----

----

| T | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |   |
|---|-----------------------------------------------------------------------------------------|--------|

| £ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |   |
|--------|------------------------------------------------------------------------------------------|--------|

| Washington                                     | 001-01428                           | 68-0612191                        |
|------------------------------------------------|-------------------------------------|-----------------------------------|
| (State or other jurisdiction of incorporation) | (Commission File  Number) | (IRS Employer Identification No.) |

| 1611 N. Molter Road, Ste. 201 Liberty Lake, Washington |   | 99019      |
|-------------------------------------------------------------|--------|------------|
| (Address of principal executive offices)                    |   | (Zip Code) |

----

| Large accelerated filer £                                             | Accelerated filer £    |
|----------------------------------------------------------------------------|-----------------------------|
| Non-accelerated filer £ (Do not check if a smaller reporting company) | Smaller reporting company T |

----

----

----

| HuntMountain Resources Ltd. and Subsidiaries                                                                   |   |        |        |   |         |   |
|----------------------------------------------------------------------------------------------------------------|--------|-------------|-------------|--------|--------------|--------|
| (An Exploration Stage Enterprise)                                                                              |   |        |        |   |         |   |
|                                                                                                           |   |        |        |   |         |   |
| Consolidated Balance Sheets                                                                                    |   |        |        |   |         |   |
|                                                                                                           |   |        |        |   |         |   |
|                                                                                                           |   | June 30,    |        |   | December 31, |   |
|                                                                                                           |   | 2009        |        |   | 2008         |   |
|                                                                                                           |   | (unaudited) |        |   |         |   |
| Assets                                                                                                         |   |        |        |   |         |   |
|                                                                                                           |   |        |        |   |         |   |
| CURRENT ASSETS:                                                                                                |   |        |        |   |         |   |
| Cash and cash equivalents:                                                                                     |   |        |        |   |         |   |
| Cash                                                                                                           |   | $           | 6,758       |   |         | $      | 62,162 |   |
| Short term cash investments - domestic                                                                         |   |        | 15,170      |   |         |   | 14,246 |   |
| Short-term cash investments - Argentina                                                                        |   |        | 94,059      |   |         |   | 174,076 |   |
| Total cash and cash equivalents                                                                                |   |        | 115,986     |   |         |   | 250,484 |   |
|                                                                                                           |   |        |        |   |         |   |   |   |
| Receivables                                                                                                    |   |        | 131,272     |   |         |   | 153,135 |   |
| Prepaid expenses                                                                                               |   |        | 67,547      |   |         |   | 77,453 |   |
| Accrued interest receivable                                                                                    |   |        | 11,373      |   |         |   | 5,909 |   |
| Deposits paid to vendors                                                                                       |   |        | 584,000     |   |         |   | 584,000 |   |
| Total current assets                                                                                           |   |        | 910,179     |   |         |   | 1,070,981 |   |
|                                                                                                           |   |        |        |   |         |   |   |   |
| PROPERTY AND EQUIPMENT, NET:                                                                                   |   |        | 575,202     |   |         |   | 1,323,204 |   |
|                                                                                                           |   |        |        |   |         |   |   |   |
| OTHER ASSETS:                                                                                                  |   |        |        |   |         |   |   |   |
| Receivable - V.A. tax, Argentina, net                                                                          |   |        | 417,036     |   |         |   | 380,153 |   |
