UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      DC 20549




FORM
      10-Q


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





or


£
            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 77748


(Address
      of principal executive offices, including zip code)





713-353-9400


(registrant's
      principal executive office telephone number)








Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes xNo 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
            £Accelerated
                Filer
            TNon-Accelerated
                Filer
            £




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
            £Accelerated
                Filer
            TNon-Accelerated
                Filer
            £Smaller
                Reporting Company
            £





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





APPLICABLE
      ONLY TO CORPORATE ISSUERS


As
      of
      February 11, 2008, 56,199,385 shares of common stock, $0.001 par value, were
      outstanding.














Table
      of Contents





Part
                I. Financial InformationItem
                1
            
            Financial
                StatementsConsolidated
                Balance Sheets at December 31, 2007 and June 30,
                2007
            
            2Consolidated
                Statements of Operations for the Three and Six
                Months Ended December 31, 2007 and 2006
            
            3Consolidated
                Statements of Cash Flows for the Six Months
                Ended December 31, 2007 and 2006 and 2006
            
            4Notes
                to Consolidated Financial
                Statements
            
            6Item
                2
            
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of OperationsItem
                3
            
            Quantitative
                and Qualitative Disclosures about Market
                Risks
            
            22Item
                4
            
            Controls
                and Procedures
            
            22Part
                II. Other InformationItem
                1
            
            Legal
                Proceedings
            
            23Item
                1A
            
            Risk
                Factors
            
            23Item
                2
            
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            
            23Item
                6
            
            Exhibits
            
            24Signatures
            
            24





Table
            of Content





HYPERDYNAMICSCORPORATION


Consolidated
      Balance Sheets


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


(Unaudited)





December
                31,
            
            
            June
                30,2007
            
            
            2007ASSETSCurrent
                assetsCash
            
            $
            342
            
            
            $
            618Restricted
                certificate of deposit
            
            
            75
            
            
            
            75Accounts
                receivable, net of allowance for doubtful accounts of $4 and
                $0
            
            
            212
            
            
            
            109Subscription
                receivable
            
            
            -
            
            
            
            5,250Deposit
                on acquisition of oil and gas assets
            
            
            -
            
            
            
            374Accounts
                receivable – related party
            
            
            11
            
            
            
            3Prepaid
                expenses and other current assets
            
            
            164
            
            
            
            196Total
                current assets
            
            
            804
            
            
            
            6,625Property
                and equipment, net of accumulated depreciation of $185 and
                $149
            
            
            447
            
            
            
            366Oil
                and gas properties:Evaluated
                properties, using full cost accounting, net of accumulated depreciation
                and depletion of $365 and $174
            
            
            2,301
            
            
            
            204Unevaluated
                properties excluded from amortization
            
            
            4,480
            
            
            
            4,279Other
                assets
            
            
            12
            
            
            
            6Total
                assets
            
            $
            8,044
            
            
            $
            11,480LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilitiesShort
                term notes payable and current portion of Installment debt
            
            $
            68
            
            
            $
            375Accounts
                payable and accrued expenses
            
            
            719
            
            
            
            747Accounts
                payable seismic data
            
            
            650
            
            
            
            650Accounts
                payable related party
            
            
            62
            
            
            
            53Stock
                payable
            
            
            -
            
            
            
            95Asset
                retirement obligation, current
            
            
            88
            
            
            
            84Dividends
                payable
            
            
            372
            
            
            
            372Dividends
                payable to related party
            
            
            295
            
            
            
            245Total
                current liabilities
            
            
            2,254
            
            
            
            2,621Asset
                retirement obligation, non current
            
            
            125
            
            
            
            44Installment
                debt, non current
            
            
            23
            
            
            
            -Deferred
                rent
            
            
            81
            
            
            
            89Total
                liabilities
            
            
            2,483
            
            
            
            2,754Commitments
                and contingencies
            
            
            -
            
            
            
            -Shareholders'
                equity:Convertible
                preferred stock, par value $0.001; 20,000,000 shares
                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, 56,199,385
                and
                54,467,902 shares issued and outstanding
            
            
            56
            
            
            
            54Additional
                paid-in capital
            
            
            61,291
            
            
            
            59,045Accumulated
                deficit
            
            
            (55,786
            )
            
            
            (50,373
            )Total
                shareholders' equity
            
            
            5,561
            
            
            
            8,726Total
                liabilities and shareholders' equity
            
            $
            8,044
            
            
            $
            11,480






(See
        accompanying notes to consolidated
        financial statements)


2
 Table
            of Content





HYPERDYNAMICSCORPORATION


Consolidated
      Statements of Operations


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


(Unaudited)




Three
                Months Ended
                December 31,
            
            
            Six
                Months Ended
                December 31,2007
            
            
            2006
            
            
            2007
            
            
            2006RevenuesOil
                and gas sales
            
            $
            500
            
            
            $
            278
            
            
            $
            814
            
            
            $
            603Oilfield
                service revenues
            
            
            31
            
            
            
            64
            
            
            
            31
            
            
            
            64Total
                revenues
            
            
            531
            
            
            
            342
            
            
            
            845
            
            
            
            667Costs
                and expensesLease
                operating expense
            
            
            649
            
            
            
            99
            
            
            
            1,503
            
            
            
            275Accretion
                expense
            
            
            5
            
            
            
            -
            
            
            
            10
            
            
            
            -Depreciation,
                depletion and amortization from oil and gas properties
            
            
            78
            
            
            
            23
            
            
            
            191
            
            
            
            45Other
                operational costs
            
            
            86
            
            
            
            188
            
            
            
            238
            
            
            
            307Selling,
                general and administrative – related party
            
            
            9
            
            
            
            -
            
            
            
            38
            
            
            
            -Selling,
                general and administrative
            
            
            1,775
            
            
            
            1,480
            
            
            
            4,227
            
            
            
            3,477Gain
                from sale of operating assets
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (8
            )Depreciation,
                administrative properties
            
            
            35
            
            
            
            15
            
            
            
            57
            
            
            
            22Total
            
            
            2,637
            
            
            
            1,805
            
            
            
            6,264
            
            
            
            4,118LOSS
                FROM OPERATIONS
            
            
            (2,106
            )
            
            
            (1,463
            )
            
            
            (5,419
            )
            
            
            (3,451
            )Other
                income (expense)Interest
                expense
            
            
            (2
            )
            
            
            (402
            )
            
            
            ( 4
            )
            
            
            (1,272
            )Interest
                income
            
            
            12
            
            
            
            35
            
            
            
            50
            
            
            
            58Gain
                on settlement of debt
            
            
            -
            
            
            
            -
            
            
            
            10
            
            
            
            -Total
                other income (expense)
            
            
            10
            
            
            
            (367
            )
            
            
            56
            
            
            
            (1,214
            )NET
                LOSS
            
            
            (2,096
            )
            
            
            (1,830
            )
            
            
            (5,363
            )
            
            
            (4,665
            )Preferred
                stock dividend to related party
            
            
            (25
            )
            
            
            (28
            )
            
            
            (50
            )
            
            
            (55
            )Net
                loss chargeable to common shareholders
            
            $
            (2,121
            )
            
            $
            (1,858
            )
            
            $
            (5,413
            )
            
            $
            (4,720
            )Basic
                and diluted loss per common share
            
            $
            (0.04
            )
            
            $
            (0.04
            )
            
            $
            (0.10
            )
            
            $
            (0.10
            )Weighted
                average shares outstanding –basic and diluted
            
            
            55,698,010
            
            
            
            47,713,953
            
            
            
            55,501,993
            
            
            
            46,952,138






(See
        accompanying notes to consolidated
        financial statements)


3
 Table
            of Content





HYPERDYNAMICSCORPORATION


Consolidated
      Statements of Cash Flows


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


(Unaudited)




