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: September 30,
                2007





or


o
            Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934: For the transition period from _______ to
                _________





Commission
      file number:      000-32490





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


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





Large Accelerated Filer
            o


Accelerated Filer
            x


Non-Accelerated Filer
            o





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







APPLICABLE
      ONLY TO CORPORATE ISSUERS


As
      of
      November 13, 2007, 55,610,025 shares of common stock, $0.001 par value, were outstanding.








Transitional
      Small Business Disclosure Format (check one): Yes o No x













Table
      of Contents








Part
                I     Financial InformationItem
                1     Financial StatementsConsolidated
                Balance Sheets at September 30, 2007 And June
                30, 2007
            2Consolidated
                Statements of Operations for the three months
                ended September 30, 2007 and 2006
            3Consolidated
                Statements of Cash Flows for the three months
                ended September 30, 2007 and 2006
            4Notes
                to Consolidated Financial
                Statements
            6Item
                2     Management's Discussion
                and Analysis of Financial Condition and Results of
                Operations
            11Item
                3     Quantitative and
                Qualitative Disclosures About Market Risk
            17Item
                4     Controls and
                Procedures
            17Part
                II     Other InformationItem
                1     Legal
                Proceedings
            18Item
                1A     Risk
                Factors
            18Item
                2     Unregistered Sales of
                Equity Securities and Use of Proceeds
            18Item
                6     Exhibits
            19Signatures
            19




***Table
            of Contents***





**HYPERDYNAMICS
      CORPORATION**


**CONSOLIDATED
      BALANCE SHEETS**


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


(Unaudited)




September 30,
            
            
            June 30,2007
            
            
            2007ASSETSCurrent
                assets:Cash
            
            $
            2,323
            
            
            $
            618Restricted
                certificate of deposit
            
            
            75
            
            
            
            75Trade
                accounts receivable, net of allowances for doubtful accounts of $4
                and
                $0
            
            
            96
            
            
            
            109Subscription
                receivable
            
            
            -
            
            
            
            5,250Deposit
                on acquisition of oil and gas assets
            
            
            -
            
            
            
            374Accounts
                receivable – related party
            
            
            2
            
            
            
            3Prepaid
                expenses and other current assets
            
            
            215
            
            
            
            196Total
                current assets
            
            
            2,711
            
            
            
            6,625Property
                and equipment, net of accumulated depreciation of $167 and
                $149
            
            
            479
            
            
            
            366Oil
                and gas properties:Evaluated
                properties, using full cost accounting, net of accumulated depreciation
                and depletion of $285 and $174
            
            
            2,249
            
            
            
            204Unevaluated
                properties excluded from amortization
            
            
            4,464
            
            
            
            4,279Other
                assets
            
            
            6
            
            
            
            6Total
                assets
            
            $
            9,909
            
            
            $
            11,480LIABILITIES
                AND SHAREHOLDERS' EQUITYCurrent
                liabilities:Installment
                debt – current portion
            
            $
            121
            
            
            $
            375Accounts
                payable and accrued expenses
            
            
            1,352
            
            
            
            747Accounts
                payable seismic data
            
            
            650
            
            
            
            650Accounts
                payable related party
            
            
            55
            
            
            
            53Stock
                payable
            
            
            95
            
            
            
            95Asset
                retirement obligation, current
            
            
            86
            
            
            
            84Dividends
                payable
            
            
            372
            
            
            
            372Dividends
                payable to related party
            
            
            270
            
            
            
            245Total
                current liabilities
            
            
            3,001
            
            
            
            2,621Asset
                retirement obligation, non current
            
            
            122
            
            
            
            44Installment
                debt, non current
            
            
            25
            
            
            
            -Deferred
                rent
            
            
            85
            
            
            
            89Total
                liabilities
            
            
            3,233
            
            
            
            2,754Commitments
                and contingencies
            
            
            -
            
            
            
            -Shareholders'
                equity:Convertible
                preferred stock, par value $0.001; stated value $1,000; 20,000,000
                authorizedSeries
                A - 1,945 shares issued and outstanding
            
            
            -
            
            
            
            -Series
                B - 2,725 shares issued and 2,487 shares outstanding
            
            
            -
            
            
            
            -Common
                stock, $0.001 par value, 250,000,000 shares authorized; 55,520,371
                and
                54,467,902 shares issued and outstanding
            
            
            56
            
            
            
            54Additional
                paid-in capital
            
            
            60,285
            
            
            
            59,045Accumulated
                deficit
            
            
            (53,665
            )
            
            
            (50,373
            )Total
                shareholders' equity
            
            
            6,676
            
            
            
            8,726Total
                liabilities and shareholders' equity
            
            $
            9,909
            
            
            $
            11,480






(See
        accompanying notes to consolidated financial statements)





2
 ***Table
            of Contents***





**HYPERDYNAMICS
      CORPORATION**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


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


(Unaudited)




Three Months EndedSeptember 30,
            
            
            September 30,2007
            
            
            2006RevenuesOil
                and gas sales
            
            $
            314
            
            
            $
            325Costs
                and expensesLease
                operating expense
            
            
            854
            
            
            
            176Accretion
                expense
            
            
            5
            
            
            
            -Depreciation,
                depletion and amortization from oil and gas properties
            
            
            113
            
            
            
            22Other
                operational costs
            
            
            152
            
            
            
            119Selling,
                general and administrative – related party
            
            
            29
            
            
            
            -Selling,
                general and administrative
            
            
            2,452
            
            
            
            1,997Gain
                from sale of assets
            
            
            -
            
            
            
            (8
            )Depreciation,
                administrative properties
            
            
            22
            
            
            
            7Total
            
            
            3,627
            
            
            
            2,313Loss
                from operations
            
            
            (3,313
            )
            
            
            (1,988
            )Other
                income (expense)Interest
                expense
            
            
            (2
            )
            
            
            (870
            )Interest
                income
            
            
            38
            
            
            
            23Gain
                on settlement of debt
            
            
            10
            
            
            
            -Total
                other income (expense)
            
            
            46
            
            
            
            (847
            )Net
                loss
            
            
            (3,267
            )
            
            
            (2,835
            )Preferred
                stock dividend to related party
            
            
            (25
            )
            
            
            (27
            )Net
                loss chargeable to common shareholders
            
            $
            (3,292
            )
            
            $
            (2,862
            )Basic
                and diluted loss per common share
            
            $
            (0.06
            )
            
            $
            (0.06
            )Weighted
                average shares outstanding
            
            
            55,330,976
            
            
            
            47,348,990






(See
        accompanying notes to consolidated financial statements)


