued operations
                            
                            
                            1,889
                            
                            
                            
                            1,354Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Depreciation,
      depletion and amortization
                            
                            
                            100
                            
                            
                            
                            92Common
      stock issued for services
                            
                            
                            1,060
                            
                            
                            
                            450Employee
      stock options
                            
                            
                            243
                            
                            
                            
                            1,042Variable
      share issuance obligation
                            
                            
                            585
                            
                            
                            
                            -Loss
      on debt extinguishment
                            
                            
                            579
                            
                            
                            
                            -Interest
      accreted to debt principal
                            
                            
                            1,546
                            
                            
                            
                            -Loss
      on disposal of assets
                            
                            
                            -
                            
                            
                            
                            18Amortization
      of discount and financing costs on debt
                            
                            
                            626
                            
                            
                            
                            10Changes
      in operating assets and liabilities:Other
      current assets
                            
                            
                            109
                            
                            
                            
                            (33
                            )Accounts
      payable and accrued expenses
                            
                            
                            (846
                            )
                            
                            
                            7Deferred
      rent
                            
                            
                            (13
                            )
                            
                            
                            (12
                            )Cash
      used in operating activities – continuing operations
                            
                            
                            (4,320
                            )
                            
                            
                            (4,290
                            )Cash
      provided by (used in) operating activities – discontinued
      operations
                            
                            
                            1,129
                            
                            
                            
                            (1,054
                            )Net
      cash used in operating activities
                            
                            
                            (3,191
                            )
                            
                            
                            (5,344
                            )CASH
      FLOWS FROM INVESTING ACTIVITIESInvestment
      in unevaluated oil and gas properties
                            
                            
                            (210
                            )
                            
                            
                            (803
                            )Purchase
      of property and equipment
                            
                            
                            (5
                            )
                            
                            
                            (150
                            )Change
      in restricted cash
                            
                            
                            -
                            
                            
                            
                            75Cash
      used in investing activities – continuing operations
                            
                            
                            (215
                            )
                            
                            
                            (878
                            )Cash
      provided by (used in) investing activities – discontinued
      operations
                            
                            
                            19
                            
                            
                            
                            (1,643
                            )Net
      cash used in investing activities
                            
                            
                            (196
                            )
                            
                            
                            (2,521
                            )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from sale of common stock, net
                            
                            
                            -
                            
                            
                            
                            679Collection
      of stock subscription receivable
                            
                            
                            -
                            
                            
                            
                            5,250Proceeds
      from convertible debentures
                            
                            
                            5,000
                            
                            
                            
                            -Placement
      fees on convertible debentures
                            
                            
                            (300
                            )
                            
                            
                            -Financing
      costs deducted from convertible debentures
                            
                            
                            (30
                            )
                            
                            
                            -Prepayment
      penalty on notes payable
                            
                            
                            (271
                            )
                            
                            
                            -Proceeds
      from installment debt and notes payable
                            
                            
                            -
                            
                            
                            
                            2,047Payments
      on notes payable
                            
                            
                            (2,112
                            )
                            
                            
                            -Payments
      on installment debt
                            
                            
                            -
                            
                            
                            
                            (155
                            )Cash
      provided by financing activities – continuing operations
                            
                            
                            2,287
                            
                            
                            
                            7,821Cash
      used in financing activities – discontinued operations
                            
                            
                            (10
                            )
                            
                            
                            (246
                            )Net
      cash provided by financing activities
                            
                            
                            2,277
                            
                            
                            
                            7,575Net
      decrease  in cash
                            
                            
                            (1,110
                            )
                            
                            
                            (290
                            )Cash
      at beginning of period
                            
                            
                            1,480
                            
                            
                            
                            618Cash
      at end of period
                            
                            $
                            370
                            
                            
                            $
                            328




See
accompanying notes to consolidated financial statements


4
 Table of Contents


HYPERDYNAMICS CORPORATION


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) (Continued)


(In
Thousands)





Nine
      months ended
                  March
      31,2009
                
                
                2008SUPPLEMENTAL
      DISCLOSURESInterest
      paid in cash
                
                $
                473
                
                
                $
                107Income
      taxes paid in cash
                
                
                -
                
                
                
                -NON-CASH
      INVESTING AND FINANCING TRANSACTIONSDeemed
      dividend attributable to repriced warrants issued with purchase of common
      stock
                
                $
                29
                
                
                $
                153Accrued
      and unpaid preferred stock dividend to related party
                
                
                73
                
                
                
                75Common
      stock issued for payment of preferred stock dividends
                
                
                7
                
                
                
                -Accounts
      payable for oil and gas properties
                
                
                92
                
                
                
                542Accounts
      payable for prepaid expenses
                
                
                3
                
                
                
                -Conveyance
      of  asset retirement obligation
                
                
                86
                
                
                
                -Note
      payable for assets
                
                
                32
                
                
                
                30Stock
      payable for placement fee associated with sale of convertible
      debentures
                
                
                103
                
                
                
                -Discount
      associated with beneficial conversion feature and warrants issued with
      convertible debentures
                
                
                2,372
                
                
                
                265Common
      stock issued for accounts payable
                
                
                173
                
                
                
                95Common
      stock issued for investment  in oil and gas
      properties
                
                
                40
                
                
                
                285Common
      stock issued for prepaid services
                
                
                62
                
                
                
                -Fair
      value of warrant repricing associated with debt
    modification
                
                
                106
                
                
                
                -Conversion
      of debt into common stock
                
                
                3,863
                
                
                
                -Accelerated
      discount associated with debt conversion
                
                
                1,824
                
                
                
                -


See
accompanying notes to consolidated financial statements




5
 Table of Contents





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' Annual Report
filed with the SEC on Form 10-K for the year ended June 30, 2008. 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, 2008, as reported in the
Form 10-K, have been omitted.





Certain
amounts in the 2008 financial statements have been reclassified to conform with
the 2009 financial statement presentation.





New
Accounting Pronouncements




We are
evaluating the effect that the adoption of recently issued accounting
pronouncements will have on our results of operations, financial position, or
cash flow.





2.
Going Concern





The
accompanying Consolidated Financial Statements have been prepared assuming
Hyperdynamics will continue as a going concern.  Hyperdynamics has
incurred losses since inception, resulting in cumulative losses of $69,027,000
through March 31, 2009. Hyperdynamics has historically been able to raise
capital from debt or equity sources to finance our activities. The world
economic crisis, the depressed price for oil, and the depressed price of our
stock have weakened our ability to continue to raise new capital in this manner.
These combined conditions raise substantial doubt about Hyperdynamics’ ability
to continue as a going concern.





Hyperdynamics’
plan to resolve the uncertainty about our ability to continue as a going concern
includes the sale of our producing oil and gas properties in Louisiana, cost
reductions, and monetization of our oil and gas exploration assets by attracting
a joint venture or financial partner to participate in our exploration of our
oil and gas concession offshore Guinea.





On April
1, 2009, Hyperdynamics executed a contract to sell its revenue generating oil
and gas assets in Louisiana, which for accounting purposes will be treated as
three separate sales (See Note 11. Subsequent Events).  The proceeds
from these sales will provide short-term liquidity and additional time for
management to pursue its plans to monetize its Guinea oil and gas exploration
assets.  In addition, management is evaluating areas where it can
reduce costs of operations.





Management’s
plans focus primarily on obtaining well capitalized joint venture partners to
help us monetize a portion of our offshore exploration
asset.  Management is also evaluating how it can raise additional
capital to further its business operations. If management is not successful in
securing outside funding by monetizing a portion of its exploration assets or
raising additional funds, Hyperdynamics may not survive.





The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.





3.
Assets Held for Sale and Discontinued Operations





Assets
held for sale as of March 31, 2009 consist of land and a building in Trout,
Louisiana and working interest in our domestic oil and gas
properties.  Management initiated a plan to sell the assets during the
quarter ended March 31, 2009.  On April 1, 2009, management executed a
contract to sell the working interest in the oil and gas properties in a
transaction that will be treated for accounting purposes as three sales (See
Note 11. Subsequent Events).  The liabilities associated with the
working interest in the oil and gas properties, asset retirement obligations
(see Note 4. Asset  Retirement Obligations) will be transferred with
the assets. The sales are expected to be complete within one
year.  The scheduled payments are as follows: $1,030,000 by May 7,
2009; $820,000 in August 2009, and $820,000 in November
2009.   As of May 11, 2009, Hyperdynamics had received
$1,030,000.  Hyperdynamics estimates that, once all the sales are
complete, the total gain, prior to post-closing adjustments, will be
approximately $3,000,000.


6
 Table of Contents





These
assets, which are associated with the HYDR, or domestic, business segment are a
disposal group and constitute a component of the entity with distinguishable
cash flows.  Accordingly, these assets and cash flows and results of
operations associated with these assets are classified as discontinued
operations in the accompanying Consolidated Statements of Operations,
Consolidated Balance Sheets, and Consolidated Statements of Cash Flows in all
periods presented.





The
properties are carried at the lower of net book value or net realizable value as
of March 31, 2009.  The following assets and liabilities have been
segregated and classified as assets held for sale and liabilities associated
with assets held for sale, as appropriate, in the Consolidated Balance Sheets as
of March 31, 2009 and June 30, 2008.  The amounts presented below do
not include cash, receivables, or payables, which will be retained by
Hyperdynamics.





March
      31, 2009
                      
                      
                      June
      30, 2008Assets
      held for saleLand
      and building, net of accumulated depreciation of $7,000 and
      $5,000
                      
                      $
                      43,000
                      
                      
                      $
                      45,000Oil
      and gas equipment
                      
                      
                      -
                      
                      
                      
                      31,000Oil
      and Gas Properties, net of accumulated depletion of
      $1,278,000 and $758,000 and impairment of $2,303,000 and
      $0
                      
                      
                      326,000
                      
                      
                      
                      3,156,000Assets
      held for sale and discontinued operations
                      
                      $
                      369,000
                      
                      
                      $
                      3,232,000Liabilities
      related to assets held for sale and discontinued
operationsAsset
      retirement obligations
                      
                      $
                      31,000
                      
                      
                      $
                      99,000Liabilities
      related to assets held for sale and discontinued operations-
      noncurrentAsset
      retirement obligations
                      
                      $
                      673,000
                      
                      
                      $
                      631,000





The
following summarized financial information relates to the assets held for sale,
which are a disposal group consisting of the domestic Oil and Gas properties of
Hyperdynamics.  The disposal group has distinguishable cash
flows.  Accordingly it is a component of the entity and its results
have been segregated from continuing operations and reported as discontinued
operations in all periods presented.   Because of Hyperdynamics’
net loss, there is no provision for income taxes.