Six
                months ended
              December
                31,2007
            
            
            2006CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                loss
            
            $
            (5,363
            )
            
            $
            (4,665
            )Adjustments
                to reconcile net income to net cash used in operating
                activities:Depreciation,
                depletion and amortization
            
            
            248
            
            
            
            67Accretion
                of asset retirement obligation
            
            
            10
            
            
            
            -Shares
                issued for services
            
            
            129
            
            
            
            204Employee
                stock options
            
            
            920
            
            
            
            1,003Gain
                on settlement of debt
            
            
            (10
            )
            
            
            -Gain
                on sale of assets
            
            
            
            
            
            
            (8
            )Bad
                debt expense
            
            
            4
            
            
            
            17Amortization
                of discount and financing costs on convertible debenture
            
            
            -
            
            
            
            1,078Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (107
            )
            
            
            (140
            )Accounts
                receivable – related party
            
            
            (8
            )
            
            
            -Other
                current assets
            
            
            31
            
            
            
            19Accounts
                payable and accrued expenses
            
            
            120
            
            
            
            164Deferred
                rent
            
            
            (8
            )
            
            
            43Net
                cash used in operating activities
            
            
            (4,034
            )
            
            
            (2,218
            )CASH
                FLOWS FROM INVESTING ACTIVITIESInvestment
                in oil and gas properties
            
            
            (1,755
            )
            
            
            (82
            )Purchase
                of property and equipment
            
            
            (108
            )
            
            
            (167
            )Proceeds
                from the sale of assets
            
            
            -
            
            
            
            36Change
                in deposits
            
            
            (6
            )
            
            
            (6
            )Net
                cash provided by (used in) investing activities
            
            
            (1,869
            )
            
            
            (219
            )CASH
                FLOWS FROM FINANCING ACTIVITIESProceeds
                from sale of common stock, net
            
            
            679
            
            
            
            126Collection
                of stock subscription receivable
            
            
            5,250
            
            
            
            -Proceeds
                from convertible notes
            
            
            -
            
            
            
            1,820Proceeds
                from installment debt
            
            
            47
            
            
            
            57Payments
                on installment debt
            
            
            (349
            )
            
            
            (93
            )Net
                cash provided by financing activities
            
            
            5,627
            
            
            
            1,910Net
                decrease in cash
            
            
            (276
            )
            
            
            (527
            )Cash
                at beginning of period
            
            
            618
            
            
            
            3,435Cash
                at end of period
            
            $
            342
            
            
            $
            2,908






(See
        accompanying notes to consolidated
        financial statements)


4
 Table
            of Content





HYPERDYNAMICS
      CORPORATION


Consolidated
      Statements of Cash Flows (Continued)


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


(Unaudited)




Six
                months ended
              December
                31,2007
            
            
            2006SUPPLEMENTAL
                DISCLOSURESInterest
                paid in cash
            
            $
            5
            
            
            $
            353Income
                taxes paid in cash
            
            
            -
            
            
            
            -NON-CASH
                TRANSACTIONSConversion
                of notes payable to common stock
            
            $
            -
            
            
            $
            4,000Deemed
                dividend
            
            
            153Deemed
                dividend
            
            
            (153
            )Accrued
                and unpaid preferred stock dividend to related party
            
            
            50
            
            
            
            55Note
                payable for fixed assets
            
            
            30
            
            
            
            -Debt
                discount on convertible debt
            
            
            -
            
            
            
            450Common
                stock issued for accounts payable
            
            
            139Common
                stock issued for stock payable
            
            
            95Common
                stock issued for purchase of working interest in oil and gas
                properties
            
            
            285
            
            
            
            -






(See
        accompanying notes to consolidated
        financial statements)


5
 Table
            of Content





HYPERDYNAMICSCORPORATION


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 six months ended December 31, 2007, Hyperdynamics closed on the purchase
      of
      an 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 initial estimate of the asset retirement obligation
      associated with these properties was $75,000.





Under
      the
      purchase agreement, the seller remained the operator of the properties and
      retained a 15% working interest therein; however, Hyperdynamics is required
      to
      pay 100% of all working interest costs, including work-over and new development
      and exploration costs, up to $4,000,000 (“Promised Funds over the eighteen
      months ended December 31, 2008.  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.  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 six months ended December 31,
      2007
      included the cost of drilling an exploratory well of $190,000, capitalized
      geophysical and geological costs of $22,000 and the cost of improvements to
      production facilities at our Magee-Smith lease of $191,000.  As of
      December 31, 2007, we have capitalized $2,205,000 in oil and gas properties,
      net
      of depletion, which is subject to the full cost ceiling test for
      impairment.  At December 31, 2007, there was no impairment
      indicated.





Evaluated
      Oil and Gas Properties also includes oilfield equipment with a net book value
      of
      $96,000 as of December 31, 2007, which is not subject to
      amortization.  It is depreciated on a straight line basis over its
      estimated useful life and assessed for impairment in accordance with Statement
      of Financial Accounting Standards No. 144.





6
 Table
            of Content





Pro
      Forma
      Results





The
      unaudited pro forma results presented below for the three months and six months
      ended December 31, 2006 have been prepared to give effect to the purchase of
      the
      RABB Properties 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:Three
                months ended December 31, 2006
            
            
            Six
                months ended December 31, 2006Revenue
            
            $
            474,000
            
            
            $
            994,000Loss
                from operations
            
            
            (1,766,000
            )
            
            
            (3,788,000
            )Net
                loss chargeable to common shareholders
            
            
            (2,106,000
            )
            
            
            (5,002,000
            )Loss
                per share, basic and diluted
            
            
            (0.04
            )
            
            
            (0.11
            )





Unevaluated
      properties





We
      incurred $201,000 of geological and geophysical costs for our Guinea concession
      during the six months ended December 31, 2007.  The costs were
      incurred as follows: consulting on our Forward Exploration Program of $91,000,
      payroll costs directly associated with the evaluation of our Guinea concession
      of $24,000, seismic data license purchase in the amount of $45,000; the purchase
      of magnetic and gravity data for $30,000; a seep study costing $2,000; and
      geophysical and geological software for $9,000.








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. 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 company's asset retirement obligations consist of
      estimated costs for dismantlement, removal, site reclamation and similar
      activities associated with its oil and gas properties.





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





(
                in thousands)Asset
                retirement obligation, June 30, 2007
            
            $
            128Liabilities
                incurred
            
            
            75Revisions
                of estimates
            
            
            -Accretion
                of discount
            
            
            10Asset
                retirement obligation, December 31, 2007
            
            $
            213








4.  Installment
      debt





During
      the six months ended December 31, 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.





5.
      Stock Payable





In
      June
      2007, an Investor Relations/Public Relations consultant earned 30,000 shares
      of
      common stock when a stock price target specified in their contract 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.





7
 Table
            of Content





6.
      Shareholders’ Equity





Common
      stock issuances





In
      June
      2007, warrants to purchase 2,100,000 shares of common stock at $2.50 per share
      were exercised for gross proceeds of $5,250,000, which was shown as a
      subscription receivable in the June 30, 2007 balance sheet. The cash was
      received on July 3, 2007.





In
      July
      2007, two officers of the company received 738,251 shares of common stock upon
      the cashless exercise of warrants to purchase 800,000 shares of common stock
      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 warrants to purchase 142,000 shares of common stock, 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.





In
      October 2007, three directors received 24,654 shares of common stock valued
      at
      $54,000 in conjunction with their compensation package.





In
      October 2007, an attorney received 35,000 shares of common stock in payment
      of
      legal fees of $76,000.





In
      October 2007, a consultant received 30,000 shares of common stock for stock
      payable (see note 5).





In
      December 2007, an investor received 544,000 shares upon the exercise of a
      warrant to purchase 544,000 shares of common stock with an exercise price of
      $1.00.