3
 ***Table
            of Contents***





**HYPERDYNAMICS
      CORPORATION**


**Consolidated
      Statements of Cash Flows**


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


(Unaudited)





Three
                months ended
              September
                30,2007
            
            
            2006CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                loss
            
            $
            (3,267
            )
            
            $
            (2,835
            )Adjustments
                to reconcile net income to net cash provided by (used in) operating
                activitiesDepreciation,
                depletion and amortization
            
            
            135
            
            
            
            29Accretion
            
            
            5
            
            
            
            -Common
                stock issued for services
            
            
            139
            
            
            
            101Employee
                stock options
            
            
            682
            
            
            
            811Gain
                on settlement of debt
            
            
            (10
            )
            
            
            -Gain
                on sale of assets
            
            
            -
            
            
            
            (8
            )Bad
                debt expense
            
            
            4
            
            
            
            31Amortization
                of discount and financing costs on convertible debenture
            
            
            -
            
            
            
            747Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            9
            
            
            
            (66
            )Accounts
                receivable – related party
            
            
            1
            
            
            
            -Other
                current assets
            
            
            (19
            )
            
            
            (34
            )Accounts
                payable and accrued expenses
            
            
            548
            
            
            
            135Deferred
                rent
            
            
            (4
            )
            
            
            33Net
                cash used in operating activities
            
            
            (1,777
            )
            
            
            (1,056
            )CASH
                FLOWS FROM INVESTING ACTIVITIESInvestment
                in oil & gas properties
            
            
            (1,549
            )
            
            
            (20
            )Purchase
                of property and equipment
            
            
            (105
            )
            
            
            (105
            )Proceeds
                from the sale of assets
            
            
            -
            
            
            
            36Net
                cash used in investing activities
            
            
            (1,654
            )
            
            
            (89
            )CASH
                FLOWS FROM FINANCING ACTIVITIESStock
                sold for cash
            
            
            135
            
            
            
            -Collection
                of stock subscription receivable
            
            
            5,250
            
            
            
            -Proceeds
                from convertible notes
            
            
            -
            
            
            
            1,820Proceeds
                from installment debt
            
            
            47
            
            
            
            57Payments
                on installment debt
            
            
            (296
            )
            
            
            (39
            )Net
                cash provided by financing activities
            
            
            5,136
            
            
            
            1,838Net
                increase in cash
            
            
            1,705
            
            
            
            693Cash
                at beginning of period
            
            
            618
            
            
            
            3,435Cash
                at end of period
            
            $
            2,323
            
            
            $
            4,128






(See
          accompanying notes to consolidated financial
          statements)





4
 ***Table
            of Contents***





**HYPERDYNAMICS
      CORPORATION**


**Consolidated
      Statements of Cash Flows (Continued)**


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


(Unaudited)





Three months ended
              September 30,2007
            
            
            2006SUPPLEMENTAL
                DISCLOSURESInterest
                paid in cash
            
            $
            2
            
            
            $
            264Income
                taxes paid in cash
            
            
            -
            
            
            
            -NON-CASH
                TRANSACTIONSConversion
                of notes payable to common stock
            
            $
            -
            
            
            $
            2,475Accounts
                payable for oil and gas properties
            
            
            59
            
            
            
            -Preferred
                stock dividend requirement
            
            
            25
            
            
            
            27Note
                payable for fixed assets
            
            
            30
            
            
            
            -Debt
                discount on convertible debt
            
            
            -
            
            
            
            450Stock
                issued for purchase of working interest in oil and gas
                properties
            
            
            285
            
            
            
            -





(See
          accompanying notes to consolidated financial
          statements)


5
 ***Table
            of Contents***





**H****YP****ERDYNAMICS
      CORPORATION**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


(Unaudited)





**1.   Basis
      of Presentation**





The
      unaudited consolidated financial statements of Hyperdynamics Corporation
      ("Hyperdynamics") have been prepared in accordance with accounting principles generally
      accepted in the United States and the rules of the Securities and Exchange
      Commission ("SEC"), and should be read in conjunction with the audited financial
      statements and notes thereto contained in Hyperdynamics' latest Annual Report
      filed with the SEC on Form 10-K for the year ended June 30, 2007. 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, 2007, as reported in
      the
      Form 10-K, have been omitted.





Certain
      amounts in the 2007 financial statements have been reclassified to conform
      with
      the 2008 financial statement presentation.








**2.
      Oil and Gas Properties**





*Evaluated
      properties*





During
      the quarter ended September 30, 2007, Hyperdynamics closed on the purchase
      of
      85% working interest in various oil wells, leases, and oil and gas equipment
      in
      Louisiana, USA (“RABB properties”).  Hyperdynamics paid a total of
      $1,250,000 cash and issued 200,000 shares of common stock valued at
      $559,000.  We issued 100,000 shares of common stock in June 2007 as a
      deposit and the remaining 100,000 shares of common stock upon closing of the
      acquisition.  The estimate of the asset retirement obligation
      associated with these properties was $75,000.





Under
      the
      purchase agreement, the seller will remain the operator of the properties and
      retains a 15% working interest.  However, Hyperdynamics will pay 100%
      of all working interest costs, including work-over and new development and
      exploration costs, up to $4,000,000(“Promised Funds”).  According to
      the agreement, Hyperdynamics will invest the Promised Funds over the eighteen
      months ended December 31, 2008 in order to maximize the returns from the
      properties.  After the Promised Funds have been invested, working
      interest costs, except the cost of new drilling, will be shared pro rata
      according to the working interest percentage.  After the investment of
      the Promised Funds is completed, Hyperdynamics will continue to pay 100% of
      the
      costs of any new drilling performed on the properties.





The
      properties that were purchased are subject to overriding royalty interests
      of up
      to 27.46%.  Accordingly, Hyperdynamics’ holds net revenue interests of
      approximately 57.54% in the properties.





Other
      additions to the full cost center during the quarter ended September 30, 2007
      included the cost of drilling an exploratory well of $190,000 and the cost
      of
      improvements to production facilities at our Magee-Smith lease of
      $84,000.  As of September 30, 2007, we have capitalized $2,159,000 in
      oil and gas properties, which is subject to the full cost ceiling test for
      impairment.  At September 30, 2007, there was no impairment
      indicated.








Pro
      Forma
      Results





The
      unaudited pro forma results presented below for the three months ended September
      30, 2006 have been prepared to give effect to the purchase described above
      as if
      it had been consummated on July 1, 2006.  The unaudited pro forma
      results do not purport to represent what our results of operations actually
      would have been if this acquisition had been completed on such date or to
      project our results of operations for any future date or period.








