UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934: For the quarterly period ended: March 31, 2000
------------------
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: 000-25496
HYPERDYNAMICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 87-0400335
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2656 South Loop West, Suite 103
Houston, Texas 77054
(Address of principal executive offices, including zip code)
RAM-Z ENTERPRISES, INC.
(Registrant's former name)
1. Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
2. As of May 8, 2000 13,007,888 shares of common stock, $0.001 par value,
were outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
Table of Contents
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements 3
Consolidated Balance Sheet at
March 31, 2000 (unaudited) 3
Consolidated Statements of Income for the three
and nine months ended March 31, 2000
and 1999 (both unaudited) 4
Consolidated Statements of Stockholders' Equity
for the nine months ended March 31,
2000 and 1999 (both unaudited) 5
Consolidated Statements of Cash Flows for the nine
months ended March 31, 2000 and 1999
(both unaudited) 6
Notes to Consolidated Financial Statements 7
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II OTHER INFORMATION
ITEM 2 Changes in Securities 12
ITEM 6 Exhibits and Reports on Form 8-K 13
(a) Exhibits
(b) Reports on Form 8-K
SIGNATURES 13
<PAGE>
Part 1 Financial Information
ITEM 1 Financial Statements
HYPERDYNAMICS CORPORATION
Balance Sheet
March 31, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash 2,379,728
Accounts receivable - Trade 321,812
Inventory 117,928
Prepaid expenses 58,045
-----------
TOTAL CURRENT ASSETS 2,877,514
Property and Equipment 164,220
Other Assets
Revenue Interests 69,297
Intangible assets - net 45,189
Deposits and other 3,348
-----------
Total other assets 117,834
-----------
TOTAL ASSETS 3,159,568
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable - Trade 111,864
Accrued expenses 96,807
Accrued taxes 9,213
-----------
TOTAL CURRENT LIABILITIES 217,884
-----------
Stockholders' Equity
Preferred stock, par value $0.001; 20,000,000
shares authorized; 3,000,000 shares issued and
outstanding. 3,000
Additional paid-in capital 2,601,190
Common stock, par value $0.001;
50,000,000 shares authorized; 12,349,503
shares issued and outstanding. 12,841
Additional paid-in capital 1,937,993
Retained (deficit) (1,613,340)
-----------
Total Stockholder's equity 2,941,684
-----------
Total Liabilities and Stockholder's Equity 3,159,568
===========
</TABLE>
See notes to financial statements
<PAGE>
HYPERDYNAMICS CORPORATION
Consolidated Income Statements
3 Months and 9 Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
3 MONTHS ENDED MARCH 31 9 MONTHS ENDED MARCH 31
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $ 495,163 $ 155,078 1,450,974 $ 489,246
Cost of Revenues 473,312 94,717 1,015,860 296,772
------------ ------------ ------------ ------------
GROSS MARGIN 21,851 60,361 435,114 192,474
Operating Expenses
Selling 32,156 17,087 73,371 26,665
General and Administrative 438,598 92,079 692,762 353,660
Interest
Depreciation 12,250 4,313 24,750 19,462
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 483,004 113,479 790,883 399,787
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (461,153) (53,118) (355,769) (207,313)
------------ ------------ ------------ ------------
Other Income (Expense)
Other income (expense) 0 512 0 (7,460)
Revenue sharing income 18,161 18,161
Gain on sale of Revenue Sharing
Agreement 12,000 0 12,000 0
Writedown of carrying value of
receivable from sale of subsidiary (50,000) 0 (50,000) 0
Interest income 21,480 1 21,507 1.426
Interest expense 0 0 0 (4,702)
------------ ------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS (459,512) (52,605) (354,101) (218,049)
Gain/(Loss) from Discontinued
Operations, net of income tax benefit of
$0 and $0, respectively 0 55,169 (568) 10,285
Gain / (Loss) on Sale of Discontinued
Operations, net of income tax benefit of
$0 and $0 , respectively 0 0 127,065 0
------------ ------------ ------------ ------------
NET INCOME (LOSS) BIT (459,512) 2,564 (227,604) (207,764)
------------ ------------ ------------ ------------
Income Tax (Benefit) 0 0 0 0
------------ ------------ ------------ ------------