7.
      Deemed Dividend





In
      December 2007, the Company modified the terms of certain warrants previously
      issued in June 2006 in connection with the sale of convertible
      debt.  The price of the warrants was reduced from $2.50 to
      $1.00.  The modification resulted in a deemed dividend of $153,000,
      which was calculated using the Black-Scholes method, assuming volatility of
      96%,
      expected term of 3.5 years, and a risk adjusted interest rate of
      3%.








8.
      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 generally are exercisable immediately as
      of the effective date of the option grant.





Options
      granted to employees





During
      the six months ended December 31, 2007, Hyperdynamics granted 705,000 options
      to
      employees.   The options had exercise prices ranging from $1.60
      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 $875,000.  The aggregate compensation cost
      recognized for the share-based compensation vested during the six months ended
      December 31, 2007 was $920,000.  The weighted average fair value of
      the employee stock options granted during the six months ended December 31,
      2007
      was $1.24.





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





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            of Content








2007Risk-free
                interest rate
            
            
            3
              -
              5
            %Dividend
                yield
            
            
            0
            %Volatility
                factor
            
            
            82
              - 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
            
            
            705,000
            
            
            
            2.69Exercised
            
            
            -
            
            
            
            -Forfeited
            
            
            (10,000
            )
            
            
            2.80Cancelled
            
            
            (20,000
            )
            
            
            1.00Outstanding
                at December 31, 2007
            
            
            2,284,999
            
            
            
            3.55
            
            
            $
            228,000
            
            
            
            2





Options
                outstanding and exercisable as of December 31, 2007:Exercise
                Price
            
            
            Outstanding
                Number of Shares
            
            Remaining  Life
            
            Exercisable
                 Number of Shares$
            1.00
                - 1.49
            
            
            
            380,000
            
            1
                year or less
            
            
            380,000$
            1.50
                - 1.99
            
            
            
            40,000
            
            1
                years
            
            
            40,000$
            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
            
            
            
            50,000
            
            3
                years
            
            
            50,000$
            2.50
                - 2.99
            
            
            
            40,000
            
            1
                year
            
            
            40,000$
            2.50
                – 2.99
            
            
            
            180,000
            
            2
                years
            
            
            180,000$
            2.50
                – 2.99
            
            
            
            305,000
            
            3
                years
            
            
            305,000$
            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
            
            
            -2,284,999
            
            
            
            
            1,684,999





At
      December 31, 2007, there was $184,517 of unrecognized compensation costs related
      to non-vested share-based compensation arrangements granted under the
      Plan.





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The
      following table summarizes common stock warrants issued and
      outstanding:





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
            
            
            544,000
            
            
            
            1.00Exercised
            
            
            (1,401,640
            
            
            
            .55Cancelled
            
            
            (628,360
            
            
            
            2.20Expired
            
            
            -Outstanding
                at December 31, 2007
            
            
            8,626,783
            
            
            
            2.70
            
            
            $
            168,750
            
            
            
            4








Warrants
                outstanding and exercisable as of December 31, 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
            
            
            
            3,471,783
            
            2
                years
            
            
            3,471,783$
            4.00
            
            
            
            1,500,000
            
            7
                years
            
            
            1,500,000$
            5.00
            
            
            
            50,000
            
            3
                years
            
            
            -8,626,783
            
            
            
            
            8,576,783





At
      December 31, 2007, there was $27,949 of unrecognized compensation expense
      associated with the outstanding warrants.








9.
      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.








10.
      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”. 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.





We
      do not
      expect the adoption of recently issued accounting pronouncements to have a
      significant impact on our results of operations, financial position, or cash
      flow.








11.  Related
      Party Transactions





Accounts
      receivable – related party consists of advances to employees and Mike Watts, the
      brother of Kent Watts, our chief executive officer, who provides investor
      relations, public relations, financial consulting, and general advisory
      services, for certain company related expenses.





Accounts
      payable – related party consists of directors fees payable to independent
      directors and an officer in accordance with their compensation packages of
      $62,000 and $53,000 as of December 31, 2007 and June 30, 2007,
      respectively.





Selling,
      general and administrative – related party of $38,000 during the six months
      ended December 31, 2007 consists of reimbursement of out of pocket expenses
      incurred by Michael Watts, the brother of our CEO, in association with his
      consulting contract.





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During
      the six months ended December 31, 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.








12.
      Subsequent Events





In
      January 2008, we issued 22,360 shares of common stock to two directors in
      accordance with their compensation packages to pay directors fees of
      $36,000.  We also issued 23,000 shares of common stock valued at
      $37,000 to a consultant for services rendered.





In
      January 2008, two officers of the company and three independent directors were
      granted options to purchase 110,000 shares of common stock in accordance with
      their compensation packages.  The options have a value of $59,000
      based upon the Black-Sholes valuation method.





In
      January 2008, we became obligated to pay 30,000 shares of our common stock
      to an
      Investor Relations/Public Relations consultant in accordance with the terms
      of
      our contract.  If still employed, the consultant will earn an
      additional 30,000 shares on May 1, 2008 or upon the satisfaction of certain
      performance conditions, if they occur earlier than May 1, 2008.





On
      February 6, 2008, Hyperdynamics Corporation entered into a financing agreement
      (the Financing Agreement) with YA Global Investments, LP (“YA Global”). Under
      the Financing Agreement, we will issue, and YA Global will purchase, up to
      $3,000,000 of notes. On February 6, 2008, we completed the first closing and
      issued $911,000 of notes under the Financing Agreement. We expect to issue
      an
      additional $1,089,000 of notes upon the satisfactory completion of certain
      conditions, and the remaining $1,000,000 of notes within the next 120 days.
      We
      expect the new note agreements will contain provisions similar to those
      described below. In connection with this Financing Agreement, we will issue
      94,899 shares of common stock and a total of 825,000 warrants to purchase common
      stock, of which, 550,000 warrants with an exercise price of $2.00 per share
      were
      issued on February 6, 2008 in connection with the first closing. The remaining
      warrants, with an exercise price equal to 130% of the market value of our common
      stock on the date of closing,  will be issued at the third closing,
      which is expected to occur in approximately 120 days from February 6, 2008.
      The
      exercise price of the warrants are subject to “reset” provisions in the event we
      subsequently issue common stock, stock warrants, stock options or convertible
      debt with a stock price, exercise price or conversion price lower than $2.00.
      If
      these provisions are triggered, YA Global will receive warrants to purchase
      additional shares of common stock and a reduction in the exercise price of
      all
      their warrants. We will also issue $60,000 worth of common stock upon the third
      closing. Notes issued under this arrangement are collateralized by substantially
      all of the assets of Hyperdynamics and its subsidiaries, except the assets
      of
      SCS Corporation and SCS Guinea. Further, this new agreement limits our ability
      to draw down on our equity line of credit with Dutchess Capital.





As
      discussed above, we issued $911,000 of notes under the arrangement and received
      net proceeds of $750,000. The notes carry an annual interest rate equal to
      20%
      and mature on July 6, 2010. The notes and accrued interest will be repaid in
      monthly installments of $22,763, which commence on September 1, 2008. At our
      option, we can redeem the notes at an earlier date and pay an “early redemption
      premium” of 15% of the principal amount being redeemed.





The
      note
      agreement contains several default provisions, including delisting from a stock
      exchange in which our stock is quoted; any change of control transaction; and
      various other default provisions. Upon default, the notes become immediately
      due
      and payable. In addition, any time following an event of default, the notes
      become convertible at the option of the holder into shares of the Company’s
      common stock. The conversion price is equal to the lesser of $2.00 or 70% of
      the
      lowest closing bid price of the common stock during the 15 consecutive trading
      days prior to the conversion date. In the event we issue or sell shares of
      common stock at a price that is less than the conversion price, the conversion
      price is automatically reset to the new lower price. This reset feature also
      applies to the issuance of stock options, stock warrants or convertible debt
      with a conversion price lower than that currently in effect for the
      notes.