Pro
                Forma:Revenue
            
            $
            520,000Loss
                from operations
            
            
            2,022,000Net
                loss chargeable to common shareholders
            
            
            2,896,000Loss
                per share, basic and diluted
            
            
            0.06




6
 ***Table
            of Contents***





*Unevaluated
      properties*





We
      incurred $185,000 of geological and geophysical costs for our Guinea concession
      during the quarter ended September 30, 2007.  The work included
      consulting on our Forward Exploration Program and payroll costs of $105,000,
      the
      purchase of a license to use seismic data of $45,000, the purchase of magnetic
      and gravity data for $30,000, and software used in geophysical and geological
      work of $5,000.





**3.
      Asset Retirement Obligations**





SFAS
      No. 143, “Accounting for Asset Retirement Obligations,” addresses financial
      accounting and reporting for obligations associated with the retirement of
      tangible long-lived assets and the associated asset retirement costs. This
      statement requires that the fair value of a liability for an asset retirement
      obligation be recognized in the period in which it is incurred. The associated
      asset retirement costs are capitalized as part of the carrying cost of the
      asset. The company's asset retirement obligations consist of estimated costs
      for
      dismantlement, removal, site reclamation and similar activities associated
      with
      its oil and gas properties. An asset retirement obligation and the related
      asset
      retirement cost are recorded when an asset is first drilled, constructed or
      purchased. The asset retirement cost is determined and discounted to present
      value using a credit-adjusted risk-free rate. After initial recording, the
      liability is increased for the passage of time, with the increase being
      reflected as accretion expense in the statement of operations. Subsequent
      adjustments in the cost estimate are reflected in the asset retirement
      obligation liability and the amounts continue to be amortized over the useful
      life of the related long-lived asset.





The
      following is a reconciliation of our asset retirement obligation liability
      as of
      September 30, 2007 and June 30, 2007:





**September**
              **30,
                2007**
            
            
            **June
                30,**
              **2007****(in
                Thousands)**Asset
                retirement obligation, beginning of period
            
            $
            128
            
            
            $
            12Liabilities
                incurred
            
            
            75
            
            
            
            -Revisions
                of estimates
            
            
            -
            
            
            
            115Accretion
                of discount
            
            
            5
            
            
            
            1Asset
                retirement obligation, end of period
            
            $
            208
            
            
            $
            128








**4.  Installment
      debt**





During
      the quarter ended September 30, 2007, Hyperdynamics repaid an installment note
      payable for legal settlement that was originally payable in six monthly
      installments of $40,000 each.  The original amount of the note was
      $240,000.  The noteholder accepted $230,000 in full payment of the
      note, resulting in a gain on the settlement of debt of $10,000.





During
      the quarter ended September 30, 2007, Hyperdynamics entered into an installment
      note payable in the amount of $30,000 for the purchase of a
      vehicle.  The note bears imputed interest of 10% per annum and is
      payable in installments of principal and interest of $600 per month for 60
      months and is secured by the vehicle.








**5.
      Stock Payable**





In
      June
      2007, an Investor Relations/Public Relations consultant earned 30,000 shares
      of
      common stock when a stock price target was met.  The stock payable was
      valued at $3.18, the closing stock price on the date the stock was
      earned.  The stock was issued in October 2007.








**6.
      Shareholders’ Equity**





7
 ***Table
            of Contents***





*Common
      stock issuances*





In
      July
      2007, two officers of the company received 738,251 shares of common stock upon
      the cashless exercise of 800,000 warrants that were granted in 2001, each with
      an exercise price of $0.23.





In
      July
      2007, an investor received 119,389 shares of common stock upon the cashless
      exercise of 142,000 warrants, each with an exercise price of $0.50.





In
      July
      2007, an investor purchased 48,160 shares of common stock for $135,000 cash
      when
      we exercised a put on our equity line of credit.





In
      July
      2007, a consultant received 30,000 shares of common stock valued at $89,000
      in
      exchange for services.





In
      July
      2007, three directors received 16,669 shares of common stock valued at $50,000
      in conjunction with their compensation package.





In
      August
      2007, we issued 100,000 shares of common stock in connection with the purchase
      of the RABB properties (see note 2).  The stock was valued at fair
      value or $2.85 per share.  The total value of the stock was
      $285,000.





**7.
      Stock Options and Warrants**





Hyperdynamics'
      Stock Option Plan provides for the grant of stock, stock options, or warrants
      to
      purchase common stock to directors, employees and consultants, and opportunities
      for directors, officers, employees and consultants to make purchases of stock
      in
      Hyperdynamics. The plan grants are administered by the Board of Directors or
      the
      Compensation Committee who have substantial discretion to determine which
      persons, amounts, time, price, exercise terms, and restrictions, if
      any.





*Options
      granted to employees*





During
      the quarter ended September 30, 2007, Hyperdynamics granted 520,000 options
      to
      employees.  The options had exercise prices ranging from $2.38
      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 $696,000.  Additionally, we recognized
      compensation cost for options granted during the year ended June 30, 2007 which
      had not previously vested.  The compensation cost recognized for the
      share-based compensation vested during the quarter ended September 30, 2007
      was
      $682,000.  The weighted average fair value of the employee and
      consultant stock options and warrants vested during the quarter ended September
      30, 2007 was $1.22.





The
      following table details the significant assumptions were used in the
      Black-Scholes model to compute the fair market values of employee stock options
      granted:





**2007**Risk-free
                interest rate
            
            
            5
            %Dividend
                yield
            
            
            0
            %Volatility
                factor
            
            
            90-110
            %Expected
                life (years)
            
            
            1-1.5








Summary
      information regarding options and warrants is as follows:




Options
            
            
            Weighted
              Average
              Share
                Price
            
            
            Warrants
            
            
            Weighted
              Average
              Share
                PriceOutstanding
                at year ended June 30, 2007
            
            
            1,609,999
            
            
            
            3.89
            
            
            
            10,112,783
            
            
            $
            2.46Granted
            
            
            520,000
            
            
            
            2.78
            
            
            
            
            
            
            
            -Exercised
            
            
            -
            
            
            
            -
            
            
            
            (857,640
            )
            
            
            .27Cancelled,
                expired, or forfeited
            
            
            (10,000
            )
            
            
            2.80
            
            
            
            (84,360
            )
            
            
            .30Outstanding
                at quarter ended September 30, 2007
            
            
            2,119,999
            
            
            $
            3.62
            
            
            
            9,170,783
            
            
            $
            2.69




8
 ***Table
            of Contents***




**Warrants
                outstanding and exercisable as of September 30,
                2007****Exercise Price**
            
            
            **Outstanding Number**
              **of Shares**
            
            **Remaining Life**
            
            **Exercisable**
              **Number of Shares**$
            .25
            
            
            