NET INCOME (LOSS $ (459,512) $ 2,564 $ (227,604) $ (207,764)
============ ============ ============ ============
Income (Loss) per Common Share
NET INCOME (LOSS) PER C/S SHARE $ (0.04) $ 0.00 $ (0.02) $ (0.02)
------------ ------------ ------------ ------------
Weighted average share outstanding 12,688,041 12,256,534 12,520,292 12,224,158
</TABLE>
See notes to financial statements
<PAGE>
HYPERDYNAMICS CORPORATION
Consolidated Statements of Stockholders' Equity
9 Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
RETAINED
AS RESTATED SHARES AMOUNT PAID IN CAPITAL (DEFICIT) TOTALS
Preferred Stock
Balances - June 30, 1998 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Shares issued for cash
Balances - March 31, 1999
Common Stock
Balances - June 30, 1998 12,208,321 12,208 1,567,500 1,579,708
Adjustments for options paid 37,625 37,626
Options exercised 18,182 18 24,982 25,000
Shares issued for cash 123,000 123 49,877 50,000
Balances - March 31, 1999 12,349,503 $12,349 $ 1,679,984 1,692,334
---------- ------- ----------------
Retained Earnings
Balance - June 30, 1998 (1,201,191) (1,201,191)
Net (loss) (218,084) (218,084)
Balance - March 31, 1999 $(1,419,275) (1,419,275)
------------
Total Stockholders' Equity -
March 31, 1999 $ 273,059
------------
Preferred Stock
Balance - June 30, 1999 0.00 $ 0.00 $ 0.00 $ 0.00
Shares issued for cash 3,000,000 3,000 2,601,190 2,604,190
Balance - March 31, 2000 3,000,000 $ 3,000 $ 2,601,190 2,604,190
---------- ------- ----------------
Common Stock
Balances - June 30, 1999 12,409,503 $12,409 $ 1,709,924 1,722,333
Shares issued for cash 432,000 432 228,068 228,500
Balances - March 31, 2000 12,841,503 $12,841 $ 1,937,992 1,950,834
---------- ------- ----------------
Retained Earnings
Balance - June 30, 1998 $(1,385,737) (1,385,737)
Net Income (Loss) (227,603) (227,603)
Balances - March 31, 2000
$(1,613,340) (1,613,340)
------------
Total Stockholders' Equity -
March 31, 2000 $ 2,941,684
------------
</TABLE>
See notes to financial statements
<PAGE>
HYPERDYNAMICS CORPORATION
Consolidated Statements of Cash Flows
9 Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
Cash flows from operating activities
Net Income (loss) $ (227,603) $(207,764)
Adjustments to reconcile net income
to cash provided from operating activities
Depreciation and amortization 24,750 19,010
Gain on sale of revenue sharing agreement (12,000) 0
Sale of Discontinued Operations (127,065) 0
Writedown of carrying value of receivable
from sale of subsidiary 50,000 0
Writedown of capitalized intangible assets 4,757
Income or loss from Discontinued Operations 568 (10,285)
Changes in:
Restricted certificate of deposit 0 94,000
Accounts receivable - Trade (239,626) (38,969)
- Other 1,500 30,000
Inventory (65,968) (16,376)
Other assets (58,046) 0
Collection of revenue interest 1,263 31,056
Accounts payable 64,626 34,119
Accrued expenses 90,121 (10,600)
----------- ----------
NET CASH USED FOR OPERATING ACTIVITIES (492,723) (75,809)
Cash flows from investing activities
Cash investment in discontinued operations 0 (10,958)
Proceeds from sale of revenue interest 85,500 0
Purchase of fixed assets (101,939) (48,405)
----------- ----------
NET CASH USED FOR INVESTING ACTIVITIES (16,439) (59,363)
Cash flows from financing activities
Increase in short-term convertible notes 12,499
Sale of preferred stock 2,604,190 0
Sale of common stock 228,500 112,626
----------- ----------
NET CASH PROVIDED FROM FINANCING ACTIVITIES 2,832,690 125,125
Net increase (decrease) in cash 2,323,528 (10,047)
CASH AT BEGINNING OF PERIOD 56,200 11,582
----------- ----------
CASH AT END OF PERIOD $2,379,728 $ 1,535
=========== ==========
Supplemental Information
Interest paid $ 0 $ 4,702
</TABLE>
See notes to financial statements
<PAGE>
HYPERDYNAMICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. The accompanying unaudited interim financial statements of Hyperdynamics
Corporation, a Delaware Corporation ("Company") have been prepared in accordance
with generally accepted accounting principles 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 the Company's latest
Annual Report filed with the SEC on Form 10-KSB. 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 disclosure contained in the audited financial statements for the
most recent fiscal year, 1999, as reported in Form 10-KSB, have been omitted.