Hyperdynamics
      is currently evaluating the instruments for derivative accounting consideration
      under SFAS 133 and EITF 00-19.  Upon completion of the analysis,
      Hyperdynamics will allocate the proceeds of the notes payable among the stock,
      warrants, and embedded or free standing derivatives, if any, using applicable
      accounting principles.








13.
      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.





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





SCS
            
            
            HYDR
            
            
            Corporate
            
            
            TotalSegment
                assetsAs
                of December 31, 2007
            
            $
            4,877,000
            
            
            $
            2,707,000
            
            
            $
            460,000
            
            
            $
            8,044,000As
                of June 30, 2007
            
            
            4,467,000
            
            
            
            804,000
            
            
            
            6,209,000
            
            
            
            11,480,000Six
                months ended December 31, 2007:Revenues
                from external customers
            
            
            -
            
            
            
            845,000
            
            
            
            -
            
            
            
            845,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            
            191,000
            
            
            
            -
            
            
            
            191,000Depreciation
                – administration
            
            
            35,000
            
            
            
            2,000
            
            
            
            20,000
            
            
            
            57,000Loss
                from operations
            
            
            (2,198,000
            )
            
            
            (1,171,000
            )
            
            
            (2,050,000
            )
            
            
            (5,419,000
            )Expenditures
                for long-lived assets
            
            
            295,000
            
            
            
            1,869,000
            
            
            
            14,000
            
            
            
            2,178,000Three
                months ended December 31, 2007:Revenues
                from external customers
            
            
            -
            
            
            
            531,000
            
            
            
            -
            
            
            
            531,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            
            78,000
            
            
            
            -
            
            
            
            78,000Depreciation
                – administration
            
            
            23,000
            
            
            
            2,000
            
            
            
            10,000
            
            
            
            35,000Loss
                from operations
            
            
            (1,046,000
            )
            
            
            (348,000
            )
            
            
            (712,000
            )
            
            
            (2,106,000
            )Expenditures
                for long-lived assets
            
            
            16,000
            
            
            
            131,000
            
            
            
            3,000
            
            
            
            150,000Six
                months ended December 31, 2006:Revenues
                from external customers
            
            
            -
            
            
            
            667,000
            
            
            
            -
            
            
            
            667,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            
            45,000
            
            
            
            -
            
            
            
            45,000Depreciation
                – administration
            
            
            10,000
            
            
            
            -
            
            
            
            12,000
            
            
            
            22,000Loss
                from operations
            
            
            (1,255,000
            )
            
            
            (212,000
            )
            
            
            (1,984,000
            )
            
            
            (3,451,000
            )Expenditures
                for long-lived assets
            
            
            76,000
            
            
            
            55,000
            
            
            
            118,000
            
            
            
            249,000Three
                months ended December 31, 2006Revenues
                from external customers
            
            
            -
            
            
            
            342,000
            
            
            
            -
            
            
            
            342,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            
            23,000
            
            
            
            -
            
            
            
            23,000Depreciation
                – administration
            
            
            7,000
            
            
            
            -
            
            
            
            8,000
            
            
            
            15,000Loss
                from operations
            
            
            (710,000
            )
            
            
            (83,000
            )
            
            
            (670,000
            )
            
            
            (1,463,000
            )Expenditures
                for long-lived assets
            
            
            68,000
            
            
            
            43,000
            
            
            
            13,000
            
            
            
            124,000





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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.








Item2.
      Management's Discussion and Analysis of
      Financial Condition and Results of Operations





Overview





During
      the quarter ended December 31, 2007, we took steps to significantly enhance
      and
      to bring our technical capabilities in-house.  As a first step hired a
      successful veteran explorationist, Mr. James R. Spear as our Vice President
      of
      Exploration and Production; later we added Mr. Charles Andrews to our board
      of
      directors. Both gentlemen are highly successful geoscientists. Mr. Spear is
      primarily focused on the extensive exploration effort regarding 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 contract 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.





Since
      Mr.
      Spear joined Hyperdynamics in October, he has reinterpreted and clarified many
      leads from our 2-D seismic surveys completed in 2002 and 2003.  During
      the quarter we reported that approximately 25 leads so far have been identified
      as potential drilling targets. Mr. Spear also helped to identify and to focus
      our attention on the notable potential development in the Lower Cretaceous
      section where most of the West African oil has been found to
      date.  Additionally, he has reconfirmed the potential to explore
      deeper in the syn-rift Mesozoic basins within the Paleozoic
      section.  In November, a very encouraging clarification was made to
      define our primary niche area as the transform margin play offshore the Republic
      of Guinea. Over the last three years, this play has resulted in at least 39
      new
      field discoveries offshore West Africa that we know of to date.  It
      was reported also during the quarter that, as a result of the company’s
      exploration work since 2002, including the identification of interpretive
      procedures performed over the last several months, detailed and focused
      specifications have now been laid out to acquire additional 2-D seismic data
      and, for the first time in the history of the Guinea offshore, we began laying
      out 3-D seismic grids as a next step to having drillable
      prospects.  During the quarter ended December 31, 2007 and now into
      the current quarter, Mr. Spear has worked closely with Kent Watts, our Chief
      Executive Officer, to lay out operational plans for our 2008 exploration
      efforts.





Our
        work
        this quarter, based on our historical library of geophysical and geological
        data, supports that the primary petroleum systems in our concession contain
        at
        least three oil-prone, marine, and lacustrine (lake-like) source rock zones
        deposited during Lower Cretaceous time (Early Albian to Early
        Cenomanian).  It is believed at this point that a secondary petroleum
        system may have a Late Cenomanian to Turonian shale source rock. The trap
        types
        are numerous and relatively widespread, in particular, those associated with
        Mesozoic/Cretaceous syn-rift basins and transform related faulting and
        unconformities. The traps on the shelf/slope and within the newly identified
        basins on the shelf are ideally located for access to oil migration. We reported
        initially that we will further delineate our targets into drillable prospects
        with a new extensive 2-D seismic survey of approximately 12,000 linear
        kilometers.  After additional work, we are now planning more 3-D with
        a smaller additional 2-D survey to start this year.


We
      are
      meeting continuously with key seismic vendors and potential joint venture
      partners with varying degrees of interest.  We believe our recent work
      and continued efforts will help to make these partners much more serious in
      the
      future as we continue our goal to develop a portfolio of drillable
      prospects.





13
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            of Content





It
      is our
      plan to improve the quality of life in Guinea as we advance our work offshore
      Guinea. Our Chairman and Chief Executive Officer, Kent Watts, 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. The company has been active in support and relief
      efforts in Guinea in the past and plans to increase efforts as its exploration
      work progresses. , With the continued support of volunteers, AFG reports that
      it
      is still working to support water well projects and other similar programs
      that
      could help the quality of life in Guinea.





We
      realized oil production revenues of $500,000 for the quarter ended December
      2007
      compared to $278,000 in oil production revenue for the quarter ended December
      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
      December, we performed little work on our Rabb properties while we were
      reworking our salt water well on our McGee Smith leases.  The
      production from Magee Smith was shut down in December even with the reported
      increase in revenue. The McGee Smith leases were brought back on with three
      additional wells now producing in late January. We expect increased revenues
      to
      be reported throughout the current quarter.   We estimated that
      we were producing approximately 150 barrels of oil per day (BOPD) in the middle
      of November and were expecting to soon reach 250 barrels per day from the work
      planned.  While we didn’t reach this goal as of December 2007 due to
      the McGee Smith work, we still expect to reach this goal very soon and begin
      our
      strategy to increase our production to 500 BOPD by the end of our fiscal year,
      June 30, 2008.