| Performance bond                                                                                               |   |        | 139,108     |   |         |   | 98,927 |   |
| Property deposits and property purchase option                                                                 |   |        | 341,500     |   |         |   | 341,500 |   |
| Investments                                                                                                    |   |        | 7,331       |   |         |   | 7,331 |   |
| Total other assets                                                                                             |   |        | 1,614,975   |   |         |   | 827,911 |   |
|                                                                                                           |   |        |        |   |         |   |   |   |
| Total assets                                                                                                   |   | $           | 3,100,356   |   |         | $      | 3,222,095 |   |
|                                                                                                           |   |        |        |   |         |   |   |   |
| Liabilities and Stockholders’ Equity (Deficit)                                                           |   |        |        |   |         |   |   |   |
|                                                                                                           |   |        |        |   |         |   |   |   |
| CURRENT LIABILITIES:                                                                                           |   |        |        |   |         |   |   |   |
| Trade accounts payable                                                                                         |   | $           | 1,982,170   |   |         | $      | 2,376,402 |   |
| Accrued wages and related taxes                                                                                |   |        | 110,338     |   |         |   | 115,260 |   |
| Employee expense payable                                                                                       |   |        | 1,337       |   |         |   | 3,412 |   |
| Tax payable, Argentina                                                                                         |   |        | 80,392      |   |         |   | 123,290 |   |
| Shareholder loan, including interest payable                                                                   |   |        | -           |   |         |   | 1,898,534 |   |
| Net short term note payable                                                                                    |   |        | 528,983     |   |         |   | - |   |
| Accrued interest on note payable                                                                               |   |        | 216,049     |   |         |   | - |   |
| Other payable                                                                                                  |   |        | -           |   |         |   | 202,500 |   |
| Note payable                                                                                                   |   |        | 34,182      |   |         |   | - |   |
| Total current liabilities                                                                                      |   |        | 2,953,452   |   |         |   | 4,719,397 |   |
|                                                                                                           |   |        |        |   |         |   |   |   |
| COMMITMENTS & CONTINGENCIES                                                                                |   |        | -           |   |         |   | - |   |
|                                                                                                           |   |        |        |   |         |   |   |   |
| STOCKHOLDERS’ EQUITY (DEFICIT):                                                                          |   |        |        |   |         |   |   |   |
| Preferred stock – 10,000,000 shares, $0.001 par value, authorized;-0- shares issued and outstanding      |   |        | -           |   |         |   | - |   |
| Common stock – 300,000,000 shares, $0.001 par value, authorized;76,251,362 shares issued and outstanding |   |        | 76,251      |   |         |   | 76,251 |   |
| Additional paid-in capital                                                                                     |   |        | 57,770,373  |   |         |   | 50,975,578 |   |
| Retained earnings - prior to exploration stage                                                                 |   |        | 90,527      |   |         |   | 90,527 |   |
| Deficit accumulated during the exploration stage                                                               |   |        | (57,639,430 | )      |         |   | (52,448,659 | ) |
| Accumulated other comprehensive gain (loss)                                                                    |   |        | (150,817    | )      |         |   | (190,999 | ) |
| Total stockholders’ equity (deficit)                                                                     |   |        | 146,904     |   |         |   | (1,497,302 | ) |
|                                                                                                           |   |        |        |   |         |   |   |   |
| Total liabilities and stockholders’ equity (deficit)                                                     |   | $           | 3,100,356   |   |         | $      | 3,222,095 |   |
|  The accompanying condensed notes are an integral part of these consolidated financial statements.        |   |        |        |   |         |   |   |   |