Three Months Ended March
31,
                      
                      
                      Nine Months Ended March 31,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Revenues
                      
                      $
                      343,000
                      
                      
                      $
                      793,000
                      
                      
                      $
                      2,074,000
                      
                      
                      $
                      1,637,000Costs
      and Expenses:Lease
      operating costs
                      
                      
                      (312,000
                      )
                      
                      
                      (601,000
                      )
                      
                      
                      (1,131,000
                      )
                      
                      
                      (2,104,000
                      )Depreciation,
      depletion, and amortization
                      
                      
                      (32,000
                      )
                      
                      
                      (196,000
                      )
                      
                      
                      (528,000
                      )
                      
                      
                      (389,000
                      )Accretion
                      
                      
                      (20,000
                      )
                      
                      
                      (5,000
                      )
                      
                      
                      (60,000
                      )
                      
                      
                      (15,000
                      )Impairment
      of oil and gas properties
                      
                      
                      -
                      
                      
                      
                      (7,000
                      )
                      
                      
                      (2,303,000
                      )
                      
                      
                      (7,000
                      )Gain
      on settlement of debt
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      144,000
                      
                      
                      
                      10,000Other
      expenses
                      
                      
                      (16,000
                      )
                      
                      
                      (175,000
                      )
                      
                      
                      (85,000
                      )
                      
                      
                      (486,000
                      )Loss
      from discontinued operations
                      
                      $
                      (37,000
                      )
                      
                      $
                      (191,000
                      )
                      
                      $
                      (1,889,000
                      )
                      
                      $
                      (1,354,000
                      )





4.
Oil and Gas Properties





Unevaluated
properties





We
incurred $342,000 of geological and geophysical costs for our Guinea concession
during the nine months ended March 31, 2009.  The costs were incurred
as follows: payroll and consulting costs directly associated with geophysical
and geological evaluation of our Guinea concession of $139,000; costs associated
with our 2008 seismic shoot of $54,000; costs associated with geological studies
of $78,000; professional expenses of $50,000 and geophysical and geological
software costs of $21,000.  These amounts include payroll and
consulting costs directly associated with geophysical and geological evaluation
of our Guinea concession of $7,000; professional expenses of $7,000 and
geophysical and geological software of $7,000 incurred during the three months
ended March 31, 2009.


7
 Table of Contents


Evaluated
properties





Additions
to the full cost center during the nine months ended March 31, 2009 included
exploratory drilling costs of $67,000, lease acquisition costs of $6,000 and
development costs of $6,000. As of December 31, 2008, based on the ceiling test,
an impairment of $2,303,000 on our oil and gas properties was indicated, and the
net value of the properties after impairment and depletion was
$349,000.  As of March 31, 2009, after the effect of the impairment,
we had capitalized $326,000 in oil and gas properties, which is net of depletion
of $30,000 and is subject to the full cost ceiling test for
impairment.  As of March 31, 2009, no impairment was indicated on our
oil and gas properties.





During
July 2008, Hyperdynamics had assigned 15% of its working interest in its
Magee-smith leases to Rabb Resources (“Rabb”), who became the operator of the
wells.  In return for the working interest assignment, Hyperdynamics
received a $1,600,000 credit from Rabb toward the $4,000,000 Promised Funds
commitment related to certain oil and gas properties acquired from Rabb in July
2007.  Hyperdynamics has fully satisfied the Promised Fund
commitment.  No gain or loss was recognized for this transaction in
accordance with full cost rules.





During
July 2008, Hyperdynamics assigned 100% of its working interest in the Kelly and
Norris leases to a third party buyer.  There were no proved reserves
assigned to these properties.  The buyer assumed the asset retirement
obligation associated with these properties, $86,000, in connection with the
transaction.  No gain or loss was recognized for this transaction in
accordance with full cost rules.





The sales
proceeds will be collected from a 10% overriding royalty interest retained by
Hyperdynamics in the Kelly and Norris leases.  If the buyer does not
produce revenues from these properties, they are not required to pay the
purchase price.  Accordingly, we did not recognize a receivable from
the sale of the working interest.  We will recognize revenues, if any,
when they occur.





As of
March 31, 2009, management initiated a plan to sell the domestic oil and gas
properties and as of that date they were included in the caption “Assets held
for sale - discontinued operations” (See Note 2. Assets Held for Sale and
Discontinued Operations).  On April 1, 2009, Hyperdynamics executed a
contract to sell these properties (See Note 11. Subsequent Events).




5.
Asset Retirement Obligations





The
following is a reconciliation of our asset retirement obligation
liability:





Asset
      retirement obligation, June 30, 2008
                  
                  $
                  730,000Liabilities
      sold
                  
                  
                  (86,000
                  )Accretion
      of discount
                  
                  
                  60,000Asset
      retirement obligation, March 31, 2009
                  
                  $
                  704,000





As of
March 31, 2009, the oil and gas properties that give rise to these asset
retirement obligations were held for sale (See Note 2. Assets Held for Sale and
Discontinued Operations).  Accordingly, the asset retirement
obligations are classified as Liabilities related to assets held for sale and
discontinued operations. On April 1, 2009, Hyperdynamics executed a contract to
sell the properties associated with the liabilities (See Note 11. Subsequent
Events).  In conjunction with the sales, the buyer will assume the
liabilities.





6.  Short-term
Notes Payable and Long-term Debt





Short-term
notes payable and long-term debt consist of:








March 31,
      2009
                      
                      
                      June
      30, 2008Installment
      notes payable
                      
                      $
                      28,000
                      
                      
                      $
                      118,000YA
      GlobalGross
                      
                      
                      -
                      
                      
                      
                      2,000,000Unamortized
      discount
                      
                      
                      -
                      
                      
                      
                      (402,000
                      )Net
                      
                      
                      -
                      
                      
                      
                      1,598,000Convertible
      debenturesGross
                      
                      
                      2,684,000
                      
                      
                      
                      -Unamortized
      discount
                      
                      
                      (555,000
                      )Net
                      
                      
                      2,129,000
                      
                      
                      
                      -Total
      short term notes payable and long term debt
                      
                      
                      2,157,000
                      
                      
                      
                      1,716,000Less:
      current portion
                      
                      
                      (425,000
                      )
                      
                      
                      (401,000
                      )Carrying
      value of notes as of March 31, 2009
                      
                      $
                      1,732,000
                      
                      
                      $
                      1,315,000





8




Installment
notes payable





In
addition to installment notes payable as of June 30, 2008, during the nine
months ended March 31, 2009, Hyperdynamics financed three insurance policies for
an aggregate amount of $32,000. Hyperdynamics is obligated to pay installments
on these notes consisting of principal and interest of approximately $4,000 per
month until May 2009.





YA
Global





On
February 6, 2008, Hyperdynamics entered into a financing agreement (the
“Financing Agreement”) with YA Global Investments, LP (“YA Global”). Under the
Financing Agreement, we issued $2,000,000 of notes, whose carrying value (net of
discount of $402,000) as of June 30, 2008 was $1,598,000.





The notes
carried an annual interest rate equal to 20% and matured on July 6, 2010. The
notes provided for monthly principal installments of $50,000 beginning on
September 1, 2008 and monthly interest installments. The notes were redeemable
at our option at an earlier date provided we paid an “early redemption premium”
of 15% of the principal amount being redeemed.





Hyperdynamics
repaid the notes on September 12, 2008.  At the time of payoff,
Hyperdynamics paid $1,950,000 principal remaining on the debt and a prepayment
penalty of $271,000.  Hyperdynamics recognized accelerated discount
amortization of $364,000 related to the payoff of these
notes.  Accordingly, Hyperdynamics recognized a loss on extinguishment
of debt of $635,000.





Sale
of Convertible Debentures





On
September 12, 2008, Hyperdynamics sold $5,000,000 convertible debentures,
convertible at $2.25 per share, to an investor in a registered direct
offering.  Placement costs totaled $403,000, with $300,000 payable in
cash and $103,000 payable with 66,000 shares of Hyperdynamics common stock, and
the lender received $30,000 for legal costs.  This resulted in net
cash proceeds of $4,670,000.   The investor also received
warrants to purchase 1,111,111 shares of common stock at $3.00 per share and
warrants to purchase 1,111,111 shares of common stock at $2.75 per
share.





Hyperdynamics
has evaluated the warrants for derivative accounting consideration under SFAS
133 and EITF 00-19. We have concluded that the warrants meet the criteria for
classification in stockholders' equity under SFAS 133 and EITF 00-19. Therefore,
derivative accounting is not applicable for the warrants.





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 fair
value of the investment was allocated among the debentures and warrants as
follows:





Relative
      fair value of $2.75 warrant
                      
                      $
                      947,000Relative
      fair value of $3.00 warrant
                      
                      
                      939,000Relative
      fair value of note payable
                      
                      
                      3,114,000





The fair
value of the warrant was calculated using the Black-Scholes method, assuming
volatility of 113%, expected term of 7 years, and a risk adjusted interest rate
of 3.45%.





We
analyzed the convertible debentures for the existence of a beneficial conversion
feature under EITF 98-5 and 00-27.  The intrinsic value of the
beneficial conversion feature was $486,000.





The
relative fair value of the warrants, the intrinsic value of the beneficial
conversion feature, and $30,000 of financing costs were recorded as a discount
to the notes. Deferred financing costs consisting of cash and stock payments to
the placement agent for the transaction totaled $403,000.  These
discounts and deferred financing costs, totaling $2,805,000, were amortized and
were to be charged to interest expense over the life of the notes using the
effective interest rate method. The effective interest rate on the notes,
including the discount, was 62% per annum.


9
 Table of Contents


The
debentures carried an annual interest rate equal to 10% with a maturity date of
September 12, 2012. The notes were to be repaid in monthly installments of
$139,000 beginning September 12, 2009.  Interest installments were
also to be paid quarterly on the outstanding balance. Interest installments
commenced on October 1, 2008. At Hyperdynamics’ option, the notes could be
redeemed within 120 days of the closing date, September 12, 2008, and payment of
an “early redemption premium” of 10% of the principal amount being
redeemed.   After 120 days, the investor was to be paid a
“make-whole” payment with each conversion or redemption of 40% of the principal
less interest previously paid.    Hyperdynamics had the
option to pay, if certain conditions were met, the principal installments,
interest payments, and make-whole payments using Hyperdynamics common stock
using a formula based on current market prices of the stock.





The
investors in the convertible debentures previously received 2,424,243 warrants
to purchase common stock with an exercise price of $3.27 per share as part of a
registered direct offering of our common stock completed in May
2008.  The provisions of the warrants include a reduction in the
exercise price in the event stock or convertible securities were issued with a
lower exercise price. By agreement with the investors, the exercise price of the
warrants was reduced from $3.27 to $3.00. The modification resulted in a deemed
dividend to the warrant holders of $29,000.





During
October 2008, the above investor converted $563,000 of debenture principal to
common stock, resulting in the issuance of 250,000 shares of common stock and
payment of cash of $89,000 for a portion of the associated make whole
interest.  The remaining make whole interest of $133,000 associated
with these conversions was added to the debenture principal in November 2008 as
discussed below.





On
November 20, 2008, Hyperdynamics entered into an amendment agreement with the
same debenture investor.  The agreement reduced the conversion price
of the debentures to $1.65 per share, reduced the exercise price of the
2,424,243 warrants issued during May 2008 to $2 per share, and reduced the
exercise price of the 1,111,111 Series A and Series B warrants each issued
during  September 2008 to $2.25 per share and $2.50 per share,
respectively. The amendment also provided a new interest payment option, payment
in kind, by which interest, including any ‘make whole’ interest due, could be
added to the outstanding principal amount of the Debenture (the “Accreted
Payments”). Any Accreted Payments will increase the Monthly Redemption Amount
(as such term is defined in the Debenture), accrue only ordinary interest of 10%
per annum and, upon conversion or redemption, will not be subject to any further
make-whole interest payable due pursuant to the Debenture.