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, 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 December 31, 2007
      and June 30, 2007 and income statement data about Hyperdynamics' reportable
      segments and corporate overhead for the three months and six months ended
      December 31, 2007 and 2006:





SCS
            
            
            HYDR
            
            
            Corporate
            
            
            TotalSegment
                assetsAs
                of December 31, 2007
            
            $
            4,877,000
            
            
            $
            2,707,000
            
            
            $
            460,000
            
            
            $
            8,044,000As
                of June 30, 2007
            
            
            4,467,000
            
            
            
            804,000
            
            
            
            6,209,000
            
            
            
            11,480,000Six
                months ended December 31, 2007Revenues
                from external customers
            
            
            -
            
            
            
            845,000
            
            
            
            -
            
            
            
            845,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            
            191,000
            
            
            
            -
            
            
            
            191,000Depreciation
                – administration
            
            
            35,000
            
            
            
            2,000
            
            
            
            20,000
            
            
            
            57,000Loss
                from operations
            
            
            (2,198,000
            )
            
            
            (1,171,000
            )
            
            
            (2,050,000
            )
            
            
            (5,419,000
            )Expenditures
                for long-lived assets
            
            
            295,000
            
            
            
            1,869,000
            
            
            
            14,000
            
            
            
            2,178,000Three
                months ended December 31, 2007Revenues
                from external customers
            
            
            -
            
            
            
            531,000
            
            
            
            -
            
            
            
            531,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            
            78,000
            
            
            
            -
            
            
            
            78,000Depreciation
                – administration
            
            
            23,000
            
            
            
            2,000
            
            
            
            10,000
            
            
            
            35,000Loss
                from operations
            
            
            (1,046,000
            )
            
            
            (348,000
            )
            
            
            (712,000
            )
            
            
            (2,106,000
            )Expenditures
                for long-lived assets
            
            
            16,000
            
            
            
            131,000
            
            
            
            3,000
            
            
            
            150,000Six
                months ended December 31, 2006Revenues
                from external customers
            
            
            -
            
            
            
            667,000
            
            
            
            -
            
            
            
            667,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            
            45,000
            
            
            
            -
            
            
            
            45,000Depreciation
                – administration
            
            
            10,000
            
            
            
            -
            
            
            
            12,000
            
            
            
            22,000Loss
                from operations
            
            
            (1,255,000
            )
            
            
            (212,000
            )
            
            
            (1,984,000
            )
            
            
            (3,451,000
            )Expenditures
                for long-lived assets
            
            
            76,000
            
            
            
            55,000
            
            
            
            118,000
            
            
            
            249,000Three
                months ended December 31, 2006Revenues
                from external customers
            
            
            -
            
            
            
            342,000
            
            
            
            -
            
            
            
            342,000Depreciation,
                depletion and amortization - oil and gas properties
            
            
            -
            
            
            
            23,000
            
            
            
            -
            
            
            
            23,000Depreciation
                – administration
            
            
            7,000
            
            
            
            -
            
            
            
            8,000
            
            
            
            15,000Loss
                from operations
            
            
            (710,000
            )
            
            
            (83,000
            )
            
            
            (670,000
            )
            
            
            (1,463,000
            )Expenditures
                for long-lived assets
            
            
            68,000
            
            
            
            43,000
            
            
            
            13,000
            
            
            
            124,000





14
 Table
            of Content





Geographical
      Information


All
      revenues are currently derived from sources within the United States of America.
      All long-lived assets are located in the USA and in Guinea.








Six
      months ended December 31, 2007 compared to Six months ended December 31,
      2006.








Louisiana
      Operations ("HYDR")





Six
      months ended December 31, 2007 compared to Six months ended December 31,
      2006.





Revenues  Our
      revenues were $845,000 for the six months ended December 31, 2007, of which
      $814,000 was derived from oil revenues and $31,000 from service revenues,
      compared to $667,000 in 2006, of which $603,000 was derived from oil revenues
      and $64,000 from service revenues. The increase in total revenue is $178,000
      or
      27%. The increase of 35% in oil revenues, or $211,000, is attributable to an
      increase in the selling price of oil and an increase in
      production.  Our oil revenues resulted from the sale of 9,833 net
      barrels of oil at an average price of $82.78 per barrel during the six months
      ended December 31, 2007. During the six months ended December 31, 2006, our
      oil
      revenues resulted from the sale of 9,643 net barrels at an average price of
      $62.55 per barrel. The RABB properties generated about 67% of our total oil
      production.





Lease
      operating
      expense was $1,503,000 for the six months ended December 31, 2007
      compared to $275,000 for the six months ended December 31, 2006. During the
      six
      months ended December 31, 2007, lease operating expense consists of $1,455,000
      associated with the RABB properties, $312,000 associated with our operated
      properties (Magee-Smith, Kelly, and Norris leases), and $48,000 of severance
      tax.  During the quarter ended December 31, 2006, lease operating
      expense consists of $205,000 associated with our operated properties and $70,000
      of severance tax.  The increase in total lease operating expense of
      446%, or $1,228,000, is primarily attributable to the 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 ten oil
      wells and four service wells for a cost of $585,000. We also incurred routine
      lease operating expenses related to the RABB properties of $558,000 related
      to
      the operation of six service wells and fifteen oil wells acquired in July
      2007.  The increase of operating expenses on our operated properties
      was of $105,000, or 52%, is attributable  to increased payroll costs
      and work-over and service work on our wells.  Lease operating expense
      also includes severance tax of $48,000 and $70,000 for the six months ended
      December 31, 2007 and the six months ended December 31, 2006, respectively.
      The
      decrease in severance tax of 31%, or $22,000, is attributable to the 67% of
      oil
      production on our non-operated properties that are taxed at a lower
      rate.





Depreciation,
      depletion and
      amortization from oil and gas properties was $191,000 for the six months
      ended December  31, 2007 compared to $45,000 for the six months ended
      December  31, 2006. The increase of 324%, or $146,000, is due to
      higher depletion expenses attributable to the acquisition of the RABB
      properties, partially offset by a decrease in the depletion rate.  The
      full cost pool increased $2,200,000 with the RABB properties acquisition, the
      improvements to the production facilities at our Magee-Smith lease and
      additional geological and geophysical expenses.  The depletion rate
      decreased because of the reserves added with the purchase of the RABB
      properties.





Other
      operational
      costs were $238,000 for the six months ended December 31, 2007 compared
      to $307,000 for the six months ended December 31, 2006. The decrease of 22%,
      or
      $69,000, is attributable to lower worker’s compensation expenses, tools &
yard costs, repairs and maintenance, and other field related
      expenses.





15
 Table
            of Content





Selling,
      general, and
      administrative - related party was $12,000 for the six months ended
      December 31, 2007 compared to $0 for the six months ended December 31, 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 $60,000 for the six months ended December
      31, 2007 compared to $260,000 for the six months ended December 31, 2006. This
      represents a decrease of 77%, or $200,000, due to decreases in legal expenses
      of
      $193,000 which includes insurance proceeds of $130,000 to reimburse us for
      legal
      expenses we incurred in a lawsuit we settled during June
      2007,  insurance costs of $14,000, bad debt expenses of $13,000, and
      office lease, property taxes and bank charges of $8,000. Additionally, salaries
      increased by $23,000, and other general expenses increased by
      $5,000.




Loss
      from operations
      was $1,171,000 for the six months ended December 31, 2007 compared to $212,000
      for the six months ended December 31, 2006. This represents an increase of
      452%,
      or $959,000, 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
      note holder 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 $1,869,000 during the six months ended December 31,
      2007 compared to $55,000 during the six months ended December 31, 2006. This
      represents an increase of  3,298% or
      $1,814,000,  attributable to the costs for improvements at the
      Magee-Smith lease and the acquisition of the RABB properties.





Guinea
      and Seismic Data Management ("SCS")





Six
      months ended December 31, 2007 compared to six months ended December 31,
      2006.