            125,000
            
            1
                year
            
            
            125,000$
            2.40
            
            
            
            3,480,000
            
            7
                years
            
            
            3,480,000$
            2.50
            
            
            
            544,000
            
            5
                years
            
            
            544,000$
            2.50
            
            
            
            3,471,783
            
            2
                years
            
            
            3,471,783$
            4.00
            
            
            
            1,500,000
            
            7
                years
            
            
            1,500,000$
            5.00
            
            
            
            50,000
            
            3
                years
            
            
            -9,170,783
            
            
            
            
            9,120,783






**Options outstanding and exercisable as of September 30, 2007********Exercise********Price**
            
            
            **Outstanding Number**
              **of Shares**
            
            ******Remaining********Life**
            
            **Exercisable**
              **Number of Shares**$
            1.00
                - 1.49
            
            
            
            400,000
            
            1
                year
            
            
            400,000$
            1.50
                - 1.99
            
            
            
            40,000
            
            2
                years
            
            
            40,000$
            2.00
                - 2.49
            
            
            
            155,000
            
            1
                year
            
            
            155,000$
            2.00
                – 2.49
            
            
            
            179,999
            
            2
                years
            
            
            179,999$
            2.00
                - 2.49
            
            
            
            130,000
            
            3
                years
            
            
            130,000$
            2.50
                - 2.99
            
            
            
            40,000
            
            1
                year
            
            
            40,000$
            2.50
                – 2.99
            
            
            
            155,000
            
            2
                years
            
            
            155,000$
            2.50
                – 2.99
            
            
            
            315,000
            
            3
                years
            
            
            265,000$
            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
            
            
            -2,119,999
            
            
            
            
            1,469,999







**8.
      Cost Reimbursement**





In
      July
      2007, Hyperdynamics received $130,000 as a reimbursement of legal costs we
      incurred during fiscal 2006 and 2007 in our lawsuit with Trendsetter Investors
      LLC.








**9.
      New Accounting Pronouncements**




In
      June 2006, the Financial Accounting Standards Board (FASB) issued FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
      interpretation of FASB Statement No. 109” (FIN 48). This Interpretation
      provides guidance on recognition, classification and disclosure concerning
      uncertain tax liabilities. The evaluation of a tax position requires recognition
      of a tax benefit if it is more likely than not it will be sustained upon
      examination. We adopted this Interpretation effective January 1, 2007. The
      adoption did not have a material impact on our consolidated financial
      statements.







**10.  Related
      Party Transactions**





Accounts
      receivable – related party consist of an advance to a consultant that will be
      deducted from his bills.





Accounts
      payable – related party consist of expense reimbursements payable to employees
      of $2,000 and $0 for the periods ended September 30, 2007 and June 30, 2007,
      respectively, and directors fees payable to independent directors and an officer
      in accordance with their compensation packages of $53,000 in each of the periods
      ended September 30, 2007 and June 30, 2007.





Selling,
      general and administrative – related party of $29,000 during the quarter ended
      September 30, 2007 consists of reimbursement of out of pocket expenses incurred
      by Michael Watts, the brother of the CEO, in association with his consulting
      contract.





During
      the quarter ended September 30, 2007, two officers of the company received
      738,251 shares of common stock upon the cashless exercise of 800,000 warrants
      with an exercise price of $0.23 per share.





9
 ***Table
            of Contents***





**11.
      Subsequent Events**





In
      October 2007, we issued 24,654 shares of common stock to three directors in
      accordance with their compensation packages to pay directors fees of
      $53,000.  We also issued 35,000 shares of common stock valued at
      $76,000 to a consultant for services rendered, and 30,000 shares of common
      stock
      valued at $95,000 to a consultant for services rendered.





In
      October 2007, two officers of the company and three independent directors were
      granted options to purchase 105,000 shares of common stock in accordance with
      their compensation packages.  The options have a value of $118,000
      based upon the Black-Sholes valuation method.





In
      November 2007, SCS hired a new Vice President and Chief
      Geophysicist.  In conjunction with the employment agreement, the
      employee received options to purchase a total of 410,000 shares of common stock
      that vest 50,000 on November 1, 2007 and 30,000 at the end of each quarter
      during the three year employment term. The options to purchase 50,000 shares
      of
      common stock have a value of $42,000 based upon the Black-Sholes valuation
      method.







**12.
      Segment Information**





Reportable
      segments


Hyperdynamics
      has two reportable segments: SCS Corporation ("SCS") and our domestic Louisiana
      operations ("HYDR"). SCS is engaged in oil and gas exploration activities
      pertaining to offshore Guinea, West Africa. HYDR is 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 September 30, 2007 and
      June
      30, 2007 and income statement data about Hyperdynamics' reportable segments
      and corporate overhead for the three months ended September 30, 2007 and
      2006:








**SCS**
            
            
            **HYDR**
            
            
            **Corporate**
            
            
            **Total****Segment
                assets**As
                of September 30, 2007
            
            $
            4,786
            
            
            $
            2,610
            
            
            $
            2,513
            
            
            $
            9,909As
                of June 30, 2007
            
            
            4,467
            
            
            
            804
            
            
            
            6,209
            
            
            
            11,480Three
                months ended September 30, 2007Revenues
                from external customers
            
            
            -
            
            
            
            314
            
            
            
            -
            
            
            
            314Depreciation,
                depletion and amortization from oil and gas properties
            
            
            -
            
            
            
            113
            
            
            
            -
            
            
            
            113Depreciation,
                administrative properties
            
            
            12
            
            
            
            -
            
            
            
            10
            
            
            
            22Loss
                from operations
            
            
            (1,152
            )
            
            
            (823
            )
            
            
            (1,338
            )
            
            
            (3,313
            )Expenditures
                for long-lived assets
            
            
            279
            
            
            
            1,738
            
            
            
            11
            
            
            
            2,028Three
                months ended September 30, 2006Revenues
                from external customers
            
            
            -
            
            
            
            325
            
            
            
            -
            
            
            
            325Depreciation,
                depletion and amortization from oil and gas properties
            
            
            -
            
            
            
            22
            
            
            
            -
            
            
            
            22Depreciation,
                administrative properties
            
            
            3
            
            
            
            -
            
            
            
            4
            
            
            
            7Loss
                from operations
            
            
            (545
            )
            
            
            (129
            )
            
            
            (1,314
            )
            