The
investors also agreed, until the earlier of January 12, 2009 or such time that
the trading price of our common stock exceeds $2 per share, not to convert more
than $3,300,000 principal amount of the Debentures in the
aggregate.





Hyperdynamics
analyzed the transaction based on EITF 96-19 and concluded that the amendment
resulted in a substantial modification of terms of the
debt.  Accordingly, Hyperdynamics recognized the amendment as an
extinguishment of debt which provides that the fair value of the assets given to
the investor to refund the existing debt will be compared with the carrying
value of the existing debt and a gain or loss on extinguishment be recognized.
Gain on extinguishment of $56,000 from the transaction was computed as
follows:





Carrying value of the debentures
immediately prior to modification:




Face
      value of debentures issued on September 12, 2008
                  
                  $
                  5,000,000Less:
         Discount related to warrants
                  
                  
                  (1,886,000)Discount
      related to conversion feature
                  
                  
                  (486,000)Discount
      related to financing costs
                  
                  
                  (30,000)Subtotal
                  
                  
                  2,598,000Less:    Conversions
                  
                  
                  (563,000)Add:    
      Amortization of discount
                  
                  
                  422,000Carrying
      value of debentures at November 20, 2008
                  
                  $
                  2,457,000





Gain
on debt extinguishment:


Fair
      value of debenture principal on the date of modification
                      
                      $
                      1,963,000Repriced
      May 2008 warrants
                      
                      
                      31,000Repriced
      September 2008 warrants
                      
                      
                      75,000Fair
      value of assets given
                      
                      
                      2,069,000Less:    Carrying
      value of debt prior to modification
                      
                      
                      (2,457,000)Unamortized
      deferred financing charge
                      
                      
                      332,000Gain
      on debt extinguishment
                      
                      $
                      (56,000)




10
 Table of Contents


As a
consequence of the extinguishment, the post modification debt is recorded at its
fair value and the resulting discount is amortized as interest expense over the
term of the debentures.  At November 20, 2008, the discount of the
post modification debt was $2,474,000, which represents the difference between
the stated principal of $4,438,000 and the fair value of the post modification
debt and the fair value of warrants that were repriced in conjunction with the
debt modification.  The post modification debt has an effective
interest rate of 29% per annum.  The fair value of the post
modification debt was determined based upon the value of the conversion feature
in the debentures using the Company’s stock price on November 20, 2008 of $0.73
per share.





The fair
value of the warrant repricings associated with the modification was computed as
follows:





The price
of the warrants, originally issued in May 2008, was reduced from $3.00 to
$2.00.  The modification resulted in a fair value of $31,000, which
was calculated using the Black-Scholes method. The following table details the
significant assumptions used to compute the fair market value of the
modification to these warrants:





Before
                  
                  
                  AfterRisk-free
      interest rate
                  
                  
                  2.43
                  %
                  
                  
                  2.43
                  %Dividend
      yield
                  
                  
                  0
                  %
                  
                  
                  0
                  %Volatility
      factor
                  
                  
                  111.62
                  %
                  
                  
                  111.62
                  %Remaining
      term (years)
                  
                  
                  6.47
                  
                  
                  
                  6.47





The price
of the warrants, originally issued in September 2008, was reduced from $2.75 and
$3.00 to $2.25 and $2.50, respectively. The modification resulted in a fair
value of $75,000, which was calculated using the Black-Scholes method. The
following table details the significant assumptions used to compute the fair
market value of the warrant modification:





Before
                  
                  
                  AfterRisk-free
      interest rate
                  
                  
                  2.43
                  %
                  
                  
                  2.43
                  %Dividend
      yield
                  
                  
                  0
                  %
                  
                  
                  0
                  %Volatility
      factor
                  
                  
                  112.32
                  %
                  
                  
                  112.32
                  %Remaining
      term (years)
                  
                  
                  6.78
                  
                  
                  
                  6.78








The total
fair value of the warrant modifications discussed above of $106,000 is included
in the discount on the post modification debt, with the offsetting credit
recorded as additional paid in capital.





In
conjunction with the extinguishment, the investor converted $3,254,000 of
debenture principal into Hyperdynamics’ common stock, resulting in issuance of
1,972,222 shares of common stock.  Voluntary conversion make whole
interest which was due and payable as of November 20, 2008 of $1,416,000 was
accreted to the debenture principal. This includes the amount outstanding prior
to the extinguishment of $133,000 and the amount that became due upon the
conversion in the amendment agreement, which totaled $1,283,000. Additionally,
interest due on the debentures at December 31, 2008 of $48,000 was accreted to
principal.





The
accelerated discount relating to the converted debentures of $1,814,000 was
immediately recognized as a reduction of additional paid in capital. The
amortization of discount through December 31, 2008 was $19,000.





During
the three months ended March 31, 2009, an additional $46,000 of principal was
converted to 27,778 shares of common stock.  Conversion make whole
interest of $17,000 due upon the conversion was accreted to
principal.  Accelerated discount related to the conversion of $10,000
was immediately recognized as a reduction of additional paid in
capital.  In addition, the interest payment for the quarter ended
March 31, 2009, $65,000, was accreted to principal.





The
following table details the change in the carrying value of the debentures from
November 20, 2008 through March 31, 2009:





Principal
                  
                  
                  Discount
                  
                  
                  NetAt
      November 20, 2008
                  
                  $
                  4,438,000
                  
                  
                  $
                  (2,474,000
                  )
                  
                  $
                  1,964,000Interest
      accreted to principal
                  
                  
                  1,546,000
                  
                  
                  
                  -
                  
                  
                  
                  1,546,000Debenture
      conversion
                  
                  
                  (3,300,000
                  )
                  
                  
                  1,824,000
                  
                  
                  
                  (1,476,000
                  )Amortization
      of discount
                  
                  
                  -
                  
                  
                  
                  95,000
                  
                  
                  
                  95,000At
      March 31, 2009
                  
                  $
                  2,684,000
                  
                  
                  $
                  (555,000
                  )
                  
                  $
                  2,129,000




11
 Table of Contents


The
changes to the principal on this debt changed the Monthly Redemption
Amount.  As of March 31, 2009, the Monthly Redemption Amount, the
first payment of which is due on September 12, 2009, is $75,000.





Future
minimum debt payments





Future
minimum debt payments on installment debts and debentures for the twelve months
ending March 31:





2009
                    
                    $
                    533,0002010
                    
                    
                    901,0002011
                    
                    
                    902,0002012
                    
                    
                    376,000Total
      minimum payments required
                    
                    $
                    2,712,000





7.
Shareholders’ Equity




Stock
issuances





Fiscal
year 2009





The
following table describes the stock issued in each of the three months
ended:




March 31, 2009
                            
                            
                            December 31, 2008
                            
                            
                            September 30, 2008shares
                            
                            
                            $
                            
                            
                            shares
                            
                            
                            $
                            
                            
                            shares
                            
                            
                            $Shares
      issued for:Services
      (1)
                            
                            
                            634,021
                            
                            
                            $
                            232,000
                            
                            
                            
                            465,366
                            
                            
                            $
                            417,000
                            
                            
                            
                            326,771
                            
                            
                            $
                            513,000Accounts
      payable (2)
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            109,839
                            
                            
                            
                            173,000Placement
      costs (3)
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            66,000
                            
                            
                            
                            103,000
                            
                            
                            
                            -
                            
                            
                            
                            -Debenture
      conversion (4)
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            250,000
                            
                            
                            
                            563,000
                            
                            
                            
                            -
                            
                            
                            
                            -Debenture
      conversion (5)
                            
                            
                            27,778
                            
                            
                            
                            46,000
                            
                            
                            
                            1,972,222
                            
                            
                            
                            3,254,000
                            
                            
                            
                            -
                            
                            
                            
                            -Preferred
      stock conversion(6)
                            
                            
                            321,884
                            
                            
                            
                            7,000
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Total
      shares issued
                            
                            
                            983,683
                            
                            
                            $
                            285,000
                            
                            
                            
                            2,753,588
                            
                            
                            $
                            4,337,000
                            
                            
                            
                            436,610
                            
                            
                            $
                            686,000





(1) Stock
issued from the stock and stock option plan for services.  Shares were
valued using the market close share price on the date of
grant.





(2) Stock
issued from the stock and stock option plan for for services which had been
rendered  and accrued during the year ending June 30, 2008. The stock
was valued using the market closing price on the date of
grant.





(3) Stock
associated with placement costs for a convertible debenture (See Note
6).





(4) Stock
associated with the conversion of debentures at a conversion price of
$2.25.





(5) Stock
associated with the conversion of debentures at a conversion price of
$1.65.





(6) Stock
associated with the conversion of  41 shares of Series B Preferred
stock and payment of dividends accrued on the stock.


12
 Table of Contents


Fiscal
year 2008





The
following table describes the stock issued in each of the three months
ended:


March 31, 2008
                          
                          
                          December 31, 2007
                          
                          
                          September 30, 2007#
      shares
                          
                          
                          $
                          
                          
                          #
      shares
                          
                          
                          $
                          
                          
                          #
      shares
                          
                          
                          $Shares
      issued for:Services
      (1)
                          
                          
                          136,077
                          
                          
                          $
                          181,000
                          
                          
                          
                          59,654
                          
                          
                          $
                          130,000
                          
                          
                          
                          46,669
                          
                          
                          $
                          139,000Accounts
      payable (2)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          30,000
                          
                          
                          
                          95,000
                          
                          
                          
                          -
                          
                          
                          
                          -Cashless
      warrant exercise by related party  (3)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          738,251
                          
                          
                          
                          -Cashless
      warrant exercise (4)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          119,389
                          
                          
                          
                          -Warrant
      exercise for cash
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          544,000
                          
                          
                          
                          544,000
                          
                          
                          
                          -
                          
                          
                          
                          -Cash
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          48,160
                          
                          
                          
                          135,000
                          
                          
                          
                          -
                          
                          
                          
                          -Oil
      and gas property (5)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          100,000
                          
                          
                          
                          285,000In
      conjunction with note payable (6)
                          
                          
                          94,899
                          
                          
                          
                          80,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Preferred
      stock conversion (7)
                          
                          
                          200,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Total
      shares issued
                          
                          
                          430,926
                          
                          
                          $
                          261,000
                          
                          
                          
                          681,814
                          
                          
                          $
                          904,000
                          
                          
                          
                          1,004,309
                          
                          
                          $
                          424,000








(1) Stock
issued from the stock and stock option plan for services. Shares were valued
using the market close price on the date of grant.





(2) Stock
issued from the stock and stock option plan for for services which had been
rendered  and accrued during the year ending June 30, 2007. The stock
was valued using the market closing price on the date of
grant.





(3)
738,251 shares of common stock issued upon the cashless exercise by two officers
of our Company of warrants, with a strike price of $0.23, to purchase 800,000
shares of common stock.