Revenues.
      We had no
      revenues during the six months ended December  31, 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 $2,163,000 for the six months ended
      December  31, 2007 compared to $1,245,000 for the six months ended
      December 31, 2006. This represents an increase of 74%, or $918,000, attributable
      to an increase of some general and administrative expenses of $1,240,000 offset
      by a decrease in other general and administrative expenses of $322,000. The
      increase of $1,240,000 is due to the following factors:





1)
      Public
      relations and marketing expenses increased by $799,000.  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)
      Equity
      based compensation increased by $120,000 related to options issued to officers
      of the subsidiary.




3)
      Salaries and payroll taxes increased by $112,000 due in part to hiring our
      new
      Vice President and Chief Geophysicist and Chief Financial Officer for
      SCS-Guinea, as well as to wage increases for all employees;





4)
      Auto
      expense increased by $54,000 due to maintenance and repairs of vehicles in
      Guinea;





5)
      Office
      supplies and postage increased $36,000 due to increase in supply usage both
      in
      the US and Guinea offices;





6)
      Office
      lease and utilities increased by $8,000 due to increase in office space in
      Guinea;





7)
      Insurance expenses increased by $35,000 due to increase in employee new
      hire.





8)
        Travel
        expense increased by $58,000 due in part to payment of travel costs for the
        Guinean delegation to visit Houston as well as increased travel to Guinea;
        and





9)
      Other
      administrative expenses increased by $18,000.





The
      decrease of $322,000 is due to the following factors:





16
 Table
            of Content





1)
      Consulting expense decreased $282,000. Consulting expense consists of lobbying
      costs, which decreased by $360,000, and costs associated with industry
      visibility work of geological industry consultants, which increased by
      $78,000.  The decrease in lobbying expense occurred because a payment in
      2006 to our lobbyist in Guinea was not repeated this year, and  our
      geological consultant, Geoexperts, completed work related to the completion
      of a
      farm-out brochure in 2007.  We brought in our own in house Vice
      President and Chief Geo-Physicist thus reducing the amount of geophysical and
      geological consulting expenses.





2)
      Professional expenses decreased $40,000 due to decrease in legal and technical
      expenses as well as other professional expenses incurred in Guinea.








Depreciation,
      administrative
      properties was $35,000 for the six months ended December 31, 2007
      compared to $10,000 for the six months ended December 31, 2006. The increase
      of
      250% or $25,000, is due to depreciation expense on additional assets purchased
      in Guinea.





Loss
      from operations
      was $2,198,000 for the six months ended December 31, 2007 compared to $1,255,000
      for the six months ended December 31, 2006 due to the factors discussed
      above.





Expenditures
      for long lived
      assets were $295,000 for the six months ended December 31, 2007 compared
      to $76,000 for the six months ended December 31, 2006. This represents a
      decrease of 288% or $219,000, due to decrease in purchases of office furniture,
      equipment and leasehold improvements in Guinea..








Corporate
      Overhead





Six
      months ended December 31, 2007 compared to six months ended December 31,
      2006.





Selling,
      general and
      administrative - related party was $26,000 for the six months ended
      December 31, 2007 compared to $0  for the six months ended December
      31, 2006. Mike Watts, the brother of our chief executive officer, 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
      $26,000 represents reimbursements for his expenses as authorized by his
      contract.





Selling,
      general and
      administrative expenses were $2,004,000 for the six months ended December
      31, 2007 compared to $1,972,000 for the six months ended December 31, 2006.
      This
      represents an increase of approximately 1%, or $32,000, due to an increase
      in
      administrative expenses of $329,000 which was partially offset by a decrease
      in
      other administrative expenses of $297,000. The increase is due to the following
      factors:





1)
      Professional expenses increased by $119,000 due to increased audit fees, costs
      associated with compliance with the provisions of the Sarbanes-Oxley Act and
      the
      legal costs pertaining to our existing lawsuit;





2)
      Investor and Public relations expenses increased by $62,000 due to increase
      in
      cost related to nationwide roadshow appearances for the purposes of promoting
      and educating the investors about our company as well as additional cost of
      retaining a public relations company;





3)
      Travel
      expenses increased by $59,000 due to director and officers travel as well as
      additional travel expenses related to the road show promotions;





4)
      Salaries and taxes increased by $32,000 due to employee new hire and increase
      in
      office wages.





5)
      Insurance and other general expenses increased by $57,000 due to higher general
      liability and auto insurance costs, auto expense, property taxes, meals &
entertainment and bank charges.





The
      decrease in expenses includes a decrease in other general expenses of $6,000
      due
      to lower office lease and supplies expenses, a decrease in office expenses
      of
      $70,000 due to the expenses incurred in relocating to our new corporate office
      in the six months ended December 2006, which were not repeated in the six months
      ended December 2007. A decrease in consulting expense of $29,000, and a decrease
      in stock-based compensation of $192,000 also occurred.





Depreciation,
      administrative
      properties was $20,000 for the six months ended December 31, 2007
      compared to $12,000 in the six months ended December 31, 2006. This represents
      an increase of 66%, or $8,000. The increase is due to an increase in capitalized
      office equipment.





17
 Table
            of Content





Loss
      from operations
      was $2,050,000 for the six months ended December 31, 2007 compared to $1,984,000
      for the six months ended December 31, 2006, due to the factors discussed
      above.





Interest
      expense was
      $2,000 and $1,270,000 for the six months ended December 31, 2007 and 2006,
      respectively.  The interest expense for 2006 included interest payable
      on convertible debentures and accelerated amortization of the discount of
      debentures which were satisfied and fully paid in the fiscal year ended June
      30,
      2007.  There was no equivalent obligation in 2007. Accordingly,
      interest expense decreased $1,268,000, or close to 100%.





Interest
      income was
      $50,000 and $58,000 for the six months ended December 31, 2007 and 2006,
      respectively.




Net
      loss chargeable to
      common shareholders Based on the factors discussed above, our net loss
      chargeable to common shareholders was $5,413,000 and $4,720,000 for the six
      months ended December 31, 2007 and 2006, respectively.  The loss per
      common share was $0.10 in each of the six months ended December 31, 2007 and
      2006.





Our
      expenditures for long
      lived assets were $14,000 for the six months ended December 31, 2007
      compared to $118,000 in the six months ended December 31, 2006. The decrease
      of
      $104,000, or 88%, 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.








Three
      months ended December 31, 2007 compared to three months ended December 31,
      2006.








Louisiana
      Operations ("HYDR")





Three
      months ended December 31, 2007 compared to three months ended December 31,
      2006.





Revenues.  Our
      revenues were $531,000 for the three months ended December 31, 2007, of which
      $500,000 represented  oil revenues and $31,000 represented service
      revenues, compared to $342,000 in 2006, of which $278,000 represented oil
      revenues and $64,000 represented service revenues. The increase of 79% in oil
      revenues, or $222,000, is attributable to an increase in the selling price
      of
      oil and an increase in production.  Our oil revenues derive from the
      sale of 5,524 net barrels of oil at an average price of $90.67 per barrel in
      the
      three months ended December 31, 2007. During the three months ended December
      31,
      2006, our revenues derived from the sale of 5,159 net barrels at an average
      price of $57.47 per barrel. The RABB properties generated about 81% of our
      total
      oil production.  The increase in revenue from the Rabb properties
      during this quarter is a result of the work-over and  repair work
      performed on our wells during the quarter ended September 30,
      2007.  The decrease in production, and accordingly revenue, from our
      operating properties is attributable in part to maturation of the
      wells.  Additionally, the wells were not producing during December
      2007 while we performed improvements on the lease that would allow us to produce
      the remaining oil more effectively.