----

| HuntMountain Resources Ltd. and Subsidiaries                                                |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |
|---------------------------------------------------------------------------------------------|--------|-----------------------------|------------|--------|---------------------------|--------|-------------|------------------------------------------|--------|--------|-------------|--------|--------|
| (An Exploration Stage Enterprise)                                                           |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |
| Consolidated Statements of Operations                                                       |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |
|                                                                                        |   | Three months ended June 30, |       |   | Six months ended June 30, |   |        | From Inception of Development Stage |   |
|                                                                                        |   | 2009                        |       |   | 2008                      |   |        | 2009                                     |   |   | 2008        |   |   | July 1, 2005 through |   |
|                                                                                        |   | (unaudited)                 |       |   | (unaudited)               |   |        | (unaudited)                              |   |   | (unaudited) |   |   | June 30, 2009 |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |
| INCOME:                                                                                     |   | $                           | -          |   |                      | $      | -           |                                     |   | $      | -           |   |   | $ | - |   |   | $ | - |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| EXPENSES:                                                                                   |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| Professional fees                                                                           |   |                        | 179,424    |   |                      |   | 261,848     |                                     |   |   | 409,781     |   |   |   | 427,072 |   |   |   | 2,039,005 |   |
| Marketing                                                                                   |   |                        | 158        |   |                      |   | 14,154      |                                     |   |   | 1,271       |   |   |   | 20,653 |   |   |   | 229,274 |   |
| Exploration expenses                                                                        |   |                        | 267,840    |   |                      |   | 1,435,152   |                                     |   |   | 586,451     |   |   |   | 2,263,565 |   |   |   | 8,461,525 |   |
| Travel expenses                                                                             |   |                        | 53,488     |   |                      |   | 69,210      |                                     |   |   | 84,746      |   |   |   | 133,059 |   |   |   | 641,725 |   |
| Administrative and office expenses                                                          |   |                        | 86,369     |   |                      |   | 125,271     |                                     |   |   | 166,078     |   |   |   | 178,161 |   |   |   | 912,167 |   |
| Payroll expenses                                                                            |   |                        | 221,194    |   |                      |   | 228,138     |                                     |   |   | 439,687     |   |   |   | 418,288 |   |   |   | 2,302,546 |   |
| Stock compensation expense                                                                  |   |                        | 3,500      |   |                      |   | 54,000      |                                     |   |   | 7,000       |   |   |   | 106,500 |   |   |   | 434,862 |   |
| Common stock and options issued for services                                                |   |                        | -          |   |                      |   | 75,000      |                                     |   |   | -           |   |   |   | 75,000 |   |   |   | 479,838 |   |
| Interest expense and banking charges                                                        |   |                        | 106,965    |   |                      |   | 92,550      |                                     |   |   | 191,955     |   |   |   | 233,788 |   |   |   | 716,129 |   |
| Other expense - Argentina                                                                   |   |                        | 14,521     |   |                      |   | -           |                                     |   |   | 20,407      |   |   |   | - |   |   |   | 107,647 |   |
| Value added tax net present value adjustment                                                |   |                        | 49,606     |   |                      |   | -           |                                     |   |   | 86,810      |   |   |   | - |   |   |   | 1,040,330 |   |