            
            (1,988
            )Expenditures
                for long-lived assets
            
            $
            8
            
            
            $
            12
            
            
            $
            105
            
            
            $
            125




10
 ***Table
            of Contents***





**CAUTIONARY
      STATEMENT ON FORWARD-LOOKING INFORMATION**





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








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





Overview





We
      are
      currently performing geological and geophysical work relating to the acreage
      secured in our September 22, 2006 Production Sharing Contract (the “2006 PSC”)
      with the Republic of Guinea. The 2006 PSC gives us exclusive rights to explore
      and develop approximately 31,000 square miles off the coast of Guinea. However,
      certain provisions of the contract require us to surrender 64% (approximately
      20,000 square miles) of the contract area upon the passage of a “Project of
      Law”, a Presidential Decree, and a Supreme Court ruling. We would retain a
      priority non-exclusive right, to be defined in the future, to participate in
      the
      development of the surrendered contract area. Although the 2006 PSC is a legally
      binding contact under Guinea’s 1986 Petroleum Code, the process of passing a
      law, obtaining a Presidential Decree and a Supreme Court ruling effectively
      codifies the 2006 PSC into a new Guinea law in and of itself.  Whether
      these things are accomplished or not is entirely up to the Guinea
      government.  We are proceeding with our work under the 2006 PSC in any
      respect. Furthermore, we expect, through the priority rights granted in the
      2006
      PSC, to continue our participation in any surrendered contract area and to
      retain exclusive rights in the remaining 36% (approximately 11,000 square miles)
      of the contract area.





It
      is our
      vision that, as we succeed with our work offshore Guinea, we help our
      shareholders and at the same time have a dramatic impact on a small country.
      Our
      Chairman and Chief Executive Officer founded American Friends of Guinea (“AFG”),
      an organization exempt from income taxation under Section 501(C)3 of the United
      States Internal Revenue Code, in 2006 with the purpose of providing relief
      and
      medical aid helping to free the people of Guinea from unnecessary
      suffering.  During this quarter, AFG and Hyperdynamics’ associated
      volunteers in Guinea were able to help save the lives of hundreds of men, women,
      and many children that were stricken with cholera and quarantined in as many
      as
      eight different quarantine camps around Guinea. Knowing that small children
      can
      die within hours from this disease, the relief efforts promptly delivered and
      paid for antibiotics and glucose fluids that are vital for cholera infected
      people to survive. With the continued support of volunteers, AFG is now planning
      new water well projects to get to the source of solving this
      problem.





In
      conjunction with our exploration work in Guinea, our board of directors decided
      to bring our core technical talent in-house as opposed to relying on external
      consultants.  In November 2007, we hired a new Vice President and
      Chief Geophysicist.  This employee will be dedicated to coordinating
      our Forward Exploration Program.  We announced our Forward Exploration
      Program in August 2007. This exploration program was developed from studies
      of
      all prior year programs since 2002, together with new ideas developed by the
      geosciences team collaborating with other international exploration groups.
      In
      accordance with the work requirements of the 2006 PSC, the exploration program
      includes the new acquisition and study of aeromagnetic and gravity survey data,
      additional 2-D seismic survey data, and the acquisition and analysis of onshore
      oil seeps.





11
 ***Table
            of Contents***




At
      the
      end of the quarter ending September 30, 2007, a delegation sent by Guinea’s
      president Lansana Conte traveled to Sugar Land, Texas to meet us. Our Chief
      Executive Officer addressed the delegation at a dinner and reception we held
      to
      honor the delegation. In addition, City of Houston City Council Member M. J.
      Khan presided over a formal reception held at Houston's City Hall. We held
      in-depth technical meetings with delegation members and provided a thorough
      update on the exploration work completed to date and the Forward Exploration
      Program. Finally, the delegation was travelled to Northeast Louisiana and toured
      parts of Hyperdynamics' production operations. They returned through Galveston,
      Texas, where they toured the area where offshore rigs are brought for repairs.
      On the way back to Houston, the delegation traveled through the Texas cities
      of
      La Marque, Texas City, La Porte, Deer Park, and Pasadena. They were able to
      see
      the largest concentration of petrochemical manufacturing in the world. Going
      forward, we expect additional meetings here in the United States, official
      invitations for us to visit Guinea, and other positive actions of support and
      solidarity.




We
      realized oil production revenues of $314,000 for the quarter ended September
      2007 compared to $325,000 in oil production revenue for the quarter ended
      September 2006. When we acquired the RABB properties, we planned to evaluate
      work-over, rework, and other repairs on the wells that would increase production
      from the wells and to complete the repairs on a few wells each month until
      we
      have optimized production from the wells we acquired.  The routine
      lease operating costs, such as pumping, electricity, and other costs are
      relatively stable regardless of the production flow.  The increased
      production and revenue would thus add to our margin and cash flow without
      significant incremental costs after the cost of repair to each
      well.





During
      the quarter ended September 30, 2007, we completed work-over work,
      recompletions, salt water well repairs, and pump repairs on seven oil wells
      and
      one service well at a cost of $340,000. The average gross production for the
      quarter ended September 30, 2007 was approximately 50 barrels per
      day.  During October, production started to climb as the result of the
      aforementioned work.  As of the filing of this 10Q, we are producing
      130 barrels of oil per day, an increase of 80 barrels per day, or 160%. We
      believe this production will be sustained and continue to grow.  We
      are evaluating additional rework, work-over, or other repair projects, which,
      if
      completed, would be expensed in the period performed.  We will
      complete work of this nature if we believe the benefits in terms of additional
      production and cash flow outweigh the cost.







Results
      of Operations





Reportable
      segments


Hyperdynamics
      has two reportable segments: SCS Corporation ("SCS") and our domestic Louisiana
      operations ("HYDR"). SCS is engaged in oil and gas exploration activities
      pertaining to offshore Guinea, West Africa. HYDR is 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.