Lease
      operating
      expense was $650,000 for the three months ended December 31, 2007
      compared to $99,000 for the three months ended December 31, 2006. The increase
      of 556%, or $551,000, is primarily attributable to expenses of operating the
      RABB properties. These expenses include  repairs and maintenance to
      increase future production. We worked over or reworked eleven oil wells and
      one
      service well for a cost of $245,000.  Although we had significant
      expenses last quarter for the purpose of realizing a growth in revenue in this
      quarter,  we also incurred routine lease operating expenses of
      $246,000 related to the operation of six service wells and fifteen oil wells
      acquired with the RABB properties acquisition.  The operating expenses
      on our operated properties, $136,000, increased $68,000 due to increased payroll
      costs and work-over and service work on our wells.  Lease operating
      expense also includes severance tax of $23,000 and $31,000 for the three months
      ended December 31, 2007 and the three months ended December 31, 2006,
      respectively. The decrease  of 26%, or $8,000, is attributable to
      the  production of oil on our non-operated properties that are taxed
      at a lower rate.





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 December 31, 2007 compared to
      $0 in
      2006.  As of December 31, 2007, the asset retirement obligation is
      $213,000.





Depreciation,
      depletion and
      amortization from oil and gas properties was $78,000 for the three months
      ended December  31, 2007 compared to $23,000 for the three months
      ended December  31, 2006. The increase of 239%, or $55,000, is due to
      higher depletion expenses primarily attributable to the acquisition of the
      RABB
      properties on July 1, 2007, partially offset by a decrease in the depletion
      rate.  The depletion rate decreased because of the reserves added with
      the purchase of the RABB properties.





Other
      operational
      costs were $86,000 for the three months ended December 31, 2007 compared
      to $188,000 for the three months ended December 31, 2006. The decrease of 54%,
      or $102,000, is attributable to lower worker’s compensation expenses, tools
& yard costs, repairs and maintenance, and other field related
      expenses.





18
 Table
            of Content





Selling,
      general and
      administrative expenses were $59,000 for the three months ended December
      31, 2007 compared to $115,000 for the three months ended December 31, 2006.
      This
      represents a decrease of 49%, or $56,000, attributable to a decrease in legal,
      insurance and other administrative expenses of  $91,000. The decrease
      consists of  legal expenses by $55,000,  insurance costs
      decreased $24,000, office lease and utilities decreased by $6,000 and other
      administrative costs decreased  by $6,000. Additionally, other general
      and administrative expenses increased by $34,000 due to increase in salaries
      of
      $18,000, bad debts of $14,000, and other general expenses of
      $2,000.  Depreciation expenses on administrative properties increased
      $2,000 from $0 during the quarter ended December 31, 2007 and December 31,
      2006,
      respectively.





Gain
      on sale of asset
      was $0 for the three months ended December 31, 2007 compared to $8,000 for
      the
      three months ended December 31, 2006.





Loss
      from operations
      was $348,000 for the three months ended December 31, 2007 compared to $83,000
      for the three months ended December 31, 2006. This represents an increase of
      319%, or $265,000, due to the factors discussed above.





Our
      expenditures for long
      lived assets were $131,000 during the three months ended December 31,
      2007 compared to $43,000 during the three months ended December 31, 2006. This
      represents an increase of  204% or $88,000,  primarily
      attributable to the costs for improvements at the Magee-Smith
      lease.








Guinea
      and Seismic Data Management ("SCS")





Three
      months ended December 31, 2007 compared to three months ended December 31,
      2006.





Revenues.
      We had no
      revenues during the three months ended December  31, 2007 and 2006. We
      are currently focusing on our drilling and exploration plans in the concession
      delineated in the PSC.





Selling,
      general and
      administrative expenses were $1,023,000 for the three months ended
      December  31, 2007 compared to $703,000 for the three months ended
      December 31, 2006. This represents an increase of 45%, or $320,000, attributable
      to an increase of some general and administrative expenses of $489,000 offset
      by
      a decrease in other general and administrative expenses of $169,000. The
      increase of $489,000 is due to the following factors:





1)
      Public
      relations and marketing expenses increased by $223,000.  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)
      Equity
      based compensation increased by $120,000 related to options issued to officers
      of the subsidiary.





3)
      Salaries and payroll taxes increased by $48,000 due in part to hiring our new
      Vice President and Chief Geophysicist and Chief Financial Officer for
      SCS-Guinea, as well as to wage increases for all employees;





4)
      Auto
      expense increased by $38,000 due to maintenance and repairs of vehicles in
      Guinea;





5)
      Office
      supplies and postage increased $28,000 due to increase in supply usage both
      in
      the US and Guinea offices;





6)
      Office
      lease and utilities increased by $13,000 due to increase in office space in
      Guinea;





7)
      Insurance expenses increased by $8,000 due to increase in employee new
      hire.





8)
      Other
      administrative expenses increased by $11,000.





The
      decrease of $169,000 is due to a decrease in consulting expense of $111,000,
      a
      decrease of $50,000 of travel  expenses, and a decrease of other
      general expenses of $8,000.  The decrease is due to various
      factors.





1)
      Consulting expense decreased $111,000. Consulting expense consists of lobbying
      costs, which decreased by $158,000, and costs associated with industry
      visibility work of geological industry consultants, which increased
      $47,000.  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 December 31, 2007 of $96,000 due to the
      winding down of our contractual commitment to their predecessor, Seacon
      Inc.





19
 Table
            of Content





2)
      Travel
      expenses decreased $50,000 due to the reduction of travel to
      Guinea.





Depreciation,
      administrative
      properties was $23,000 for the three months ended December 31, 2007
      compared to $7,000 for the three months ended December 31, 2006. The increase
      of
      228% or $16,000, is due to depreciation expense on additional assets purchased
      in Guinea.





Loss
      from operations
      was $1,046,000 for the three months ended December 31, 2007 compared to $710,000
      for the three months ended December 31, 2006 due to the factors discussed
      above.





Expenditures
      for long lived
      assets were $16,000 for the three months ended December 31, 2007 compared
      to $68,000 in the three months ended December 31, 2006. This represents a
      decrease of 76% or $52,000, due to decrease in purchases of office furniture,
      equipment and leasehold improvements in Guinea.








Corporate
      Overhead





Three
      months ended December 31, 2007 compared to three months ended December 31,
      2006.





Selling,
      general and
      administrative - related party was $9,000 for the three months ended
      December 31, 2007 compared to $0  for the three months ended December
      31, 2006. Mike Watts, the brother of our chief executive officer, 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
      $9,000 represents reimbursements for his expenses as authorized by his
      contract.





Selling,
      general and
      administrative expenses were $693,000 for the three months ended December
      31, 2007 compared to $662,000 for the three months ended December 31, 2006.
      This
      represents an increase of approximately 4%, or $31,000, due to an increase
      in
      administrative expenses of $126,000 which was partially offset by a decrease
      in
      other administrative expenses of $95,000. The increase is due to the following
      factors:








1)
      Professional expenses increased by $65,000 due to increased audit fees, the
      cost
      of compliance with the provision of the Sarbanes-Oxley Act and the legal costs
      pertaining to our existing lawsuit; and


2)
      Insurance and other general expenses increased by $61,000 due to higher general
      liability and auto insurance costs, auto expense, and salaries.





The
      decrease in expenses includes a decrease in other general expenses by $10,000
      due to lower office  supplies expenses, a decrease in office expenses
      of $4,000, a decrease in consulting expense of $17,000, and a decrease in
      stock-based compensation of $64,000.





Depreciation,
      administrative
      properties was $10,000 for the three months ended December 31, 2007
      compared to $8,000 in the three months ended December  31, 2006. This
      represents an increase of $25%, or $2,000. The increase is due to an increase
      in
      capitalized office equipment.





Loss
      from operations
      was $712,000 for the three months ended December 31, 2007 compared to $670,000
      for the three months ended December 31, 2006, due to the factors discussed
      above.