(4)
119,389 shares of common stock issued upon the cashless exercise by an investor
of warrants, with a strike price of $0.50, to purchase 142,000 shares of common
stock





(5) Stock
issued in connection with the acquisition of the RABB oil and gas properties in
Louisiana.  The shares were valued at the closing price on date of
grant.





(6) Stock
issued to an investor in conjunction with their notes payable.





(7) Stock
issued to a related party when the entity converted 27 shares of its Series B
preferred stock to common stock.







Discount
on convertible debentures





In
September 2008, in conjunction with the sale of convertible debentures, we
issued warrants to purchase 1,111,111 shares of common stock at $3.00 per share
and warrants to purchase 1,111,111 shares of common stock at $2.75 per share.
The discount on the debt associated with the relative fair values of the
warrants of $1,886,000 and the beneficial conversion feature of $486,000 were
recorded as addition to paid in capital.  These warrants were
subsequently repriced in November  2008 (See Note 6. Short-term Notes
Payable and Long-Term Debt).





Employee
stock options





During
the nine months ended March 31, 2009, we recognized aggregate compensation
expense associated with vesting of employee stock options of $243,000. The fair
value of the options grants was determined using the Black-Scholes method (See
Note 9).





Other
items relating to equity





In
February 2009, our equity line of credit with Dutchess Capital expired and is no
longer available for use.





In July
2008, Hyperdynamics entered into a contract for 3-D seismic work offshore
Guinea. The contract is open as to scope of work and provides the price for
various activities associated with the work.  We will finalize the
scope of work when we determine the offshore area to be covered by the seismic
shoot. We estimate the cost of the 3-D seismic work to be approximately
$15,000,000 but the cost could increase to as high as an estimated $45,000,000
based on options we have to expand the scope of work.  The contract
provides for Hyperdynamics to issue 2,500,000 shares of common stock to the
vendor as a deposit. The value ascribed to the stock by the parties in the
contract is $6.00 per share. The 2,500,000 shares were issued during August 2008
and delivered to the vendor during October 2008. The contract provides that the
stock may be sold to pay invoices after the seismic work begins.  Any
proceeds from the sale of this stock may be applied by the direction of us to
any legitimate outstanding invoices.  Should we elect to pay cash for
the seismic work any remaining unsold stock will be returned to
us.  We may replace the stock deposit with a cash deposit at the rate
of $6 per share at any time and have the stock returned prior to it being
sold.  As of March 31, 2009, work had not commenced on this
project.  Because there is no performance commitment as of the date of
this report, there is no accounting recognition of the stock issued during the
nine months ended March 31, 2009, in accordance with EITF 00-18 governing
share-based payment to non-employees.  As a result, these shares are
not shown as issued in the accompanying financial statements.


13
 Table of Contents


In July
2008, we entered an agreement with an international law firm to support our 2006
PSC.  The agreement estimates the value of their work to be provided
from July 2008 through March 2009 at $630,000.  During July 2008, we
issued 350,000 shares of common stock valued at the market price on the stock
grant date of $543,000 as a payment on the new engagement and for approximately
$132,000 of fees that had been incurred in the past.   We charged
$411,000 of compensation costs associated with this stock grant to expense in
the quarter ended September 30, 2008.  The contract provides for a
“true-up” six months after the date the shares were issued.  Under the
provision, the firm will receive additional shares if the market value of the
stock has declined in value, such that the total market value of the stock
received at the true up date will be $700,000. The true up provision constitutes
an obligation to issue a variable number of shares based upon a fixed monetary
value; accordingly, the provisions of SFAS 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity, apply to
the stock grant.  If the true up were to occur on March 31, 2009,
Hyperdynamics would issue an additional 1,771,000 shares under the terms of the
agreement based upon the total scope of work in the agreement. We recorded
additional expense of $585,000 during the nine month period ended March 31,
2009, which is included in selling, general and administrative expense and is
reflected on the balance sheet as Variable share issuance obligation. The value
of the obligation was calculated based on the market price of our common stock
on March 31, 2009. The agreement does not specify a cap on the number of shares
that may be issued.





The
contract provides for bonuses of an additional 350,000 shares of common stock
upon the achievement of certain performance criteria.





8.
Warrant repricings





In
addition to the warrant repricings discussed above in Note 6. Short-term Notes
Payable and Long-Term Debt, in September 2008, the Company modified the terms of
certain warrants to purchase common stock issued during May 2008 as a result of
warrants issued to the same investor in conjunction with the sale of convertible
debentures.    The price of the warrants was reduced from
$3.27 to $3.00.  The modification resulted in a deemed dividend of
$29,000, which was calculated using the Black-Scholes method. The following
table details the significant assumptions used to compute the fair market value
of the modification to these warrants:





Before
                  
                  
                  AfterRisk-free
      interest rate
                  
                  
                  3.45
                  %
                  
                  
                  3.45
                  %Dividend
      yield
                  
                  
                  0
                  %
                  
                  
                  0
                  %Volatility
      factor
                  
                  
                  111.88
                  %
                  
                  
                  111.88
                  %Remaining
      term (years)
                  
                  
                  6.7
                  
                  
                  
                  6.7





9.
Stock Options and Warrants





Options
granted to employees





During
the nine months ended March 31, 2009, Hyperdynamics granted options to purchase
577,500 shares of common stock to employees.   The options had
exercise prices ranging from $0.33 to $2.00, exercise term of two to three years
with immediate vesting and a fair value on the date of grant totaling
$187,000.  The weighted average fair value of the employee stock
options granted during the nine months ended March 31, 2009 was
$0.33.





During
the nine months ended March 31, 2009, Hyperdynamics recognized $56,000
compensation cost from an option award that had been granted in a prior
year.  Accordingly, the aggregate compensation cost recognized for
options vested during the nine months ended March 31, 2009 was
$243,000.  At March 31, 2009, there was $50,000 of unrecognized
compensation costs related to non-vested share-based compensation arrangements
granted under our stock and stock option plan.





The
following table details the significant assumptions used in the Black-Scholes
model to compute the fair market values of employee stock options granted during
the nine months ended March 31, 2009:





Risk-free
      interest rate
                  
                  
                  0.40
      – 2.63
                  %Dividend
      yield
                  
                  
                  0
                  %Volatility
      factor
                  
                  
                  86.91
      – 118.02
                  %Expected
      life (years)
                  
                  
                  1 -
      1.5





Expected
volatility is based solely on historical volatility of our common stock over the
period commensurate with the expected term of the stock options.  We
rely solely on historical volatility as we do not have traded
options.  The expected term calculation for stock options is based on
the simplified method as described in the Securities and Exchange Commission
Staff Accounting Bulletin number 107.  We use this method because we
do not have sufficient historical information on exercise patterns to develop a
model for expected term.  The risk-free interest rate is based on the
U. S. Treasury yield in effect at the time of grant for an instrument with a
maturity that is commensurate with the expected term of the stock
options.  The dividend yield rate of zero is based on the fact that we
have never paid cash dividends on our common stock and we do not intend to pay
cash dividends on our common stock.


14
 Table of Contents




The
      following table summarizes employee stock options issued and outstanding
      for the nine months ended March 31, 2009:
                  
                  Options
                  
                  
                  Weighted
      average exercise priceOutstanding
      at year end June 30, 2008
                  
                  
                  2,238,696
                  
                  
                  
                  3.45Granted
                  
                  
                  577,500
                  
                  
                  
                  1.47Exercised
                  
                  
                  -
                  
                  
                  
                  -Forfeited
                  
                  
                  (143,989
                  )
                  
                  
                  1.62Expired
                  
                  
                  (480,000
                  )
                  
                  
                  1.34Outstanding
      at March 31, 2009
                  
                  
                  2,192,207
                  
                  
                  $
                  3.51








Options
      outstanding and exercisable as of March 31, 2009:Exercise Price
                                
                                Outstanding
      Number of Shares
                                
                                Remaining  Life
                                
                                Exercisable
       Number of SharesLess
      than $1
                                
                                37,500
                                
                                1 -
      2 years
                                
                                37,500Less
      than $1
                                
                                60,000
                                
                                2 -
      3 years
                                
                                60,000$1.00
      - 1.49
                                
                                122,500
                                
                                1 -
      2 years
                                
                                122,500$1.00
      - 1.49
                                
                                60,000
                                
                                2 -
      3 years
                                
                                60,000$1.50
      - 1.99
                                
                                85,000
                                
                                1
      year or less
                                
                                85,000$1.50
      - 1.99
                                
                                75,000
                                
                                1 -
      2 years
                                
                                75,000$1.50
      - 1.99
                                
                                30,000
                                
                                2 -
      3 years
                                
                                30,000$2.00
      - 2.49
                                
                                283,447
                                
                                1
      year or less
                                
                                283,447$2.00
      – 2.49
                                
                                130,000
                                
                                1 -
      2 years
                                
                                130,000$2.00
      - 2.49
                                
                                360,000
                                
                                2 -
      3 years
                                
                                360,000$2.50
      - 2.99
                                
                                105,000
                                
                                1
      year or less
                                
                                105,000$2.50
      – 2.99
                                
                                138,760
                                
                                1 -
      2 years
                                
                                138,760$3.00
      – 3.50
                                
                                40,000
                                
                                1
      year or less
                                
                                40,000$3.00
      – 3.50
                                
                                65,000
                                
                                1 -
      2 years
                                
                                65,000$5.00
                                
                                300,000
                                
                                2 -
      3 years
                                
                                -$10.00
                                
                                300,000
                                
                                2 -
      3 years
                                
                                -2,192,207
                                
                                
                                
                                1,592,207




The
exercisable options had no intrinsic value at March 31, 2009.





The
following table summarizes common stock warrants issued and outstanding for the
nine months ended March 31, 2009:


Warrants
                          
                          
                          Weighted
      average exercise priceOutstanding
      at year June 30, 2008
                          
                          
                          11,717,692
                          
                          
                          
                          2.54Granted
                          
                          
                          9,292,930
                          
                          
                          
                          2.56Exercised
                          
                          
                          -
                          
                          
                          
                          -Cancelled
                          
                          
                          (7,070,708
                          )
                          
                          
                          3.05Expired
                          
                          
                          (3,596,783
                          )
                          
                          
                          2.42Outstanding
      at March 31, 2009
                          
                          
                          10,343,131
                          
                          
                          $
                          2.24


15
 Table of Contents




Warrants
      outstanding and exercisable as of March 31, 2009:Exercise Price
                                          
                                          Outstanding
      Number  of Shares
                                          
                                          Remaining
      Life
                                          
                                          Exercisable
       Number of Shares$1.65
                                          
                                          666,666
                                          
                                          5
      years
                                          
                                          666,666$1.65
                                          
                                          3,480,000
                                          
                                          6
      years
                                          
                                          3,480,000$2.00
                                          
                                          2,424,243
                                          
                                          6
      years
                                          
                                          2,424,243$2.25
                                          
                                          1,111,111
                                          
                                          7
      years
                                          
                                          1,111,111$2.50
                                          
                                          1,111,111
                                          
                                          7
      years
                                          
                                          1,111,111$4.00
                                          
                                          1,500,000
                                          
                                          6
      years
                                          
                                          1,500,000$5.00
                                          
                                          50,000
                                          
                                          3
      years
                                          
                                          -10,343,131
                                          
                                          
                                          
                                          10,293,131





At March
31, 2009, there was $28,000 of unrecognized compensation expense associated with
the outstanding warrants.  The exercisable warrants had no intrinsic
value at March 31, 2009.