2. During the quarter 177,000 options for free trading shares were exercised
for $105,000 and 100,000 warrants for restricted 144 stock was exercised for
$50,000.
3. Revenue Interests consists of the following:
Revenue interest in SeirraNet $19,865
Revenue interest in Wired & Wireless Corporation 49,432
------
$69,297
======
4. Sale of Revenue Interest.
In May 1997, the Company purchased a 4% revenue interest in the Sierra-Net
subsidiary of Internet Finance & Equipment, Inc. by issuing 177,000 shares of
stock. The Company valued this transaction at $177,000. Since that time, the
Company has been receiving expected cash flows and amortizing its carrying value
appropriately. On March 6, 2000, substantially all assets of Sierra-Net were
purchased by M&A West, Inc. (stock trading symbol "MAWI"), for cash and MAWI
stock. Sierra-Net may only sell 1/6 of the shares per month during the first
six months after the MAWI shares are registered (the "lock-up period"). As of
May 12, 2000, these shares had not been registered. This sale includes a "put"
provision whereby Sierra-Net can demand repurchase of its MAWI stock for $16.25
per share. The provision expires at the end of the lock-up period. If
Sierra-Net exercises this provision, MAWI may refuse to repurchase the stock and
Sierra-Net can then elect to rescind the entire transaction and return the MAWI
shares and all of the cash received up front. As of May 12, 2000, these shares
were trading at around $11 per share. According to the May 1997 agreement, the
Company's share of any Sierra-Net asset sales is 19%, and accordingly, the
Company received $85,500 as its share of the cash received by Sierra-Net.
$73,500 of this cash is shown as a reduction of the remaining $93,365 carrying
value of the Sierra-Net Revenue Interest and the remaining $12,000 was
recognized in the current quarter. Profit will be recognized on this
transaction commensurate with the previous monthly revenue stream until the
"put" provision expires.
<PAGE>
5. Write down of revenue interest.
In September 1999, the Company sold its Wired & Wireless, Inc. ("W&W")
subsidiary to its founder in exchange for a 5% net revenue interest. This asset
is valued at $100,000 and W&W's net book value at that time was a deficit
$27,065, resulting in a recorded gain on sale of $127,065. Cash flows received
since that date total $4,515, and the principal balance of $100,000 was
amortized by $568. In November 1999, a hunting accident severely injured the
key employee of W&W, and the Company took a resulting $50,000 write-down in the
current quarter. The net remaining balance is $49,432.
6. The Company utilizes trade credit lines to purchase components that it
sells. Terms with its vendors range from COD company check to net 30 day terms.
The Company has no long term debt
7. Preferred Stock. During the quarter $3,000,000 of Series A preferred
stock was sold to investors. Expenses of the offering totaled $395,810 and were
netted against capital, resulting in net proceeds of $2,604,190. The preferred
stock is convertible into the Company's common stock at a price of 80% of the
previous 5 day average trading days upon the conversion date. All or portions of
the 3,000 shares outstanding may converted at any time.
8. Subsequent to March 31, 2000, the Company has signed a 10-year lease with
the Westwood Technology Center in Houston for approximately 15,236 sq. ft. of
general office, integration, and IT hosting center space. The Company will move
its Houston based headquarters into the space in the September time frame. The
space is to be provided by the Landlord to the Company for its build-out by June
30, 2000. Under the terms of the lease, the Company has a right of first offer
for an additional 15,000 square feet of space adjacent to its current space.