Interest
      expense was
      $2,000 and $402,000 for the three months ended December 31, 2007 and 2006,
      respectively.  The interest expense for 2006 included interest payable
      on convertible debentures and accelerated amortization of the discount of
      debentures which were satisfied and fully paid in the fiscal year ended June
      30,
      2007.  There was no equivalent obligation in 2007 period. Accordingly,
      interest expense decreased $400,000, or 99%.




Our
      expenditures for long
      lived assets were $3,000 for the three months ended December 31, 2007
      compared to $13,000 in the three months ended December 31, 2006. The decrease
      of
      $10,000, or 77%, 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.





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Liquidity
      and Capital Resources





Our
      ratio
      of current assets to current liabilities (current ratio) was .36 to 1 at
      December 31, 2007, 2.53 to 1 at June 30, 2007 and 1.47 to 1 at December 31,
      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.





In
      December we filed an S-3 Registration statement which will provide various
      registered securities available to us to sell to investors. When effective,
      this
      will allow us to raise, subject to market conditions, up to
      $50,000,000.





Currently
      we have obtained new financing from Yorkville Advisors, LLC as a Qualified
      Institutional Buyer (QIB) the details of which are disclosed in an 8K filed
      on
      February 8, 2008 and also disclosed elsewhere herein in this 10Q. This financing
      was designed to be a bridge loan using notes for $2,000,000 and possibly up
      to
      $3,000,000.   We are using our oil and gas reserves in Louisiana
      as collateral for this loan and as our reserves increase, additional financing
      on this basis could become available.





On
      February 6, 2008, Hyperdynamics Corporation entered into a financing agreement
      (the Financing Agreement) with YA Global Investments, LP (“YA Global”). Under
      the Financing Agreement, we will issue, and YA Global will purchase, up to
      $3,000,000 of notes. On February 6, 2008, we completed the first closing and
      issued $911,000 of notes under the Financing Agreement. We expect to issue
      an
      additional $1,089,000 of notes upon the satisfactory completion of certain
      conditions, and the remaining $1,000,000 of notes within the next 120 days.
      We
      expect the new note agreements will contain provisions similar to those
      described below. In connection with this Financing Agreement, we will issue
      94,899 shares of common stock and a total of 825,000 warrants to purchase common
      stock, of which, 550,000 warrants with an exercise price of $2.00 per share
      were
      issued on February 6, 2008 in connection with the first closing. The remaining
      warrants, with an exercise price equal to 130% of the market value of our common
      stock on the date of closing,  will be issued at the third closing,
      which is expected to occur in approximately 120 days from February 6, 2008.
      The
      exercise price of the warrants are subject to “reset” provisions in the event we
      subsequently issue common stock, stock warrants, stock options or convertible
      debt with a stock price, exercise price or conversion price lower than $2.00.
      If
      these provisions are triggered, YA Global will receive warrants to purchase
      additional shares of common stock and a reduction in the exercise price of
      all
      their warrants. We will also issue $60,000 worth of common stock upon the third
      closing. Notes issued under this arrangement are collateralized by substantially
      all of the assets of Hyperdynamics and its subsidiaries, except the assets
      of
      SCS Corporation and SCS Guinea. Further, this new agreement limits our ability
      to draw down on our equity line of credit with Dutchess Capital.





As
      discussed above, we issued $911,000 of notes under the arrangement and received
      net proceeds of $750,000. The notes carry an annual interest rate equal to
      20%
      and mature on July 6, 2010. The notes and accrued interest will be repaid in
      monthly installments of $22,763, which commence on September 1, 2008. At our
      option, we can redeem the notes at an earlier date and pay an “early redemption
      premium” of 15% of the principal amount being redeemed.





The
      note
      agreement contains several default provisions, including delisting from a stock
      exchange in which our stock is quoted; any change of control transaction; and
      various other default provisions. Upon default, the notes become immediately
      due
      and payable. In addition, any time following an event of default, the notes
      become convertible at the option of the holder into shares of the Company’s
      common stock. The conversion price is equal to the lesser of $2.00 or 70% of
      the
      lowest closing bid price of the common stock during the 15 consecutive trading
      days prior to the conversion date. In the event we issue or sell shares of
      common stock at a price that is less than the conversion price, the conversion
      price is automatically reset to the new lower price. This reset feature also
      applies to the issuance of stock options, stock warrants or convertible debt
      with a conversion price lower than that currently in effect for the
      notes.




Hyperdynamics
      is currently evaluating the instruments for derivative accounting consideration
      under SFAS 133 and EITF 00-19.  Upon completion of the analysis,
      Hyperdynamics will allocate the proceeds of the notes payable among the stock,
      warrants, and embedded or free standing derivatives, if any, using applicable
      accounting principles.




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. This equity line has been
      coveted by us not to be used at prices under $4.00 or at the permission of
      Yorkville Advisors, LLC until their notes are repaid.




We
      have
      other options to finance our efforts which 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 for
      interests in our oil and gas properties. 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 continue to work on creative
      financing structures to finance our exploration offshore Guinea, we have already
      taken steps to put in place a world renowned exploration team to go along with
      our world class asset. We believe that financing commitments will come easier
      by
      showing  our formidable technical team has the successful experience
      and background of making discoveries.  While we are working to obtain
      a financial partner(s) 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 wells to be drilled in
      the
      future.





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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.








Item3.
      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.








Item4.
      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 December
      31, 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;





•   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.





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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 December
      31,
      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.





•   hiring
      additional staff to assist in the recording of transactions and reconciliation
      of account activity.





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





Item1.  Legal
      Proceedings




For
      information regarding our legal proceedings see the legal proceedings disclosed
      in Item 3 of our most recent on Form 10-K. Except as disclosed below, there
      have
      been no material developments from the disclosures contained in our most recent
      Form 10-K.




US
      Oil




In
      the US
      Oil v. SCS and HDY case, we are preparing discovery to be sent to Plaintiff
      within the next 30 days. Initial efforts by Plaintiff to resolve this case
      without further litigation is in the very early stages. It is unknown at this
      time the chance of success of these resolution efforts.







Item1A.  Risk
      Factors




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




There
      is a Material Weakness in Our Financial Controls and Procedures




A
      material weakness is a control deficiency, or a combination of control
      deficiencies, that results in there being more than a remote likelihood that
      a
      material misstatement in our financial statements will not be prevented or
      detected. We have determined that our financial controls and procedures 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. The actions that we have taken to date have not been effective
      in
      remediating this material weakness. We do not know when this material weakness
      will be corrected. This could result in a material misstatement in our financial
      statements.






Item2.
      Unregistered Sales of Equity Securities and Use of
      Proceeds




In
      December 2007, we issued options to purchase 30,000 shares of common stock
      to an
      employee as compensation. These options have an exercise price of $1.60 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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In
      January 2008, we issued options to purchase 65,000 shares of common stock to
      two
      employees as compensation. These options have an exercise price of $2.00 per
      share and expire in three years. These transactions were made in reliance upon
      exemptions from registration under Section 4(2) of the Securities Act. Each
      certificate issued for unregistered securities contained a legend stating that
      the securities have not been registered under the Securities Act and setting
      forth the restrictions on the transferability and the sale of the securities.
      No
      underwriter participated in, nor did we pay any commissions or fees to any
      underwriter, in these transactions. These transactions did not involve a public
      offering. The investors had knowledge and experience in financial and business
      matters that allowed them to evaluate the merits and risk of receipt of these
      securities. The investors were knowledgeable about our operations and financial
      condition.




In
      January 2008, we issued options to purchase 45,000 shares of common stock to
      three directors as compensation. These options have an exercise price of $1.61
      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.






Item6.
      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 WattsKent
                Watts, Chairman of the Board,Chief
                Executive OfficerDated:
                February 11, 2008By:
                /s/ Steven M. PlumbSteven
                M. Plumb,Chief
                Financial OfficerPrincipal
                Accounting OfficerDated:
                February 11, 2008






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