During
the nine months ended March 31, 2008, Hyperdynamics granted 885,000 options to
employees.   The options had exercise prices ranging from $1.18
to  $3.01, expected exercise terms ranging from 1 to 1.5 years,
vesting dates ranged from immediate to August 3, 2008, and a fair value on the
date of grant totaling $964,000.  The weighted average fair value of
the employee stock options granted during the nine months ended March 31, 2008
was $1.09.
 
 The
aggregate compensation cost recognized for the share-based compensation during
the nine months ended March 31, 2008 was $1,042,000.
 
 The
following table details the significant assumptions used in the Black-Scholes
model to compute the fair market values of employee stock options
granted:
 
 2008Risk-free
      interest rate
                    
                    
                    2 -
      5
                    %Dividend
      yield
                    
                    
                    0
                    %Volatility
      factor
                    
                    
                    75
      - 110
                    %Expected
      life (years)
                    
                    
                    1 -
      1.5
 
 Expected
volatility is based solely on historical volatility of our common stock over the
period commensurate with the expected term of the stock options.  We
rely solely on historical volatility as we do not have traded
options.  The expected term calculation for stock options is based on
the simplified method as described in the Securities and Exchange Commission
Staff Accounting Bulletin number 110.  We use this method because we
do not have sufficient historical information on exercise patterns to develop a
model for expected term.  The risk-free interest rate is based on the
U. S. Treasury yield in effect at the time of grant for an instrument with a
maturity that is commensurate with the expected term of the stock
options.  The dividend yield rate of zero is based on the fact that we
have never paid cash dividends on our common stock and we do not intend to pay
cash dividends on our common stock.
 
 The
following table summarizes employee stock options issued and
outstanding:
  Options
                      
                      
                      Weighted
      average exercise price
                      
                      
                      Aggregate
      intrinsic value
                      
                      
                      Weighted
      average remaining contractual life (years)Outstanding
      at year end June 30, 2007
                      
                      
                      1,609,999
                      
                      
                      
                      3.89
                      
                      
                      $
                      -
                      
                      
                      
                      2Granted
                      
                      
                      885,000
                      
                      
                      
                      2.47Exercised
                      
                      
                      -
                      
                      
                      
                      -Forfeited
                      
                      
                      (99,629
                      )
                      
                      
                      2.86Expired
                      
                      
                      (30,000
                      )
                      
                      
                      1.00Outstanding
      at March 31, 2008
                      
                      
                      2,365,370
                      
                      
                      $
                      3.44
                      
                      
                      $
                      68,000
                      
                      
                      
                      2
  16
  Options
outstanding and exercisable as of March 31, 2008:
 
 Exercise
      Price
                                          
                                          Outstanding
      Number of Shares
                                          
                                          Remaining  Life
                                          
                                          Exercisable
                                            Number
      of Shares$1.00
      - 1.49
                                          
                                          
                                          370,000
                                          
                                          1
      year or less
                                          
                                          
                                          370,000$1.00
      - 1.49
                                          
                                          
                                          70,000
                                          
                                          3
      years
                                          
                                          
                                          70,000$1.50
      - 1.99
                                          
                                          
                                          40,000
                                          
                                          1
      year
                                          
                                          
                                          40,000$1.50
      - 1.99
                                          
                                          
                                          45,000
                                          
                                          2
      years
                                          
                                          
                                          45,000$1.50
      - 1.99
                                          
                                          
                                          30,000
                                          
                                          3
      years
                                          
                                          
                                          30,000$2.00
      - 2.49
                                          
                                          
                                          195,000
                                          
                                          1
      year or less
                                          
                                          
                                          195,000$2.00
      – 2.49
                                          
                                          
                                          359,999
                                          
                                          2
      years
                                          
                                          
                                          359,999$2.00
      - 2.49
                                          
                                          
                                          115,000
                                          
                                          3
      years
                                          
                                          
                                          115,000$2.50
      - 2.99
                                          
                                          
                                          40,000
                                          
                                          1
      year or less
                                          
                                          
                                          40,000$2.50
      – 2.99
                                          
                                          
                                          105,000
                                          
                                          2
      years
                                          
                                          
                                          105,000$2.50
      – 2.99
                                          
                                          
                                          290,371
                                          
                                          3
      years
                                          
                                          
                                          290,371$3.00
      – 3.50
                                          
                                          
                                          40,000
                                          
                                          2
      years
                                          
                                          
                                          40,000$3.00
      – 3.50
                                          
                                          
                                          65,000
                                          
                                          3
      years
                                          
                                          
                                          65,000$5.00
                                          
                                          
                                          300,000
                                          
                                          3
      years
                                          
                                          
                                          -$10.00
                                          
                                          
                                          300,000
                                          
                                          3
      years
                                          
                                          
                                          -2,365,370
                                          
                                          
                                          
                                          
                                          1,765,370
 
 At March
31, 2008, there was $136,000 of unrecognized compensation costs related to
non-vested share-based compensation arrangements granted under the
Plan.
 
 The
following table summarizes common stock warrants issued and outstanding as of
March 31, 2008:
 
 Warrants
                  
                  
                  Weighted
      average exercise price
                  
                  
                  Aggregate
      intrinsic value
                  
                  
                  Weighted
      average remaining contractual life (years)Outstanding
      at year June 30, 2007
                  
                  
                  10,112,783
                  
                  
                  
                  2.46
                  
                  
                  $
                  -
                  
                  
                  
                  4Granted
                  
                  
                  1,094,000
                  
                  
                  
                  1.50Exercised
                  
                  
                  (1,401,640
                  )
                  
                  
                  .55Cancelled
                  
                  
                  (628,360
                  )
                  
                  
                  2.20Expired
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at March 31, 2008
                  
                  
                  9,176,783
                  
                  
                  $
                  2.66
                  
                  
                  $
                  116,250
                  
                  
                  
                  4
  17
  Warrants
outstanding and exercisable as of March 31, 2008:
 
 Exercise
      Price
                              
                              Outstanding
      Number of Shares
                              
                              Remaining
      Life
                              
                              Exercisable
      Number of Shares$.25
                              
                              
                              125,000
                              
                              1
      year or less
                              
                              
                              125,000$2.00
                              
                              
                              550,000
                              
                              5
      years
                              
                              
                              550,000$2.40
                              
                              
                              3,480,000
                              
                              7
      years
                              
                              
                              3,480,000$2.50
                              
                              
                              3,471,783
                              
                              1
      year or less
                              
                              
                              3,471,783$4.00
                              
                              
                              1,500,000
                              
                              7
      years
                              
                              
                              1,500,000$5.00
                              
                              
                              50,000
                              
                              3
      years
                              
                              
                              -9,176,783
                              
                              
                              
                              
                              9,126,783
 
 At March
31, 2008, there was $28,000 of unrecognized compensation expense associated with
the outstanding warrants.  Cash proceeds received for the exercise of
warrants during the nine months ended March 31, 2008 was $544,000.
 
 10.
Cost Reimbursement





In July
2007, Hyperdynamics received $130,000 as a reimbursement of legal costs incurred
during fiscal 2006 and 2007 in a lawsuit with Trendsetter Investors
LLC.  The reimbursement was recorded as a reduction of legal costs
relating to nine months ended March 31, 2009 and it is included in selling,
general and administrative expense.





11.
Subsequent Events





During
April 2009, we granted options to purchase 292,500 shares to employees and
directors in accordance with their compensation packages. The fair value of the
options was $42,000 based upon the Black-Scholes valuation model.





During
April 2009, Hyperdynamics issued 356,931 shares of common stock for services
valued using the market close price on the date of grant at
$85,000.





On April
1, 2009, Hyperdynamics executed a contract to sell its working interest in its
oil and gas properties in Louisiana.  Under the terms of the contract,
the properties will be sold in three groups.  The first group will be
irrevocably assigned to the buyer and the second and third group will be
revocably assigned to the buyer upon payment of $1,030,000, such payment being
received by the Company on May 7, 2009.  The buyer will receive all
revenues and will pay all expenses associated with all three groups of
properties as of the date of the assignment.  The second group will be
irrevocably assigned to the buyer when Hyperdynamics receives payment of
$820,000, which is due during August 2009 and the third group will be
irrevocably assigned to the buyer when Hyperdynamics receives payment of
$820,000, which is due during November 2009.  If the second and third
payments are not timely received, Hyperdynamics has the option to repurchase the
related properties in the groups for a nominal fee.  The income or
loss associated with each group of properties will be attributable for
accounting purposes to Hyperdynamics until the sales proceeds are collected;
this income or loss will be treated as an adjustment to the purchase price and
accordingly to the realized gain or loss on sale of assets. Hyperdynamics will
recognize the gain or loss on the sales of the properties as each payment is
received and each group of properties is irrevocably assigned to the
buyer.





18
 Table of Contents




12.
Segment Information





Reportable
segments




Hyperdynamics
has two reportable segments: SCS Corporation ("SCS") and our domestic operations
("HYDR"). SCS is engaged in oil and gas exploration activities pertaining to
offshore Guinea, West Africa. HYDR was historically engaged in oil and gas
exploration, development, and production activities in Louisiana, USA.
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, 2009 and
June 30, 2008 and income statement data about Hyperdynamics' reportable segments
and corporate overhead for the three and nine months ended March 31, 2009 and
2008:










SCS
                              
                              
                              HYDR
                              
                              
                              Corporate
                              
                              
                              TotalSegment
      assetsAs
      of March 31, 2009
                              
                              $
                              7,844,000
                              
                              
                              $
                              804,000
                              
                              
                              $
                              260,000
                              
                              
                              $
                              8,908,000As
      of June 30, 2008
                              
                              
                              7,590,000
                              
                              
                              
                              3,774,000
                              
                              
                              
                              1,586,000
                              
                              
                              
                              12,950,000Nine
      months ended March 31, 2009:Revenues
      from external customers
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Depreciation,
      depletion and amortization
                              
                              
                              73,000
                              
                              
                              
                              -
                              
                              
                              
                              27,000
                              
                              
                              
                              100,000Loss
      from operations
                              
                              
                              (3,438,000
                              )
                              
                              
                              -
                              
                              
                              
                              (1,913,000
                              )
                              
                              
                              (5,351,000
                              )Loss
      from discontinued operations (2)
                              
                              
                              -
                              
                              
                              
                              (1,889,000
                              )
                              
                              
                              -
                              
                              
                              
                              (1,889,000
                              )Expenditures
      for long-lived assets (1)
                              
                              
                              347,000
                              
                              
                              
                              78,000
                              
                              
                              
                              -
                              
                              
                              
                              425,000Three
      months ended March 31, 2009:Revenues
      from external customers
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Depreciation,
      depletion and amortization
                              
