UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549




FORM
10-Q


(Mark
One)




x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934




For the
quarterly period ended June 30,
2009




 ̈
            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:  000-49725


Constitution Mining
Corp.


(Exact
name of registrant as specified in its charter)




Nevada
              88-0455809(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)





Pasaje Mártir Olaya 129, Oficina 1203, Centro
      Empresarial José Pardo Torre A, Miraflores, Lima,
    Perú(Address
      of principal executive offices)+51-1-446-6807(Registrant’s
      telephone number, including area code)Manuela Saenz 323, Suite 706, Buenos Aires,
      Argentina C1107BPA(Former
      name, former address and former fiscal year, if changed since last
      report)


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 issuer was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.  ý Yes   ̈ No




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).   ýYes ̈No




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,” “non-accelerated filer,” and “a smaller reporting company”
in Rule 12b-2 of the Exchange Act.




Large
accelerated filer  ̈                                                                                                            Accelerated
filer  ̈


Non-accelerated
filer  ̈(Do not check
if a smaller reporting
company)                            Smaller
reporting company ý




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  ̈Yes  ý No




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:




Class
                
                Outstanding
      at July 21, 2009Common
      Stock, $0.001 par value
                
                67,099,095
  Table of Contents


FORM
      10-Q
                      CONSTITUTION
      MINING CORP.
                      JUNE
      30, 2009
                      
                      TABLE OF CONTENTS
                    PagePART I – FINANCIAL INFORMATIONItem
      1.
                    Financial Statements.
                    3Item
      2.
                    Management’s Discussion and Analysis of Financial Condition and
      Results of Operations.
                    4Item
      3.
                    Quantitative and Qualitative Disclosures About Market
      Risk.
                    18Item
      4T.
                    Controls and Procedures.
                    18PART II – OTHER INFORMATIONItem
      1.
                    Legal Proceedings.
                    20Item
      1A.
                    Risk Factors.
                    20Item
      2.
                    Unregistered Sales of Equity Securities and Use of
      Proceeds.
                    20Item
      3.
                    Defaults Upon Senior Securities.
                    20Item
      4.
                    Submission of Matters to a Vote of Security
      Holders.
                    20Item
      5.
                    Other Information.
                    21Item
      6.
                    Exhibits.
                    21SignaturesExhibitsCertifications







- 2
-
 Table of Contents





PART
I - FINANCIAL INFORMATION




Item
1.                                Financial
Statements.




Our
      unaudited consolidated financial statements included in this Form 10-Q are
      as follows:F-1
            Unaudited
      Consolidated Balance Sheet as of June 30, 2009.F-2
            Unaudited
      Consolidated Statements of Loss and Comprehensive Loss for the three and
      six months ended June 30, 2009 and 2008 and from inception on March 6,
      2000 to June 30, 2009.F-3
            Unaudited
      Consolidated Statements of Cash Flows for the three and six months ended
      June 30, 2009 and 2008 and from inception on March 6, 2000 to June 30,
      2009.F-4
            Unaudited
      Consolidated Statement of Changes in Stockholders'
      Equity (Deficiency) from inception on March 6, 2000 to June 30,
      2009.F-5
            Notes
      to Unaudited Consolidated Financial
Statements.




These
unaudited consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and the SEC instructions to Form
10-Q.  In the opinion of management, all adjustments considered
necessary for a fair presentation have been included.  Operating
results for the interim period ended June 30, 2009 are not necessarily
indicative of the results that can be expected for the full year.











- 3
-
 Table of Contents





Constitution
Mining Corp.


(An
Exploration Stage Company)


Consolidated
Balance Sheets
 (Expressed
in U.S. Dollars)
 (Unaudited)





As
      at
                30
      June
                2009
              
              
              As
      at
                31
      December
                2008
                (Audited)$
              
              
              
              $AssetsCurrentCash
      and cash equivalents
              
              
              117,830
              
              
              
              66,580Amounts
      receivable (Note 4)
              
              
              30,000
              
              
              
              60,000Prepaid
      expenses
              
              
              5,814
              
              
              
              271,250153,644
              
              
              
              397,830Mineral property costs(Note 7)
              
              
              8,124,260
              
              
              
              5,120,260Equipment(Note
      5)
              
              
              155,852
              
              
              
              102,049Website development cost(Note 6)
              
              
              36,513
              
              
              
              47,2958,470,269
              
              
              
              5,667,434LiabilitiesCurrentAccounts
      payable and accrued liabilities (Note 8)
              
              
              708,454
              
              
              
              547,891Due
      to related parties (Note 9)
              
              
              189,193
              
              
              
              12,379897,647
              
              
              