| Depreciation expense                                                                        |   |                        | 22,313     |   |                      |   | 12,819      |                                     |   |   | 45,622      |   |   |   | 15,133 |   |   |   | 143,269 |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |                        | 1,005,378  |   |                      |   | 2,368,141   |                                     |   |   | 2,039,806   |   |   |   | 3,871,219 |   |   |   | 17,508,319 |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| LOSS BEFORE OTHER INCOME                                                                    |   |                        | (1,005,378 | )      |                      |   | (2,368,141  | )                                        |   |   | (2,039,806  | )      |   |   | (3,871,219 | ) |   |   | (17,508,319 | ) |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| OTHER INCOME/(EXPENSE):                                                                     |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| Financing charge                                                                            |   |                        | (2,837,295 | )      |                      |   | (12,244,341 | )                                        |   |   | (2,837,295  | )      |   |   | (16,474,287 | ) |   |   | (31,687,292 | ) |
| Amortization of debt discount                                                               |   |                        | (528,983   | )      |                      |   | (2,254,073  | )                                        |   |   | (528,983    | )      |   |   | (3,895,284 | ) |   |   | (8,747,468 | ) |
| Dividend and interest income                                                                |   |                        | 7,655      |   |                      |   | 1,965       |                                     |   |   | 9,831       |   |   |   | 4,000 |   |   |   | 90,324 |   |
| Income from partnership interest                                                            |   |                        | -          |   |                      |   | -           |                                     |   |   | -           |   |   |   | - |   |   |   | 5,423 |   |
| Gain on sale of fixed assets                                                                |   |                        | -          |   |                      |   | -           |                                     |   |   | 5           |   |   |   | - |   |   |   | 2,424 |   |
| Foreign exchange gain/(loss)                                                                |   |                        | (9,836     | )      |                      |   | -           |                                     |   |   | 157,007     |   |   |   | - |   |   |   | 157,007 |   |
| Accretion of VAT discount, Argentina                                                        |   |                        | 16,712     |   |                      |   | -           |                                     |   |   | 48,471      |   |   |   | - |   |   |   | 48,471 |   |
| Net other income                                                                            |   |                        | -          |   |                      |   | (6,941      | )                                        |   |   | -           |   |   |   | (6,141 | ) |   |   | - |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| LOSS BEFORE INCOME TAXES:                                                                   |   |                        | (4,357,126 | )      |                      |   | (16,871,531 | )                                        |   |   | (5,190,771  | )      |   |   | (24,242,932 | ) |   |   | (57,639,430 | ) |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| Income taxes:                                                                               |   |                        | -          |   |                      |   | -           |                                     |   |   | -           |   |   |   | - |   |   |   | - |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| NET LOSS AFTER TAXES from continued operations                                              |   | $                           | (4,357,126 | )      |                      | $      | (16,871,531 | )                                        |   | $      | (5,190,771  | )      |   | $ | (24,242,932 | ) |   | $ | (57,639,430 | ) |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| OTHER COMPREHENSIVE GAIN/(LOSS)                                                             |   |                        | 54,853     |   |                      |   | -           |                                     |   |   | 40,183      |   |   |   | - |   |   |   | - |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE LOSS                                                                          |   | $                           | (4,302,274 | )      |                      | $      | (16,871,531 | )                                        |   | $      | (5,150,588  | )      |   | $ | (24,242,932 | ) |   | $ | (57,639,430 | ) |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| BASIC AND DILUTED COMPREHENSIVE LOSS PER SHARE based on weighted-average shares outstanding |   | $                           | (0.06      | )      |                      | $      | (0.32       | )                                        |   | $      | (0.07       | )      |   | $ | (0.58 | ) |   |   |   |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING, BASIC AND DILUTED                               |   |                        | 76,251,362 |   |                      |   | 53,322,212  |                                     |   |   | 76,251,362  |   |   |   | 41,867,969 |   |   |   |   |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |                        |       |   |                      |   |        |                                     |   |   |        |   |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements.     |   |