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








**SCS**
            
            
            **HYDR**
            
            
            **Corporate**
            
            
            **Total****Segment
                assets**As
                of September 30, 2007
            
            $
            4,786
            
            
            $
            2,610
            
            
            $
            2,513
            
            
            $
            9,909As
                of June 30, 2007
            
            
            4,467
            
            
            
            804
            
            
            
            6,209
            
            
            
            11,480Three
                months ended September 30, 2007Revenues
                from external customers
            
            
            -
            
            
            
            314
            
            
            
            -
            
            
            
            314Depreciation,
                depletion and amortization from oil and gas properties
            
            
            -
            
            
            
            113
            
            
            
            -
            
            
            
            113Depreciation,
                administrative properties
            
            
            12
            
            
            
            -
            
            
            
            10
            
            
            
            22Loss
                from operations
            
            
            (1,152
            )
            
            
            (823
            )
            
            
            (1,338
            )
            
            
            (3,313
            )Expenditures
                for long-lived assets
            
            
            279
            
            
            
            1,738
            
            
            
            11
            
            
            
            2,028Three
                months ended September 30, 2006Revenues
                from external customers
            
            
            -
            
            
            
            325
            
            
            
            -
            
            
            
            325Depreciation,
                depletion and amortization from oil and gas properties
            
            
            -
            
            
            
            22
            
            
            
            -
            
            
            
            22Depreciation,
                administrative properties
            
            
            3
            
            
            
            -
            
            
            
            4
            
            
            
            7Loss
                from operations
            
            
            (545
            )
            
            
            (129
            )
            
            
            (1,314
            )
            
            
            (1,988
            )Expenditures
                for long-lived assets
            
            
            8
            
            
            
            12
            
            
            
            105
            
            
            
            125




12
 ***Table
            of Contents***





Louisiana
      Operations ("HYDR")





Three
      months ended September 30, 2007 compared to three months ended September 30,
      2006.





Revenues.  Our
      revenues were $314,000 for the three months ended September 30, 2007 in
      comparison to $325,000 in 2006. The decrease of 3%, or $11,000, is attributable
      to an increase in the selling price of oil offset by a decrease in
      production.  Our revenues derive from the sale of 4,308 net barrels of
      oil at an average price of $74.00 per barrel in the three months ended September
      30, 2007. During the three months ended September 30, 2006, our revenues derived
      from the sale of 4,760 net barrels at an average price of $68.00 per barrel.
      The
      RABB properties generated about half of our total production.  Thus,
      although we experienced a decrease in production from the properties owned
      during the quarter ended September 30, 2006 due to the maturation of the wells,
      we did replace the production with production from newly acquired properties.
      Because we performed work-over and repair work on our wells during the quarter
      ended September 30, 2007, we also expect production increases in the second
      quarter from all of our properties.





Lease
      operating expense was $854,000 for the three months ended September 30, 2007
      compared to $176,000 for the three months ended September 30, 2006. The increase
      of 385%, or $678,000, is primarily attributable to expenses of operating the
      RABB properties. These expenses include significant repairs that we performed
      in
      an effort to increase future production. We worked over or reworked seven
      oil wells and one service well for a cost of $340,000. Thus, these expenses,
      while expensed this period, were incurred for the purpose of realizing a growth
      in revenue with only normal lifting costs in the future.  We also
      incurred routine lease operating expenses of $312,000 related to the operation
      of eight service wells and nineteen oil wells acquired in July
      2007.  The operating expenses on our operated properties, $176,000,
      increased due to increased payroll costs.  Lease operating expense
      also includes severance tax of $26,000 and $39,000 for the three months ended
      September 30, 2007 and the three months ended September 30, 2006, respectively.
      The decrease of 33%, or $13,000, is attributable to the decrease in oil
      production.





Accretion
      expense.  In accordance with SFAS 143, we discount the fair value
      of our asset retirement obligations and record accretion expense due to the
      passage of time using the interest method of allocation.  As of July
      1, 2007 and 2006, respectively, our asset retirement obligation was $203,000
      and
      $12,000, respectively.  This resulted in accretion expense of $5,000
      for the three months ended September 30, 2007 compared to $0 in
      2006.





Depreciation,
      depletion and amortization from oil and gas properties was $113,000 for the
      three months ended September 30, 2007 compared to $22,000 for the three months
      ended September 30, 2006. The increase of 413%, or $91,000, is due to higher
      depletion expenses because of the increase in the full cost center offset by
      a
      decrease in the depletion rate.  The full cost center increased $2.1
      Million because of the RABB acquisition, the drilling of an exploratory well,
      and improvements to the production facilities at our Magee-Smith
      lease.  The depletion rate decreased because of the reserves added
      with the purchase of the RABB properties.





13
 ***Table
            of Contents***





Other
      operational costs were $152,000 for the three months ended September 30,
      2007 compared to $119,000 for the three months ended September 30, 2006. The
      increase of 28%, or $33,000, is attributable to higher worker’s compensation
      expenses, tools & yard costs, repairs and maintenance, and other field
      related expenses.





Selling,
      general, and administrative - related party was $12,000 for the three months
      ended September 30, 2007 compared to $0 for the three months ended September
      30,
      2006. Mike Watts, the brother of Kent Watts, provides investor relations, public
      relations, financial consulting, and general advisory services in conjunction
      with a contract entered into during March 2007 for services he will deliver
      through March 2010.  The $12,000 represents reimbursements for his
      expenses as authorized by his contract.





Selling,
      general and administrative expenses were $1,000 for the three months ended
      September 30, 2007 compared to $145,000 for the three months ended September
      30,
      2006. This represents a decrease of 99%, or $144,000, due to a decrease in
      legal
      and bad debt expenses of $166,000. This includes insurance proceeds of $130,000
      to reimburse us for legal expenses we incurred in a lawsuit we settled during
      June 2007, a decrease in bad debt expense of $28,000, and a decrease in legal
      costs of $8,000. Additionally, other general and administrative expenses
      increased by $22,000 because insurance, salaries and other general expenses
      increased by $15,000 and auto expense increased by $7,000.





Loss
      from operations was $823,000 for the three months ended September 30, 2007
      compared to $129,000 for the three months ended September 30, 2006. This
      represents an increase of 538%, or $694,000, due to the factors discussed
      above.





Gain
      on settlement of debt. In July 2007, we prepaid an installment note payable
      for legal settlement that was originally payable in six monthly installments
      of
      $40,000 each.  The original amount of the note was
      $240,000.  The noteholder accepted $230,000 in full payment of the
      note, resulting in a gain on the settlement of $10,000.





Our
      expenditures for long lived assets were $1,738,000 during the three months
      ended September 2007 compared to $12,000 during the three months ended September
      30, 2006. This represents an increase of $1,726,000, or 14,383%, attributable
      to
      the purchase of the RABB properties, costs to drill an exploratory well, costs
      for improvements at the Magee-Smith lease, and the purchase of a truck in
      2007.








Guinea
      and Seismic Data Management ("SCS")





Three
      months ended September 30, 2007 compared to three months ended September 30,
      2006.





Revenues.
      We had no revenues during the three months ended September 30, 2007 and 2006.
      We
      signed a Production Sharing Contract (PSC) with the Republic of Guinea on
      September 22, 2006 and are currently focusing on our drilling and exploration
      plans in the concession delineated in the PSC.