                              
                              24,000
                              
                              
                              
                              -
                              
                              
                              
                              9,000
                              
                              
                              
                              33,000Loss
      from operations
                              
                              
                              (467,000
                              )
                              
                              
                              -
                              
                              
                              
                              (589,000
                              
                              
                              
                              (1,056,000
                              )Loss
      from discontinued operations (2)
                              
                              
                              -
                              
                              
                              
                              (37,000
                              )
                              
                              
                              -
                              
                              
                              
                              (37,000
                              )Expenditures
      for long-lived assets (1)
                              
                              
                              21,000
                              
                              
                              
                              6,000
                              
                              
                              
                              -
                              
                              
                              
                              27,000Nine
      months ended March 31, 2008:Revenues
      from external customers
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Depreciation,
      depletion and amortization
                              
                              
                              61,000
                              
                              
                              
                              -
                              
                              
                              
                              31,000
                              
                              
                              
                              92,000Loss
      from operations
                              
                              
                              (2,912,000
                              )
                              
                              
                              -
                              
                              
                              
                              (2,890,000
                              )
                              
                              
                              (5,802,000
                              )Loss
      from discontinued operations
                              
                              
                              -
                              
                              
                              
                              (1,354,000
                              )
                              
                              
                              -
                              
                              
                              
                              (1,354,000
                              )Expenditures
      for long-lived assets (1)
                              
                              
                              938,000
                              
                              
                              
                              2,500,000
                              
                              
                              
                              14,000
                              
                              
                              
                              3,452,000Three
      months ended March 31, 2008:Revenues
      from external customers
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Depreciation,
      depletion and amortization
                              
                              
                              26,000
                              
                              
                              
                              -
                              
                              
                              
                              11,000
                              
                              
                              
                              37,000Loss
      from operations
                              
                              
                              (714,000
                              )
                              
                              
                              -
                              
                              
                              
                              (840,000
                              )
                              
                              
                              (1,554,000
                              )Loss
      from discontinued operations
                              
                              
                              
                              
                              
                              
                              (191,000
                              )
                              
                              
                              
                              
                              
                              
                              (191,000
                              )Expenditures
      for long-lived assets (1)
                              
                              
                              643,000
                              
                              
                              
                              631,000
                              
                              
                              
                              -
                              
                              
                              
                              1,274,000








(1) Expenditures
for long-lived assets includes non cash items.


(2) Includes
impairment of oil and gas properties of $2,303,000.





19
 Table of Contents


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




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 10-Q 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 oil and gas
exploration and production 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.




Overview





Our
corporate mission is to provide energy for the future by exploring for,
developing new, and re-establishing pre-existing sources of energy
worldwide.  Through our domestic and international business segments,
we historically produced oil in Louisiana, USA and we explore for oil in Guinea,
West Africa.





Domestic
Operations





During
the quarter ended March 31, 2009, we committed to a plan to sell our working
interest in all our producing oil and gas properties in Louisiana,
USA.  As of April 1, 2009, we had entered into a contract to sell
those properties.





International
Operations





On
September 22, 2006, our wholly owned subsidiary, SCS Corporation signed a
Production Sharing Contract (the “2006 PSC”) with the Republic of Guinea. The
2006 PSC gives us exclusive rights to explore, develop, and produce the
petroleum resources in an area of approximately 31,000 square miles off the
coast of Guinea.  Developments of our work on the 2006 PSC over the
nine months ended March 31, 2009 include the following:





·
            During
      the quarter ended September 30, 2008, we interpreted 2008 2-D seismic,
      which had been acquired during the quarter ended June 30, 2008. Our
      geological and geophysical staff continues to evaluate the
      data.  We also negotiated a contract with a contractor to
      acquire up to 4,100 square kilometers of 3-D seismic data.  We
      believe that the 3-D seismic data will provide us with a portfolio of
      drillable prospects. See Item 1A – Risk Factors in our Form 10-K for the
      year ended June 30, 2008.





·
            During
      the nine months ended March 31, 2009, our geological and geophysical staff
      is conducting planning activity associated with acquiring 3-D seismic
      data.





·
            During
      the nine months ended March 31, 2009, we continued to provide technical
      presentations to potential joint venture
  partners.





·
            During
      the quarter ended March 31, 2009, we began additional geological and
      geophysical analysis to enhance our understanding of the prospects and the
      features of our concession.





·
            During
      the quarter ending June 30, 2009, we will begin to reprocess and analyze
      vintage geological and geophysical that was acquired in the 1970’s in
      order to enhance our understanding of the regional
  profile.








In
December 2008, the President of Guinea, President Lansana Conte, died and a
group, the National Council for Democracy and Development (“CNDD”), attained
power in Guinea.  The CNDD has organized a new
government.  Hyperdynamics believes its contract rights will be
honored by the new government and has management personnel in-country in Guinea
to monitor events and to communicate with the new government.








RESULTS
OF OPERATIONS





Based on
the factors discussed below for each segment and for the corporate overhead, the
net loss attributable to common shareholders, which includes a provision for
preferred stock dividends,


·
            Decreased
      $603,000, or 32%, from $(1,880,000), or $(0.03) per share during the three
      months ended March 31, 2008 to $(1,277,000), or $(0.02) per share during
      the three months ended March 31,
2009.


·
            Increased
      $2,978,000, or 41%, from $(7,293,000), or $(0.13) per share during the
      nine months ended March 31, 2008 to $(10,271,000), or $(0.17) per share
      during the nine months ended March 31,
2009.


20
 Table of Contents


Reportable
segments




Hyperdynamics
has two reportable segments: our international operations in Guinea (“SCS”)
and our domestic Louisiana operations (“HYDR”). SCS is engaged in oil and gas
exploration activities pertaining to offshore Guinea, West
Africa.   HYDR was historically engaged in oil and gas
exploration and production activities in Louisiana, USA. 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





Domestic
Operations ("HYDR")





As of
March 31, 2009, the oil and gas properties owned in Louisiana, USA, are
classified as held for sale and the results of operations for the properties are
classified as discontinued operations for all periods presented.  The
following table summarizes selected financial information about these
discontinued operations:





Three
      months ended March 31,
                    
                    
                    Increase
                    
                    
                    %
                    
                    
                    Nine
      months ended
                      March 31,
                    
                    
                    Increase2009
                    
                    
                    2008
                    
                    
                    (decrease)
                    
                    
                    Change
                    
                    
                    2009
                    
                    
                    2008
                    
                    
                    (Decrease)
                    
                    
                    %
      ChangeProduction
      dataGross
      barrels sold
                    
                    
                    13,497
                    
                    
                    
                    12,651
                    
                    
                    
                    846
                    
                    
                    
                    7
                    %
                    
                    
                    45,775
                    
                    
                    
                    27,519
                    
                    
                    
                    18,256
                    
                    
                    
                    66
                    %Net
      barrels sold
                    
                    
                    8,444
                    
                    
                    
                    8,123
                    
                    
                    
                    321
                    
                    
                    
                    4
                    %
                    
                    
                    28,711
                    
                    
                    
                    17,955
                    
                    
                    
                    10,756
                    
                    
                    
                    60
                    %Average
      sales price per barrel
                    
                    $
                    40.62
                    
                    
                    $
                    97.63
                    
                    
                    $
                    (57.01
                    )
                    
                    
                    (58
                    )%
                    
                    $
                    72.24
                    
                    
                    $
                    89.44
                    
                    
                    $
                    (17.20
                    )
                    
                    
                    (19
                    )%RevenuesRevenues
      from oil and  gas production
                    
                    $
                    343,000
                    
                    
                    $
                    793,000
                    
                    
                    $
                    (450,000
                    )
                    
                    
                    (57
                    )%
                    
                    $
                    2,074,000
                    
                    
                    $
                    1,606,000
                    
                    
                    $
                    468,000
                    
                    
                    
                    29
                    %Revenues
      from oilfield services
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    N/A
                    
                    
                    
                    -
                    
                    
                    
                    31,000
                    
                    
                    
                    (31,000
                    )
                    
                    
                    (100
                    )%Costs
      and ExpensesLease
      operating costs
                    
                    
                    312,000
                    
                    
                    
                    601,000
                    
                    
                    
                    (289,000
                    )
                    
                    
                    (48
                    )%
                    
                    
                    1,131,000
                    
                    
                    
                    2,104,000
                    
                    
                    
                    (973,000
                    )
                    
                    
                    (46
                    )%Depreciation,
      depletion, and amortization
                    
                    
                    32,000
                    
                    
                    
                    196,000
                    
                    
                    
                    (164,000
                    )
                    
                    
                    (84
                    )%
                    
                    
                    528,000
                    
                    
                    
                    389,000
                    
                    
                    
                    139,000
                    
                    
                    
                    36
                    %Impairment
                    
                    
                    -
                    
                    
                    
                    7,000
                    
                    
                    
                    (7,000
                    )
                    
                    
                    (100
                    )%
                    
                    
                    2,303,000
                    
                    
                    
                    7,000
                    
                    
                    
                    2,296,000
                    
                    
                    
                    N/AAccretion
                    
                    
                    20,000
                    
                    
                    
                    5,000
                    
                    
                    
                    15,000
                    
                    
                    
                    300
                    %
                    
                    
                    60,000
                    
                    
                    
                    15,000
                    
                    
                    
                    45,000
                    
                    
                    
                    300
                    %Selling,
      general and administrative expense
                    
                    
                    12,000
                    
                    
                    
                    171,000
                    
                    
                    
                    (159,000
                    )
                    
                    
                    (93
                    )%
                    
                    
                    79,000
                    
                    
                    
                    482,000
                    
                    
                    
                    (403,000
                    )
                    
                    
                    (84
                    )%Other
      expense
                    
                    
                    4,000
                    
                    
                    
                    4,000
                    
                    
                    
                    -
                    
                    
                    
                    0
                    %
                    
                    
                    (138,000
                    )
                    
                    
                    (6,000
                    )
                    
                    
                    (132,000
                    )
                    
                    
                    N/ALoss
      from discontinued operations
                    
                    
                    (37,000
                    )
                    
                    
                    (191,000
                    )
                    
                    
                    (154,000
                    )
                    
                    
                    (81
                    )%
                    
                    
                    (1,889,000
                    )
                    
                    
                    (1,354,000
                    )
                    
                    
                    (535,000
                    )
                    
                    
                    (40
                    )%





Loss from
discontinued operations changed due to the factors discussed below:


·
            Revenues
      increased due to production increases over the nine months ended March 31,
      2009; however, the drop in the price of oil created a decrease in revenue
      when comparing the three months ended March 31, 2009 to the three months
      ended March 31, 2008.


·
            Lease
      operating costs decreased due to increased efficiency and completion of
      workovers in the nine months ended March 31, 2008 which was not required
      in the nine months ended March 31,
2009.


·
            Selling,
      general and administrative costs decreased due to cost cutting
      measures.


·
            An
      impairment charge of $2,303,000 was incurred during the nine months ended
      March 31, 2009.