----

| HuntMountain Resources Ltd. and Subsidiaries                                                  |   |                  |       |   |                 |   |        |
|-----------------------------------------------------------------------------------------------|--------|-----------------------|------------|--------|----------------------|--------|-------------|
| (An Exploration Stage Enterprise)                                                             |   |                  |       |   |                 |   |        |   |   |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |
| Consolidated Statements of Cash Flows                                                         |   |                  |       |   |                 |   |        |   |   |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |
|                                                                                          |   |                  |       |   |                 |   |        | From Inception |   |
|                                                                                          |   | Six months ended |       |   | of Exploration Stage |   |
|                                                                                          |   | June 30,              |       |   | July 1, 2005 through |   |
|                                                                                          |   | 2009                  |       |   | 2008                 |   |        | June 30, 2009 |   |
|                                                                                          |   | (unaudited)           |       |   | (unaudited)          |   |        | (unaudited) |   |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |
| Increase (Decrease) in Cash and Cash Equivalents                                              |   |                  |       |   |                 |   |        |   |   |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                         |   |                  |       |   |                 |   |        |   |   |
| Net loss                                                                                      |   | $                     | (5,190,771 | )      |                 | $      | (24,242,932 | ) |   | $ | (57,639,430 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities                    |   |                  |       |   |                 |   |        |   |   |   |   |   |
| Depreciation expense                                                                          |   |                  | 45,622     |   |                 |   | 15,133      |   |   |   | 143,269 |   |
| Stock option compensation expense                                                             |   |                  | 7,000      |   |                 |   | 106,500     |   |   |   | 434,862 |   |
| Common stock and options issued for services                                                  |   |                  | -          |   |                 |   | 75,000      |   |   |   | 479,838 |   |
| Financing charge                                                                              |   |                  | 2,837,295  |   |                 |   | 16,474,287  |   |   |   | 31,687,292 |   |
| Amortization of debt discount                                                                 |   |                  | 528,983    |   |                 |   | 3,895,284   |   |   |   | 8,747,468 |   |
| Gain on sale of precious metal investments                                                    |   |                  | -          |   |                 |   | -           |   |   |   | (15,194 | ) |
| Value added tax net present value adjustment                                                  |   |                  | 49,606     |   |                 |   | -           |   |   |   | 49,606 |   |
| Accretion of VAT discount                                                                     |   |                  | (48,471    | )      |                 |   | -           |   |   |   | (48,471 | ) |
| Decrease (increase) in receivables                                                            |   |                  | (125,419   | )      |                 |   | (477,273    | ) |   |   | (658,707 | ) |
| Decrease (increase) in prepaid expenses                                                       |   |                  | 9,906      |   |                 |   | 10,072      |   |   |   | (67,547 | ) |
| Decrease (increase) in deposits paid to vendors                                               |   |                  | -          |   |                 |   | -           |   |   |   | (584,000 | ) |
| Accrued interest income                                                                       |   |                  | (5,464     | )      |                 |   | (23         | ) |   |   | (11,373 | ) |
| Increase (decrease) in accounts payable                                                       |   |                  | (444,126   | )      |                 |   | 394,534     |   |   |   | 2,014,852 |   |
| Increase in interest payable, shareholder loan                                                |   |                  | 187,515    |   |                 |   | -           |   |   |   | 216,049 |   |
| Increase in accrued liabilities                                                               |   |                  | (8,390     | )      |                 |   | (6,022      | ) |   |   | 137,995 |   |
| Increase (decrease) in other payable                                                          |   |                  | (202,500   | )      |                 |   | -           |   |   |   | - |   |
| Increase in note payable                                                                      |   |                  | 34,182     |   |                 |   | -           |   |   |   | 34,182 |   |