Selling,
      general and administrative expenses were $1,140,000 for the three months
      ended September 30, 2007 compared to $542,000 for the three months ended
      September 30, 2006. This represents an increase of 110%, or $598,000,
      attributable to an increase of some administrative expenses of $811,000 offset
      by a decrease in other general expenses of $213,000. The increase is due to
      the
      following factors:





1)
      Public
      relations and marketing expenses increased by $576,000.  Our public
      relations and marketing programs promote our company and educate the people
      of
      Guinea in order to gain recognition and support throughout Guinea. The programs
      include television commercials, radio, and other types of media and journalistic
      coverage and sponsorship of entertainment events;





2)
      Travel
      expenses increased by $107,000 due to our payment of travel costs for a Guinean
      delegation to visit Houston as well as increased employee travel to
      Guinea;





3)
      Salaries and payroll taxes increased by $64,000 due in part of hiring our new
      Chief Financial Officer for SCS-Guinea, as well as to wage increases for all
      employees;





14
 ***Table
            of Contents***





4)
      Health
      care costs increased by $26,000 due to the funding of a cholera program in
      Guinea requiring medicinal supply;





5)
      Auto
      expense increased by $16,000 due to maintenance and repairs of vehicles in
      Guinea;





6)
      Office
      supplies and postage increased $8,000 due to increase in supply usage both
      in
      the US and Guinea offices; and





7)
      Other
      administrative expenses increased by $14,000.





The
      decrease of $213,000 is due to a decrease in consulting expense of $171,000,
      a
      decrease of $37,000 of professional expenses, and a decrease of other general
      expenses of $5,000.  The decrease is due to various
      factors.





1)
      Consulting expense decreased $171,000. Consulting expense consists of lobbying
      costs, which decreased by $191,000, and costs associated with industry
      visibility work of geological industry consultants, which increased
      $20,000.  The decrease in lobbying expense occurred because a payment in
      2006 to our lobbyist in Guinea was not repeated this year.  Our geological
      consultant, Geoexperts, completed work related to the completion of a farm-out
      brochure in 2007.  This work totaled about $52,000, as opposed to costs
      incurred during the quarter ended September 30, 2007 of $32,000 due to the
      winding down of our contractual commitment to their predecessor, Seacon
      Inc.





2)
      Professional expenses decreased $37,000 due to the dismissal of a lawsuit during
      the quarter ended June 30, 2007 and thus a decrease in legal expenses incurred
      in the quarter ended September 30, 2007.





3)
      Other
      general expenses decreased $5,000.





Depreciation,
      administrative properties was $12,000 for the three months ended September
      30, 2007 compared to $3,000 for the three months ended September 30, 2006.
      The
      increase of $9,000, or 300%, is due to depreciation expense on additional assets
      purchased in Guinea.





Loss
      from operations was $1,152,000 for the three months ended September 2007
      compared to $545,000 for the three months ended September 30, 2006 due to the
      factors discussed above.





Expenditures
      for long lived assets were $279,000 for the three months ended September 30,
      2007 compared to $8,000 in the three months ended September 30, 2006. This
      represents an increase of $271,000 due to geological and geophysical exploration
      work performed on the Guinea concession and purchase of vehicles for use in
      Guinea.








Corporate
      Overhead





Three
      months ended September 30, 2007 compared to three months ended September 30,
      2006.





Selling,
      general and administrative - related party was $17,000 for the three months
      ended September 30, 2007 compared to $0  for the three months ended
      September 30, 2006. Mike Watts, the brother of Kent Watts, provides investor
      relations, public relations, financial consulting, and general advisory services
      in conjunction with a contract entered into during March 2007 for services
      he
      will deliver through March 2010.  He received a warrant to purchase
      Hyperdynamics common stock as compensation. The fair value of the warrant was
      expensed in June 2007.  The $17,000 represents reimbursements for his
      expenses as authorized by his contract.





Selling,
      general and administrative expenses were $1,311,000 for the three months
      ended September 30, 2007 compared to $1,310,000 for the three months ended
      September 30, 2006. This represents an increase of approximately 0%, or $1,000,
      due to an increase in administrative expenses of $204,000 which was offset
      by a
      decrease in other administrative expenses of $203,000. The increase is due
      to
      the following factors:





1)
      Public
      and investor relation expenditures increased by $60,000;


2)
      Travel
      expenses for board meetings and investment road shows increased by
      $47,000;


3)
      Professional expenses increased by $54,000 due to increased audit fees and
      the
      cost of engaging a consultant to assist in the evaluation of our internal
      controls; and


4)
      Insurance and other general expenses increased by $43,000 due to higher general
      liability and auto insurance costs, auto expense, and salaries.





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The
      decrease in expenses includes a decrease in fees associated with the filing
      of
      registration statements and American Stock Exchange listing fees of $48,000,
      a
      decrease in office expenses of $16,000, a decrease in consulting expense of
      $11,000, and a decrease in stock-based compensation of $128,000.





Depreciation,
      administrative properties was $10,000 for the three months ended September
      2007 compared to $4,000 in the three months ended September 30, 2006. This
      represents an increase of $6,000, or 60%. The increase is due to an increase
      in
      capitalized office furniture and leasehold improvements.





Loss
      from operations was $1,338,000 for the three months ended September 2007
      compared to $1,314,000 for the three months ended September 30, 2006, due to
      the
      factors discussed above.





Interest
      expensewas
      $2,000 and $870,000 for the three months ended September 30, 2007 and 2006,
      respectively.  The interest expense for 2006 included interest payable
      on convertible debentures and accelerated amortization of the discount of
      debentures that were prepaid in the quarter ended September 30,
      2006.  There was no equivalent obligation in 2007. Accordingly,
      interest expense decreased $868,000, or 100%.





Net
      loss chargeable to common shareholders. Based on the factors discussed
      above, our net loss chargeable to common shareholders was $3,292,000 and
      $2,862,000 for the three months ended September 30, 2007 and 2006,
      respectively.  The loss per common share was $0.06 in each of the
      three months ended September 30, 2007 and 2006.





Our
      expenditures for long lived assets were $11,000 for the three months ended
      September 30, 2007 compared to $105,000 in the three months ended September
      30,
      2006. The decrease of $94,000, or 90%, is due to the purchases of office
      furniture and fixtures and leasehold improvements incurred in 2006 when we
      moved
      into our new offices, which were not repeated in 2007.