Concurrently, the Company has signed a five year contract with Worldcom to
provide Tier-1 scalable backbone connectivity to support the Company's emerging
IT hosting services. Under this agreement Worldcom will extend their
Metropolitan Fiber network into the Company's IT hosting facility inside the
Westwood Technology Center and provide redundant, high bandwidth access for the
whole 536,000 sq. ft. facility. The Company will commit to a minimum bandwidth
utilization and resell the bandwidth to its clients with its bundled IT hosting
services.
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 10QSB contains
forward-looking statements. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, expectations, future events or
performance and underlying assumptions and other statements which are other than
statements of historical facts. Certain statements contained herein are
forward-looking statements and, accordingly, involve risks and uncertainties
which could cause actual results or outcomes to differ materially from those
expressed in the forward-looking statements. The Company's expectations,
beliefs and projections are expressed in good faith and are believed by the
Company to have a reasonable basis, including without limitations, management's
examination of historical operating trends, data contained in the Company's
records and other data available from third parties, but there can be no
assurance that management's expectations, beliefs or projections will result or
be achieved or accomplished. In addition to other factors and matters discussed
elsewhere herein, the following are important factors that, in the view of the
Company, could cause actual results to differ materially from those discussed in
the forward-looking statements: the ability of the Company to respond to changes
in the information system environment, competition, the availability of
financing, and, if available, on terms and conditions acceptable to the Company,
and the availability of personnel in the future.
<PAGE>
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
General Discussion
During the quarter, we reached a core capitalization milestone in raising
$3,000,000 through its private placement of preferred stock. This allowed the
Company to spend much of the quarter positioning itself and actually
implementing plans for future controlled growth. Operationally, the Company
maintains three primary revenue sources. We provide conventional IT services,
migration services to help our clients develop end-to-end eBusiness systems, and
we are rapidly preparing to fully launch our new bundled service offerings for
complete IT hosting. This quarter and next as we begin to implement our IT
hosting strategies we will be establishing a seriously focused marketing and
sales plan, especially for IT hosting. As we move closer to becoming 100%
on-line with the Houston based IT hosting center at the Westwood Technology
Center, we will be preparing to raise additional capital and looking for the
next opportunities to expand nationally. Overall, management is very pleased
with the results of operations this quarter and excited about the positioning of
our business plan and expected future results.
Results of Operations
Sales increased to $495,163 and $1,450,974 for the three (3) months and nine (9)
months ended March 31, 2000, respectively. This compared to $155,078 and
$489,246 for the same periods in 1999, respectively. The increase in revenue is
a result of the continuation of large projects started in 1999 while
successfully closing new business in addition to these projects. Additionally,
our continued flexibility to provide conventional IT services while implementing
our newer migration services to eBusiness and IT hosting services is helping us
to maintain our core revenue base while adding new sources of revenue.
Cost of Revenues increased correspondingly to $473,312 and $1,015,860 for the
three (3) months and nine (9) months ended March 31, 2000, respectively. This
compared to $94,717 and $296,772 for the same periods in 1999, respectively.
For the three (3) month period ended March 31, 2000, gross margin decreased to
4.40% compared to 44.65% for the same period in 1999. The decrease
was due to a portion of the Company's service revenue that was contracted to a
third parties, thereby reducing its gross margin percentage for the quarter. The
outsourcing has been necessary to keep up with the Company's growth rate without
adding fixed overhead too fast. As more technical professionals are employed or
added through acquisition, it is expected that gross margins will increase
significantly in future periods. For the nine (9) months period ended March 31,
2000, gross margin also decreased to 30.00% compared to 39.34% for the same
period in 1999. The decrease overall for the nine months is a combination of
increasing efficiencies overall within the organization to provide more cost
effective services even while the Company is outsourcing certain performance
processes to manage growth while minimizing losses and ultimately maximizing
profits. This outsourcing is the Company's mechanism to determine the optimum
time to add fixed overhead and to match the addition of fixed administrative
overhead, discussed below, as closely as possible with its increase in revenues
and gross profits.