| Net cash used in operating activities                                                         |   |                  | (2,325,031 | )      |                 |   | (3,755,439  | ) |   |   | (15,079,308 | ) |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                         |   |                  |       |   |                 |   |        |   |   |   |   |   |
| Land purchases                                                                                |   |                  | -          |   |                 |   | -           |   |   |   | (710,000 | ) |
| Performance bond                                                                              |   |                  | -          |   |                 |   | -           |   |   |   | (247,486 | ) |
| Property deposits                                                                             |   |                  | -          |   |                 |   | (135,000    | ) |   |   | (271,500 | ) |
| Property purchase option                                                                      |   |                  | -          |   |                 |   | -           |   |   |   | (70,000 | ) |
| Sale of precious metal investments                                                            |   |                  | -          |   |                 |   | -           |   |   |   | 28,913 |   |
| Acquisition of equipment                                                                      |   |                  | (4,679     | )      |                 |   | (152,738    | ) |   |   | (716,542 | ) |
| Net cash used in investing activities                                                         |   |                  | (4,679     | )      |                 |   | (287,738    | ) |   |   | (1,986,615 | ) |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                         |   |                  |       |   |                 |   |        |   |   |   |   |   |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |   |   |   |
| Proceeds from convertible note financing                                                      |   |                  | 2,080,500  |   |                 |   | 4,838,442   |   |   |   | 12,992,062 |   |
| Proceeds from sale of common stock                                                            |   |                  | -          |   |                 |   | -           |   |   |   | 1,132,870 |   |
| Proceeds from shareholder loan                                                                |   |                  | -          |   |                 |   | -           |   |   |   | 1,870,000 |   |
|  Net cash provided by financing activities                                               |   |                  | 2,080,500  |   |                 |   | 4,838,442   |   |   |   | 15,994,932 |   |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |   |   |   |
| Effect of currency translation on cash                                                        |   |                  | 114,712    |   |                 |   | (73,181     | ) |   |   | 79,057 |   |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |   |   |   |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |   |   |   |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                          |   |                  | (134,498   | )      |                 |   | 722,084     |   |   |   | (991,934 | ) |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR/PERIOD                                           |   |                  | 250,484    |   |                 |   | 653,304     |   |   |   | 1,107,921 |   |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, END OF YEAR/PERIOD                                                 |   | $                     | 115,986    |   |                 | $      | 1,375,388   |   |   | $ | 115,986 |   |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |   |   |   |
| Supplemental Disclosures of Cash Flow Information:                                            |   |                  |       |   |                 |   |        |   |   |   |   |   |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |   |   |   |
| NON-CASH FINANCING ACTIVITIES:                                                                |   |                  |       |   |                 |   |        |   |   |   |   |   |
| Conversion of note into equity                                                                |   |                  | -          |   |                 |   | 4,840,000   |   |   |   | 10,313,010 |   |
| Cashless exercise of options                                                                  |   |                  | -          |   |                 |   | 78          |   |   |   | 188,829 |   |
| Accrued interest                                                                              |   |                  | (187,515   | )      |                 |   | (206,579    | ) |   |   | (627,747 | ) |
| Conversion of shareholder loan to convertible note                                            |   |                  | 3,760,500  |   |                 |   | -           |   |   |   | - |   |
|                                                                                          |   |                  |       |   |                 |   |        |   |   |   |   |   |
| Income taxes, paid net of refunds:                                                            |   |                  | -          |   |                 |   | -           |   |   |   | - |   |
| Interest paid:                                                                                |   |                  | -          |   |                 |   | -           |   |   |   | - |   |
|  The accompanying notes are an integral part of these consolidated financial statements. |   |                  |       |   |                 |   |        |   |   |