21
 Table of Contents


International
Operations ("SCS")





The
following table summarizes selected financial information about our
international operations:








Three
      months ended March 31,
                
                
                
                
                
                %
                
                
                Nine
      months ended March 31,
                
                
                
                
                
                %2009
                
                
                2008
                
                
                (Decrease)
                
                
                Change
                
                
                2009
                
                
                2008
                
                
                Increase
                
                
                ChangeCosts
      and ExpensesDepreciation,
      depletion, and amortization
                
                $
                24,000
                
                
                $
                26,000
                
                
                $
                (2,000
                )
                
                
                (8
                )%
                
                $
                73,000
                
                
                $
                61,000
                
                
                $
                12,000
                
                
                
                20
                %Selling,
      general and administrative expense
                
                
                443,000
                
                
                
                688,000
                
                
                
                (245,000
                )
                
                
                (36
                )%
                
                
                3,365,000
                
                
                
                2,851,000
                
                
                
                514,000
                
                
                
                18
                %Loss
      from operations
                
                
                467,000
                
                
                
                714,000
                
                
                
                (247,000
                )
                
                
                (35
                )%
                
                
                3,438,000
                
                
                
                2,912,000
                
                
                
                526,000
                
                
                
                18
                %





Loss from
operations changed due to the factors discussed below:





Depreciation
increased due to depreciation on additional assets owned as of July 1, 2008 as
compared with July 1, 2007.





Selling,
general and administrative expenses increased due to increases in professional
and consulting expenses, compensation expense, and travel expense, offset by a
decrease in costs associated with our in-country Guinea operations.





Professional and consulting
expenses was the most significant cost driver and it includes share based
payments and a variable share issuance obligation to a legal firm for consulting
and legal expenses they are performing with respect to our Guinea
concession.





Compensation expense
increased during the nine months ended March 31, 2009 because of salary and
option grants for our geological and geophysical staff, who joined our payroll
beginning in November 2007 and therefore, the associated cost was only present
for a portion of the nine months ended March 31, 2008.  However this
category decreased during the three months ended March 31, 2009 as compared with
the three months ended March 31, 2008 due to lower fair values of options
awarded and fewer options awarded.





Travel expenses increased
during the nine months ended March 31, 2009.  This category had
increased during the six months ended December 31, 2008 as compared with
December 31, 2007 because of increased travel conducted by members of our
geological and geophysical staff and travel for conferences and
training.  However, travel decreased during the three months ended
March 31, 2009 as compared with March 31, 2008 due to cost cutting
measures.





In-country costs consist of
the following expenses incurred in Guinea: advertising, lobbying, public
relations, office expense, and a misappropriation of funds as discussed in Item
4 of this quarterly report.  The in-country costs decreased
substantially, due to cost cutting measures.  During the nine months
ended March 31, 2008, we had conducted extensive public relations work in Guinea
in order to promote and maintain positive public sentiment towards Hyperdynamics
in Guinea and we reduced our expenditures for this purpose during the nine
months ended March 31, 2009.





Corporate
Overhead





The
following table summarizes selected financial information about our corporate
overhead:




Three
      months ended March 31,
                
                
                
                
                
                %
                
                
                Nine months
      ended March 31,
                
                
                
                
                
                %2009
                
                
                2008
                
                
                (Decrease)
                
                
                Change
                
                
                2009
                
                
                2008
                
                
                (Decrease)
                
                
                ChangeCosts
      and ExpensesDepreciation,
      depletion, and amortization
                
                $
                9,000
                
                
                $
                11,000
                
                
                $
                (2,000
                )
                
                
                (18
                )%
                
                $
                27,000
                
                
                $
                31,000
                
                
                $
                (4,000
                )
                
                
                (13
                )%Selling,
      general and administrative expense
                
                
                580,000
                
                
                
                829,000
                
                
                
                (249,000
                )
                
                
                (30
                )%
                
                
                1,886,000
                
                
                
                2,859,000
                
                
                
                (973,000
                )
                
                
                (34
                )%Loss
      from operations
                
                
                589,000
                
                
                
                840,000
                
                
                
                (251,000
                )
                
                
                (30
                )%
                
                
                1,913,000
                
                
                
                2,890,000
                
                
                
                (977,000
                )
                
                
                (34
                )%





Loss from
operations changed due to the factors discussed below:





Selling, general and administrative
expenses, comprised of employee related expenses, professional expenses,
reporting and other general administrative expenses, decreased during the nine
months ended March 31, 2009 when compared to nine months ended March 31, 2008.
The major drivers attributable to the decrease are reduced option grants, travel
expenses, and other general administrative expenses, offset by increases in
professional and employee expenses.


22
 Table of Contents


During
the nine months ended March 31, 2008, there were option grants for employees and
directors but these were not repeated in the comparable period in 2009. Travel
conducted for investor relations and road shows during the three and nine months
ended March 31, 2009 were considerably reduced as compared to the three and nine
months ended March 31, 2008. Further, insurance costs decreased during the three
and nine months ended March 31, 2009, primarily due to reduction in the cost of
health and commercial insurance. Professional expenses increased during the
three and nine months ended March 31, 2009 due to increased reporting
requirements and services for defending existing lawsuits.





Other
factors affecting net loss chargeable to common shareholders





In
November 2008, Hyperdynamics had settlement gains of $56,000 attributable to the
restructuring of a debenture.  In September 2008, Hyperdynamics paid
off a different debenture, which resulted in a settlement loss of
$635,000.  Thus, total settlement loss for the nine months ended March
31, 2009 was $579,000.





During
the three and nine months ended March 31, 2009, Hyperdynamics incurred interest
expense, attributable to debentures, of $160,000 and $2,379,000,
respectively.   Hyperdynamics did not have debt of this nature
during the three and nine months ended March 31, 2008.





Liquidity
and Capital Resources





Our
current ratio was 0.25 at March 31, 2009 and 1.24 to 1 at June 30, 2008. Current
liabilities as of March 31, 2009 contain several items that are payable in
stock, that are the subject of deferred payment arrangements whereby the vendor
will not get paid except out of future revenues or cash received from a joint
venture partner, or that will be assumed by others.  Variable share
issuance obligation of $585,000, dividends payable of $372,000, and dividends
payable to related party of $410,000 are payable in stock.   Accounts
payable – seismic data of $650,000 is payable only when we sell the data to
third parties or if we get cash infusion for the Guinea concession.
 Additionally, $65,000 is accrued in accounts payable to a vendor who, by
the terms of his agreement, will not be paid until we obtain funding from a
financial or joint venture partner for Guinea. Finally, Liabilities related
to assets held for sale of $31,000 will be transferred to the buyer of the
assets when the sales are complete.  This amounts to approximately
$2,113,000 of the $3,836,000 reflected in current liabilities which will not
result in a cash outflow, will not be paid until we have adequate funds to pay
them, or will be assumed by another party.  If we considered the
effect of these liabilities, our current ratio would be .57 to 1 at March 31,
2009.





Going
Concern Considerations





The
accompanying Consolidated Financial Statements have been prepared assuming
Hyperdynamics will continue as a going concern.  Hyperdynamics has
incurred losses since inception, resulting in cumulative losses of $69,027,000
through March 31, 2009. Hyperdynamics has historically been able to raise
capital from debt or equity sources to finance our activities. The world
economic crisis, the depressed price for oil, and the depressed price of our
stock have weakened our ability to continue to raise new capital in this manner.
These combined conditions raise substantial doubt about Hyperdynamics’ ability
to continue as a going concern.





Hyperdynamics’
plan to resolve the uncertainty about our ability to continue as a going concern
includes the sale of our producing oil and gas properties in Louisiana, cost
reductions, and monetization of our oil and gas exploration assets by attracting
a joint venture or financial partner to participate in our exploration of our
oil and gas concession offshore Guinea.





On April
1, 2009, Hyperdynamics executed a contract to sell its producing oil and gas
assets in Louisiana, which for accounting purposes will be treated as three
separate sales (See Note 11. Subsequent Events).  Under the terms of
the agreement, the buyer will pay $2,670,000 for the properties in three
payments of $1,030,000, which was received on May 7, 2009, $820,000 by August 7,
2009 and $820,000 by November 7, 2009.  As the funds are collected,
the proceeds will be use to pay down liabilities and to fund current
operations.  The proceeds from these sales will provide short-term
liquidity and additional time for management to pursue its plans to monetize its
Guinea oil and gas exploration assets.





Hyperdynamics
believes all payments associated with the sales contract will be made; however,
there is some collection risk associated with the transaction.  If the
buyer fails to make a required payment when due, Hyperdynamics has the right to
re-acquire some of the properties for a nominal fee.  Accordingly, if
the proceeds are not collected as contemplated, Hyperdynamics may re-acquire the
income and cash flows associated with the property being sold.





In
addition, management is evaluating areas where it can further reduce costs of
operations.


23
 Table of Contents


Management’s
plans focus primarily on obtaining well capitalized joint venture partners to
help us monetize a portion of our offshore exploration
asset.  Management is also evaluating how it can raise additional
capital to further its business operations. If management is not successful in
securing outside funding by monetizing a portion of its exploration assets or in
raising additional funds, Hyperdynamics may not survive.





Our top
corporate priority at this time is to attract a joint venture or financial
partner so that we can fund an accelerated exploration work program offshore
Guinea.  We now expect these major funds to come primarily from
selling working interest to financial partners or joint venture partners that
invest in our Guinea offshore contract area. We have identified additional
interpretive work that our geoscientists will perform over the next few
months.  With this work, and the interpretive work already performed
on the 2008 seismic data we may be able to obtain a joint venture with one or
more viable oil company operators.  We have mapped our prospects and
prepared an in-depth technical presentation and data room available for review
by potential partners under confidentiality agreements.   We have
also expanded the scope of potential partners by entering into a contingency fee
agreement with a firm that has extensive contacts in the international natural
gas industry to present the opportunity to its clients.





Liquidity
Effects of Discontinued Operations





On April
1, 2009, Hyperdynamics executed a contract to sell its producing oil and gas
properties for $2,670,000, as previously discussed.  The cash flows
from discontinued operations are separately reported in the Consolidated
Statements of Cash Flows for all periods presented.  While this
transaction will improve Hyperdynamics’ short term liquidity, it also eliminates
Hyperdynamics’ revenue source.  Accordingly, the liquidity implication
of the discontinued operations is that Hyperdynamics will require additional
funding from debt or equity sources or from a joint venture or financial partner
in our Guinea concession in order to continue operations.





Item
3. Quantitative and Qualitative Disclosures About Market
Risk





We are
exposed to various risks including energy commodity price risk, specifically,
risk associated with changing prices of oil. We expect oil prices to remain
volatile and unpredictable. If oil prices were to decline significantly,
revenues and cash flow would significantly decline, and our ability to borrow to
finance our operations could be adversely impacted.   We do not
hedge the oil commodity price risk at this time.  We believe this is
appropriate to the size and scope of our operations.





Our
functional currency is the US dollar. We have some foreign currency exchange
rate risk resulting from our in-country office in Guinea. US dollars are
accepted in Guinea and many of our purchases and purchase obligations, such as
our office lease in Guinea, are denominated in US dollars. However, our costs
for labor, supplies, and fuel could increase if the Guinea Franc appreciates
against the US dollar. We do not hedge the exposure to currency rate
changes.