<PAGE>
Selling, General and Administrative expenses increased to $ 470,754 and $766,133
in the three (3) month and nine (9) month periods ending March 31, 2000, as
compared to $ 109,166 and $380,325 for the same periods in 1999, respectively.
$225,396 of the increase was due to a change in accounting policy regarding the
expensing versus capitalization of certain pre-operational costs of start-up
activities for the Company's bundled IT hosting services. Up until this now, the
Company had maintained a policy to capitalize certain expenditures related
specifically to establishing its new bundled IT hosting services planned to come
on-line in September of this year with the new IT hosting facility. As a result
of the change in accountants recently announced in the Company's 8K filing on
April 18, 2000, the Company's new accounting firm brought to its attention that
SOP 98-5, "Reporting on the Costs of Start-up Activities", applied to us
starting in our current fiscal year. Under the instruction of SOP 98-5 the
Company has herein reflected the cumulative effect with a one-time adjustment in
this quarter ended March 31, 2000 and is not required to report the pro forma
effects of retroactive application. The remaining increase was due to in
selling, legal, and accounting expenses as well as accounting, and
administrative staff to help support increasing activity levels.
Net Loss. The net loss of the Company was ($459,512) and ($227,604) for the
three (3) month and nine (9) month periods ended March 31, 2000. This compares
to a gain and loss of $2,564 and $(207,764) for the same periods in 1999,
respectively. The negative results are due primarily to a change in accounting
policy required by SOP 98-5 as explained above and an increase in staffing for
sales, accounting and legal expenses. Also, the Company had expected to
recognize a portion of the extraordinary gain on the sale of SierraNet, Inc. as
disclosed to a footnote in the financial statements above. Due to certain
provisions explained in this footnote, the Company has yet to recognize any of
this gain. Based on the plan to role-out the bundled IT hosting services later
this year, the Company expects fewer necessary expenditures that it would have
capitalized under its old policy but now will expense according to SOP 98-5.
Thus, the Company is working hard to reflect profits during periods that it is
ramping up its marketing and sales for its new IT hosting services as it
maintains its goal to be profitable as it grows.
Liquidity and Capital Resources
At March 31, 2000 the Company's current ratio of current assets to current
liabilities was 13.21. This compares to 1.29 for 1999. The Company has
dramatically improved its current ratio through improving results of operations
as well as obtaining additional capital financing through its Reg D private
placement completed during the quarter. The Company does not have any long-term
debt nor does it plan for any.
In the process of increasing its marketing and sales activities in preparation
for bringing the new IT hosting facility on-line, the Company is evaluating a
long-term equity line of capital to be used for implementing additional IT
hosting centers in strategic locations around the country and for key
acquisitions of technically talented IT consulting and integration firms.
The Company is in a position to obtain additional capital upon the exercise of
previously-issued warrants and outstanding options for common stock.
Prospective Information
The Company is now realizing increased sales and expects growth and
profitability in future periods. The progress of the Company to date has been
accomplished with limited capital resources. Now and for future periods, it has
obtained the working capital necessary to meet its short-term business plan
goals and to continue to grow with profits. With the new IT hosting facility
coming on-line, the Company's bundled IT service offerings and related revenues
are expected to grow exponentially. The Company plans to announce a relationship
with a key business development partner in the coming weeks. Through controlled
overhead, enhanced resources, and a focused marketing and sales strategy,
management will maintain a goal to become steadily profitable while it continues
to grow the business and expects to be successful in doing so.
<PAGE>
In preparation of rolling out its full-blown marketing plans, the Company has
already hired two new sales professionals with combined 20 years experience.
Additionally, the board of Directors made a decision to drop all reference to
the Company's subsidiaries and to roll out a unified new identity referring only
to Hyperdynamics Corporation. The Company's website will be updated in the
coming weeks to reflect this unified identity as Hyperdynamics, "the premier
information technology service provider, providing the power for eBusiness."