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|                        |   | Total  |    |   | Level I |   |    | Level II |   |   | Level III |   |
|-----------------------------|--------|--------|---------|--------|---------|--------|---------|----------|--------|--------|-----------|--------|
| Assets:                     |   |   |    |   |    |   |    |     |   |   |      |   |
| Performance bond            |   | $      | 139,108 |   |    | $      | 139,108 |     |   | $      | 0         |   |   | $ | 0 |   |
| Receivable – V.A. Tax |   |   | 417,036 |   |    |   | 0       |     |   |   | 0         |   |   |   | 417,036 |   |
| Total:                      |   | $      | 556,144 |   |    | $      | 139,108 |     |   | $      | 0         |   |   | $ | 417,036 |   |

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|                             |   | Three month periods ended |   |
|----------------------------------|--------|---------------------------|--------|
|                             |   | June 30,2009              |   |   | June 30, 2008 |   |
| Weighted average risk free rate: |   | 0.19%                     |   |   | 1.86% |   |
| Weighted average volatility:     |   | 105.06%                   |   |   | 82.8% |   |
| Expected dividend yield:         |   | 0%                        |   |   | 0% |   |
| Weighted average life (years):   |   | 5.0                       |   |   | 5.0 |   |

|   |   |   Number of Options |      |   |  Weighted Average Exercise Price |   |   | Weighted Average Remaining Contractual Life (Years) |   |   | Number of Exercisable Options at June 30, 2009 |   |
|--------|--------|-------------------------------|-----------|--------|---------------------------------------|--------|--------|-----------------------------------------------------|--------|--------|------------------------------------------------|--------|
|   |   |                          |      |   |                                  |   |   |                                                |   |   |                                           |   |
|   |   |                          | 90,000    |   |                                  | $      | 0.20   |                                                |   |   | 2.64                                           |   |   |   | 90,000 |   |
|   |   |                          | 700,000   |   |                                  | $      | 0.25   |                                                |   |   | 2.11                                           |   |   |   | 700,000 |   |
|   |   |                          | 100,000   |   |                                  | $      | 0.30   |                                                |   |   | 2.34                                           |   |   |   | 100,000 |   |
|   |   |                          | 10,000    |   |                                  | $      | 0.34   |                                                |   |   | 1.08                                           |   |   |   | 10,000 |   |
|   |   |                          | 50,000    |   |                                  | $      | 0.38   |                                                |   |   | 4.09                                           |   |   |   | 50,000 |   |
|   |   |                          | 650,000   |   |                                  | $      | 0.45   |                                                |   |   | 3.06                                           |   |   |   | 650,000 |   |
|   |   |                          | 5,000     |   |                                  | $      | 0.55   |                                                |   |   | 2.01                                           |   |   |   | 5,000 |   |
|   |   |                          | 55,000    |   |                                  | $      | 0.60   |                                                |   |   | 3.494                                          |   |   |   | 55,000 |   |
|   |   |                          | 150,000   |   |                                  | $      | 0.63   |                                                |   |   | 2.84                                           |   |   |   | 150,000 |   |
|   |   |                          | 100,000   |   |                                  | $      | 0.64   |                                                |   |   | 4.20                                           |   |   |   | 100,000 |   |
|   |   |                          | 100,000   |   |                                  | $      | 0.67   |                                                |   |   | 4.80                                           |   |   |   | 50,000 |   |
|   |   |                          | 385,000   |   |                                  | $      | 0.76   |                                                |   |   | 4.15                                           |   |   |   | 310,000 |   |
|   |   |                          |      |   |                                  |   |   |                                                |   |   |                                           |   |   |   |   |   |
| TOTALS |   |                          | 2,395,000 |   |                                  | $      | 0.456  |                                                |   |   | 3.04                                           |   |   |   | 2,270,000 |   |

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In connection with the preparation of this Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timelydecisions regarding required disclosures. Based on such evaluation, and in light of the previously identified material weakness in internal control over financial reporting, as of June 30, 2009, relating to the lack of appropriate accounting policies and related procedures described in the Company’s annual report on Form 10-K for the year ended December 31, 2008, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2009, the Company’s disclosure controlsand procedures were ineffective. 

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| ITEM 1. | LEGAL PROCEEDINGS |
|---------|-------------------|

| ITEM 1A. | RISK FACTORS |
|----------|--------------|

|  ITEM 2. | RECENT SALES OF UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
|---------------|-----------------------------------------------------------------------------|

| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
|---------|---------------------------------|

| ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
|---------|-----------------------------------------------------|

| ITEM 5. | OTHER INFORMATION |
|---------|-------------------|

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| Item 6. | Exhibits |
|---------|----------|

|   | 31.1-- | Certification required by Rule 13a-14(a) or Rule 15d-14(a). Tim Hunt |
|--------|--------|----------------------------------------------------------------------|

|   | 31.2-- | Certification required by Rule 13a-14(a) or Rule 15d-14(a). Bryn Harman |
|--------|--------|-------------------------------------------------------------------------|

|   | 32.1-- | Certification required by Rule 13a-14(a) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002,  18 U.S.C. Section 1350, Tim Hunt |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.2-- | Certification required by Rule 13a-14(a) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002,  18 U.S.C. Section 1350, Bryn Harman |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| BY:    |       TIM HUNT                |   | DATE: August 19, 2009 |
|--------|-------------------------------------------------------------|--------|----------------------------|
|   | TIM HUNT, CHAIRMAN, PRESIDENT & CHIEF EXECUTIVE OFFICER |   |                       |
|   |                                                        |   |                       |
|   |                                                        |   |                       |
|   |                                                        |   |                       |
| BY:    |       BRYN HARMAN             |   | DATE: August 19, 2009      |
|   | BRYN HARMAN, CHIEF FINANCIAL OFFICER                        |   |                       |

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