Item
4. Controls and Procedures





We
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures pursuant
to Rule 13a-15 under the Securities Exchange Act of 1934 as of the end of the
period covered by this quarterly report. In the course of this evaluation, our
management considered the material weaknesses in our internal control over
financial reporting discussed below. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as a result of
this material weakness, our disclosure controls and procedures as of March 31,
2009 were not effective in ensuring that the information required to be
disclosed by us in reports filed under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC. To address the material weakness, we have
taken additional steps in an effort to ensure our consolidated financial
statements included in this quarterly report have been prepared in accordance
with accounting principles generally accepted in the United States. Accordingly,
management believes that the financial statements included in this report fairly
present in all material respects our financial condition, results of operations
and cash flows for the periods presented.





In
connection with the preparation of our Annual Report on Form 10-K for the year
ended June 30, 2008 ("Annual Report"), management assessed the effectiveness of
our disclosure controls and procedures and internal control over financial
reporting as of June 30, 2008 as more fully described in Item 9A of our Annual
Report. Based on that assessment, management identified material weaknesses in
our internal controls.  Because of these material weaknesses,
management concluded that we did not maintain effective internal control over
financial reporting as of June 30, 2008.


24
 Table of Contents


At the
end of the second quarter of 2009, our management discovered a misappropriation
of approximately $130,000 of funds from our Guinea operation.  Funds
were misappropriated during the first quarter of 2008 and during the second
quarter of 2009. Because of the method used to misappropriate the funds, the
losses were expensed during the periods in which they actually occurred. As a
result of this, management has tightened and instituted additional controls over
cash and purchasing functions in Guinea.  Management has curtailed the
employee’s accessibility to cash and is considering appropriate disciplinary
action, including and not limited to termination and restitution, from the
employee involved.  As of March 31, 2009, the employee remains
employed and his accessibility to company funds remains curtailed.





To
address the issues associated with our material weaknesses and the
misappropriation discussed above, we have made changes in our internal controls
over financial reporting in fiscal 2009 through the date of this report, and we
continue to spend a significant amount of time and effort to improve our control
environment; including our implementation of enhanced compliance policies and
procedures. We have been implementing and will aggressively continue to
implement changes that are both organizational and process-focused to improve
the control environment. The changes made through the date of this quarterly
report include, among others:





Addressing
deficiencies in the control environment as follows:





·
            Our
      country controller for Guinea, hired in September 2008, provided direct
      financial oversight and implemented policies and procedures relating to
      purchasing and budgeting functions for our operations in Guinea between
      September 2008 and December 2008;


·
            Effective
      December 31, 2008, we reduced our expenditures and implemented an imprest
      style system of funding for our Guinea operations that reduces our
      exposure to loss and fraud; as an alternate means of internal control of
      the operation;


·
            Because  the
      reduced expenditures in Guinea substantially reduced the work assigned to
      the country controller, and because the country controller has extensive
      internal audit and Sarbanes-Oxley compliance experience, re-assigned him
      the task of performing internal audit functions, documenting policies and
      procedures, and assisting with the remediation of internal control design
      gaps;


·
            Due
      to budget constraints, we reduced our staff, including two accounting
      group staff members  We re-assigned duties among the remaining
      staff in a manner designed to retain the review procedures that we had
      previously implemented; and


·
            Implementing
      policies and procedures designed to improve the overall control
      environment, such as obtaining timely acknowledgement of our Code of
      Ethics, annual re-certification of policies, conducting department
      meetings in order to communicate accounting policies and procedures, and
      implementing restrictions on users’ access to posting in the accounting
      system.





The
country controller, who had been re-assigned to perform internal audit
functions, was among the staff members cut in the reduction mentioned
above.  This did weaken the control environment in terms of
eliminating the independent internal audit function and documenting and
monitoring the effectiveness of policies and procedures.





Addressing
deficiencies in staffing and segregation of duties as follows:





·
            Augmenting
      our staff by using qualified contractors who have experience in public
      company reporting to assist in the preparation of financial statements and
      with the evaluation of and accounting for non-routine and non-systematic
      transactions; and


·
            Providing
      training to existing employees so that they can perform additional duties,
      thus improving our ability to have independent review and approval of
      financial accounting entries; and


·
            Engaging
      a competent external financial services firm to review of the quarterly
      financial reporting package and the financial statements prior to issuance
      in order to mitigate the segregation of duty issue that the CFO is
      involved in the drafting of the financial statements and cannot conduct an
      independent review.





These
organizational and process changes have improved our internal controls
environment and increased the likelihood of our identifying non-routine and
non-systematic transactions. We will continue our efforts to improve our control
environment and to focus on:





·
            Refining
      our period-end financial reporting process;
and


·
            Improving
      our policies, processes, and systems to help insure that our financial
      reporting, operational, and business requirements are met in a timely
      manner; and


·
            Strengthening
      the risk assessment process.


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 Table of Contents


Except as
described above and in our Annual Report, there have been no additional changes
in our internal control over financial reporting that occurred during the most
recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.







Part
II Other Information





Item
1. Legal Proceedings





For
information regarding our legal proceedings see the legal proceedings disclosed
in Item 3 of our most recent on Form 10-K.




Item
1A. Risk Factors





For
information regarding our risk factors see the risk factors disclosed in Item 1A
of our most recent on Form 10-K. Other than adding the risk factors below, there
have been no material changes from the risk factors previously disclosed in our
most recent Annual Report on Form 10-K.




OUR
PAST LOSSES RAISE DOUBT ABOUT OUR ABILITY TO OPERATE PROFITABLY OR CONTINUE AS A
GOING CONCERN.




The
accompanying Consolidated Financial Statements have been prepared assuming
Hyperdynamics will continue as a going concern.  Hyperdynamics has
incurred losses since inception, resulting in cumulative losses of $69,027,000
through March 31, 2009. Hyperdynamics has historically been able to raise
capital from debt or equity sources to finance our activities. The world
economic crisis, the depressed price for oil, and the depressed price of our
stock have weakened our ability to continue to raise new capital in this manner.
These combined conditions raise substantial doubt about Hyperdynamics’ ability
to continue as a going concern, as discussed in Note 2 to the unaudited
Consolidated Financial Statements.  Our plans regarding these matters
are described in Note 2.  The unaudited Consolidated Financial
Statements do not include any adjustments that might result from the outcome of
this uncertainty.




OUR
EXPECTED FUTURE LOSSES RAISE DOUBTS ABOUT OUR ABILITY TO CONTINUE AS A GOING
CONCERN UNLESS WE CAN RAISE CAPITAL





Future
events may lead to increased costs that could make it difficult for us to
succeed. To raise additional capital, we may sell additional equity securities,
or accept debt financing or obtain financing through a bank or other entity.
There is no limit as to the amount of debt we may incur. Additional financing
may not be available to us or may not be available on terms acceptable to us. If
additional funds are raised through the issuance of additional stock, there may
be a significant dilution in the value of our outstanding common stock. Our
growth is dependent on our attaining our raising capital through the sale of
stock or debt or our ability to attract a joint venture or financial partner in
our Guinea concession. There is no assurance that we will be able to raise any
equity or debt financing or that we will be able to attract a joint venture or
financial partner to invest in our Guinea concession.




NYSE
AMEX, LLC  HAS ISSUED US A LETTER THAT INFORMS US OF NON-COMPLIANCE
WITH THEIR LISTING STANDARDS




We
received a letter dated March 17, 2009 on letterhead from NYSE Regulation of the
NYSE AMEX LLC which is the exchange on which we are listed.  The
letter stated that the NYSE AMEX LLC review of our Form 10-Q for the quarter
ended December 31, 2008 indicated that we were not in compliance with NYSE AMEX
LLC continued listing requirements.  The letter indicated that we were
not in compliance with NYSE AMEX LLC Company Guide continued listing
requirements as set forth in NYSE AMEX LLC “COMPANY GUIDE” sections
1003(a)(ii)(related to stockholders’ equity of less than $4,000,000 and losses
from continued operations and net losses in three of our four most recent fiscal
years), 1003(a)(iii)(related to stockholders’ equity of less than $6,000,000 and
losses from continued operations and net losses in our five most recent years)
and 1003(a)(iv)(related to losses that are so substantial in relation to our
overall operations or our existing financial resources or financial condition
are impaired that it appears questionable, in the opinion of the NYSE AMEX LLC,
as to whether we will be able to continue operations and/or meet our obligations
as they mature.


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 Table of Contents


We
submitted a Plan on April 16, 2009 to the NYSE AMEX LLC to regain
compliance with the listing standards.  If NYSE AMEX LLC does not
approve our Plan, we may be subject to delisting proceedings and ultimately be
delisted from the exchange.  If this occurred, it is expected that our
common stock would be quoted on the Over-the-Counter Bulletin
Board.





Any such
delisting, could possibly result in





·
            An
      increase in the bid-ask spread on the
stock




·
            Reduced
      daily stock trading volume




·
            Reduction
      in the number of investors who are interested in trading our
      stock




·
            Being
      categorized as a penny stock company because of the stock price is below
      $5.00 per share and the stock is traded on the over the counter
      market.





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








In April
2009, we issued options to purchase 37,500 shares of common stock to three
directors as compensation. These options have an exercise price of $.31 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 April
2009, we issued options to purchase 105,000 shares of common stock to four
employees as compensation. These options have an exercise price of $.31 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 April
2009, we issued options to purchase 150,000 shares of common stock to an
employee as compensation. These options have an exercise price of $.24 per share
and expire in five 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 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.




Item
4. Submission of Matters to a Vote of Security
Holders




On March
31, 2009, the company held its annual shareholder meeting (1) to elect five (5)
directors; (2) to approve the potential issuance of our common stock equal to
20% or more of
outstanding common stock as of May 11, 2008 to Enable Growth Partners
LP for less than the greater of book value or market value of the common
stock as of May 11, 2008.





The
directors who were elected are Kent Watts, Harry James Briers, Roger D.
Friedberger, L. Gene Stohler, and Charles Andrews.


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 Table of Contents


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 WithheldKent
      Watts
                  57,501,511
                  9,889,355Harry
      James Briers
                  60,903,824
                  6,687,042Roger
      D. Friedberger
                  58,349,482
                  9,241,384L.
      Gene Stohler
                  60,363,568
                  7,227,298Charles
      Andrews
                  64,555,828
                  3,035,038









ITEM
2:





With
respect to the proposal to approve the potential issuance of our common stock
equal to 20% or
more of outstanding common stock as of May 11, 2008 to Enable Growth
Partners LP for less than the greater of book value or market value of the
common stock as of May 11, 2008.




Number
      of Affirmative Votes
                  Number
      of Negative Votes
                  Abstentions58,563,780
                  8,574,130
                  452,956







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.





Signatures





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





Hyperdynamics
      Corporation(Registrant)By:
                /s/ Kent WattsKent
      Watts, Chairman of the Board,Chief
      Executive Officer





Dated:
May 11, 2009





By:
                /s/ Sarah Berel-HarropSarah
      Berel-HarropChief
      Financial OfficerPrincipal
      Accounting Officer





Dated:
May 11, 2009






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