During the quarter management applied for a NASDAQ Stock Market small-cap
listing. Market conditions were such that delayed some requirements for the
Company to meet to become listed. To facilitate the efficient processing of its
application when market conditions become favorable, management is evaluating
whether to have a stub audit completed for the period ended March 31, 2000 so
that the process to become listed on a major exchange can be expedited as much
as reasonably possible. Management feels that becoming listed on a major
exchange is an important milestone that the Company can reach in the coming
months and will continue to put a priority towards that goal.
Now that the implementation of the Company's Houston based IT hosting facility
is in process, Management will continue to update the Company's ITSP
(Information Technology Service Provider) business plan and will look to start
its next phase of capitalization. The Company is working to establish an equity
line to support its plans for adding additional IT hosting facilities across the
country and facilitate appropriate acquisitions to enhance its technical
capabilities. During the current quarter, management has made the decision to
expend adequate resources to focus on the core marketing and sales plan for the
Company.
<PAGE>
PART II OTHER INFORMATION
ITEM 2. Changes In Securities
On January 12, 2000, we sold 2,000 shares of our new issue Series A Preferred
Stock for a total of $2,000,000 in cash to three accredited investors. As part
of this transaction, we also issued to the three investors a total of 200,000
warrants to purchase shares of our common stock at a price of $5.9125 per share
which are immediately exercisable and expire on January 6, 2005. In addition,
we issued as part of the placement costs a total of 200,000 warrants to purchase
shares of our common stock at a price of $7.095 per share which are immediately
exercisable and expire on January 6, 2005.
On January 25, 2000, we sold an additional 1,000 shares of our new issue Series
A Preferred Stock for a total of $1,000,000 in cash to one of the same
accredited investors who purchased on January 12, 2000. As part of this
transaction, we also issued to the accredited investor a total of 100,000
warrants to purchase shares of our common stock at a price of $5.9125 per share
which are immediately exercisable and expire on January 6, 2005. In addition,
we issued as part of the placement costs, 100,000 warrants to purchase shares of
our common stock at a price of $7.095 per share which are immediately
exercisable and expire on January 6, 2005.
This was a private placement offering of securities that was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the Act) and Rule 506 of Regulation D of the Act. Each certificate issued for
these securities contained a legend stating that the securities have not been
registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities. None of the transactions
involved a public offering. We believe that these investors had the knowledge
and experience in financial and business matters that allowed them to evaluate
the merits and risk of the purchase of these securities. We believe that these
investors were knowledgeable about our operations and financial condition.
The Series A Preferred Stock is convertible into our common stock upon the
earlier of (i) the effective date of a registration statement covering the
shares of common stock underlying Series A Preferred Stock (the "Conversion
Shares), or (ii) the ninetieth (90th) day after the issuance of each such share
of Series A Preferred Stock(referred to as a "Conversion Date"). Each share of
Series A Preferred Stock outstanding on January 30, 2002 shall be converted
automatically into Common Stock on such date in accordance with the Conversion
Formula and the Conversion Price then in effect.
<PAGE>
The Series A Preferred Stock is convertible into our common stock in accordance
with the "Conversion Formula" which is $1,000.00 divided by "Conversion Price",
where:
Conversion Price = Average Price at Closing or the Average Price at Conversion,
whichever is less; and
Average Price at Closing = The five (5)-day average Closing Bid Price for the
Corporation's Common Stock on the trading date immediately before the date such
Series A Preferred Stock was issued; and
Average Price at Conversion = Eighty percent (80%) of (that is, a 20% discount
to) the five (5)-day average Closing Bid Price for the Corporation's Common
Stock immediately before the Conversion Date.
ITEM 6 Exhibits and Reports on Form 8-K
(A) EXHIBITS
The following exhibits are filed with this Quarterly Report or
are incorporated herein by reference:
Exhibit Number Description
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
On January 26, 2000 the Company filed form 8K reporting the
completion of its $3,000,000 financing.
On April 18, 2000 the Company filed form 8K reporting on the
change in its certifying accountant.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly
HyperDynamics Corporation
(Registrant)
By: /s/ Kent Watts
--------------------
Kent Watts, Chairman of the Board,
Chief Executive Officer,
and Chief Accounting Officer
Dated: May 31, 2000