**Liquidity
      and Capital Resources**





Our
      ratio
      of current assets to current liabilities (current ratio) was .90 to 1 at
      September 30, 2007, 2.53 to 1 at June 30, 2007 and 1.30 to 1 at September 30,
      2006. Together with our available financing in place and our funds on hand,
      we
      can fund our cash operating requirements for the next twelve months, including
      our increased operations in Guinea. With the new acquisition of working interest
      properties in July 2007, we continue to work toward sustained positive operating
      cash flow and income from domestic operations including corporate overhead.
      Cash
      funds to be used for investing in our exploration work will continue to come
      from new financing activities, financial partnerships, or working interest
      deals
      with oil companies.





We
      currently maintain an equity line of credit with Dutchess Capital.  We
      have made seven puts on the equity line of credit since February 2006 in the
      aggregate amount of $1,370,225.   As of November 9, 2007, the
      remaining amount available for us to draw down on the equity line of credit
      is
      $18,629,775. The equity line of credit expires in February 2009, after which
      we
      may no longer utilize the equity line of credit.




We
      believe that we are now prepared to structure our financing to allow us to
      expand and accelerate our exploration activity offshore Guinea. While we could
      use some of the proceeds from our equity line of credit funds to fund additional
      exploration, we are evaluating other financing options. Our options include
      taking on working interest partners who want to join our exploration efforts
      or
      working with potential financing partners to obtain financial commitments to
      fund exploration. Any funds would be used on a planned and incremental
      basis on perfecting targets and drilling offshore exploration wells over the
      next few years. While we are working to structure our financing of the
      exploration of offshore Guinea, we are already taking steps to put in place
      a
      world renowned exploration team to go along with our world class asset. We
      believe the financing commitment will go hand in hand with showing that we
      have
      the technical team capable of making a discovery.  While we are
      working to obtain a financial partner and to solidify our in-house geo-technical
      capabilities, we will continue talking with oil companies under confidentiality
      agreements, continuing the possibility to bring on working interest partners
      to
      share in the risk on some of our more expensive wells to be drilled in the
      future.





In
      summary, we are considering the following options to finance our planned
      activities: a) use our equity line to support at least the minimum work
      requirements for offshore Guinea; b) negotiate and structure a deal on a
      financial commitment basis; c) negotiate one or more transactions with oil
      company partners who share in the required work and financing risk; and d)
      structure a creative financing mechanism to execute a major secondary
      financing.





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Our
      cash
      from operations has historically been a deficit. We have taken steps to invest
      in new producing properties at a time when oil prices continue to
      rise.  Since we made our July working interest acquisition, the price
      of oil has increased from approximately $70 per barrel to over $90 per barrel.
      We acquired these additional properties in July 2007 in an effort to put our
      domestic operations on a positive cash flow basis and soon in a profitable
      mode.
      Thus, we plan to spend most of the capital we raise in the future on our
      investment in our offshore oil and gas concession.








**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk**





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








**Item
      4.Controls and procedures**





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 September
      30, 2007 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 generally accepted accounting principles. 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, as amended,
      for the year ended June 30, 2007 (“Annual Report”), management assessed the
      effectiveness of our disclosure controls and procedures and internal control
      over financial reporting as of June 30, 2007 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, 2007.





To
      address the issues associated with the material weaknesses, we have made changes
      in our internal controls over financial reporting in fiscal 2008 through the
      date of this report, and we continue to spend a significant amount of time
      and
      effort to improve our control environment. We have been implementing and will
      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:





•   hiring
      a full-time certified public accountant, who joined the company in October
      2007,
      to assist with the preparation of required SEC disclosures and with our internal
      financial reporting requirements; this new employee will also assist in the
      interpretation and application of new accounting standards and the effect of
      such standards on our financial reporting; our management will continue to
      evaluate our accounting function with respect to the number of personnel needed
      and determine whether our requirements are best satisfied through the hiring
      of
      internal personnel on a full-time or part-time basis, outsourcing or a
      combination thereof;





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•   hiring
      a full-time accountant, who joined the company in July 2007, to serve as the
      chief financial officer of our Guinea operations, overseeing all aspects of
      Guinea finance and accounting;





•   implementing
      new accounting policies and requiring employee acknowledgement of same;
      and





•   implementing
      procedures to ensure proper approvals for expenditures.





Although
      these organizational and process changes have improved our internal controls
      environment and increased the likelihood of our identifying non-routine and
      non-systematic transactions, many of the initiatives were either recently
      initiated or are being further refined, enhanced and tested as of September
      30,
      2007. As a result, they were not considered effective in remediating the
      material weakness as of that date. We will continue our efforts to improve
      our
      control environment and to focus on:





•   improving
      our organizational structure to help achieve the proper number and quality
      of
      our accounting and finance personnel;





•   refining
      our period-end financial reporting processes to improve the quality and
      timeliness of our financial information; and





•   improving
      our processes and systems requiring periodic self-assessments, independent
      tests, and reporting of our personnel's adherence to our accounting policies
      and
      procedures.





Except
      as
      described above and in our Annual Report, there have been no 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. There have been no material
      developments from the disclosures contained in our most recent 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. There have been no material changes from the
      risk factors previously disclosed in our most recent Annual Report on Form
      10-K.







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





In
      October 2007, we issued 30,000 shares of common stock valued at $95,000 to
      a
      consultant for services rendered. This transaction was made in reliance upon
      exemptions from registration under Section 4(2) of the Securities Act. Each
      certificate issued for unregistered securities contained a legend stating that
      the securities have not been registered under the Securities Act and setting
      forth the restrictions on the transferability and the sale of the securities.
      No
      underwriter participated in, nor did we pay any commissions or fees to any
      underwriter, in this transaction. These transactions did not involve a public
      offering. The investor had knowledge and experience in financial and business
      matters that allowed them to evaluate the merits and risk of receipt of these
      securities. The investor was knowledgeable about our operations and financial
      condition.




In
      November 2007, we issued options to purchase 50,000 shares of common stock
      to an
      employee as compensation. These options have an exercise price of $2.11 per
      share and expire in three years. This transaction was made in reliance upon
      exemptions from registration under Section 4(2) of the Securities Act. Each
      certificate issued for unregistered securities contained a legend stating that
      the securities have not been registered under the Securities Act and setting
      forth the restrictions on the transferability and the sale of the securities.
      No
      underwriter participated in, nor did we pay any commissions or fees to any
      underwriter, in this transaction. 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.




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**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.








**Signature**





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





Hyperdynamics
      Corporation


(Registrant)





By:
      /s/ Kent Watts


Kent
      Watts, Chairman of the Board,


Chief
      Executive Officer





Dated:
      November 13, 2007








By:
      /s/ Steven M. Plumb


Steven
      M.
      Plumb,


Chief
      Financial Officer


Principal
      Accounting Officer





Dated:
      November 13, 2007






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