              560,270Stockholders’
      equityCapital stock (Note
      11)Authorized300,000,000
      common shares, par value $0.001 and50,000,000
      preferred shares, par value $0.001Issued
      and outstanding30
      June 2009 – 62,969,456 common shares, par value $0.00131
      December 2008 – 58,469,456 common shares, par value $0.001
              
              
              62,969
              
              
              
              58,469Share subscriptions received in
      advance(Note 11)
              
              
              1,506,977
              
              
              
              -Additional
      paid in capital
              
              
              13,729,820
              
              
              
              7,945,496Warrants(Note
      11)
              
              
              3,598,533
              
              
              
              3,976,863Deficit,
      accumulated during the exploration stage
              
              
              (11,325,677
              )
              
              
              (6,873,664
              )7,572,622
              
              
              
              5,107,1648,470,269
              
              
              
              5,667,434


Nature, Basis of Presentation and
Continuance of Operations(Note 1), Commitments(Note 15), Subsequent Events (Note 16)
and Contingency(Note
17)




The
accompanying notes are an integral  part of these consolidated financial
statements.





F -
1
 Table of Contents





Constitution
Mining Corp.


(An
Exploration Stage Company)


Consolidated
Statements of Loss and Comprehensive Loss
 (Expressed
in U.S. Dollars)
 (Unaudited)


For
      the period from the date of inception on 6 March 2000 to 30 June
      2009
                  
                  
                  For
      the three month period ended 30 June 2009
                  
                  
                  For
      the three month period ended 30 June 2008
                  
                  
                  For
      the six month period ended 30 June 2009
                  
                  
                  For
      the six month period ended 30
                    June
      2008$
                  
                  
                  
                  $
                  
                  
                  
                  $
                  
                  
                  
                  $
                  
                  
                  
                  $Operating
      expensesAcquisition
      of mineral property interests
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  110,000
                  
                  
                  
                  -
                  
                  
                  
                  760,260Amortization
      expense (Notes 5 and 6)
                  
                  
                  243,118
                  
                  
                  
                  21,115
                  
                  
                  
                  9,376
                  
                  
                  
                  42,237
                  
                  
                  
                  13,019Default
      on oil and gas deposit
                  
                  
                  25,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Exploration
      costs
                  
                  
                  1,802,009
                  
                  
                  
                  394,897
                  
                  
                  
                  269,124
                  
                  
                  
                  877,048
                  
                  
                  
                  690,615Interest
      on convertible debentures
                  
                  
                  126,525
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Interest
      on mineral property (Note 7)
                  
                  
                  3,042
                  
                  
                  
                  3,042
                  
                  
                  
                  -
                  
                  
                  
                  3,042
                  
                  
                  
                  -Investor
      relations
                  
                  
                  1,383,170
                  
                  
                  
                  355,326
                  
                  
                  
                  176,897
                  
                  
                  
                  614,452
                  
                  
                  
                  271,890Management
      fees (Note 10)
                  
                  
                  652,141
                  
                  
                  
                  86,982
                  
                  
                  
                  95,312
                  
                  
                  
                  161,058
                  
                  
                  
                  173,312Office
      and miscellaneous
                  
                  
                  402,308
                  
                  
                  
                  83,382
                  
                  
                  
                  29,050
                  
                  
                  
                  164,150
                  
                  
                  
                  68,491Professional
      fees
                  
                  
                  1,562,779
                  
                  
                  
                  195,585
                  
                  
                  
                  166,060
                  
                  
                  
                  357,210
                  
                  
                  
                  316,309Rent
      (Note 10)
                  
                  
                  146,848
                  
                  
                  
                  15,243
                  
                  
                  
                  10,866
                  
                  
                  
                  42,043
                  
                  
                  
                  18,163Stock-based
      compensation (Note 12)
                  
                  
                  4,930,136
                  
                  
                  
                  774,274
                  
                  
                  
                  -
                  
                  
                  
                  2,271,494
                  
                  
                  
                  -Travel
      and entertainment
                  
                  
                  368,708
                  
                  
                  
                  8,284
                  
                  
                  
                  38,757
                  
                  
                  
                  61,134
                  
                  
                  
                  82,958Net
      operating loss before other items
                  
                  
                  (11,645,784
                  )
                  
                  
                  (1,938,130
                  )
                  
                  
                  (905,442
                  )
                  
                  
                  (4,593,868
                  )
                  
                  
                  (2,395,017
                  )Other
      itemsForeign
      exchange gain
                  
                  
                  5,201
                  
                  
                  
                  1,713
                  
                  
                  
                  8,456
                  
                  
                  
                  6,855
                  
                  
                  
                  301Gain
      on sale of oil and gas property
                  
                  
                  307,115
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  307,115Interest
      income
                  
                  
                  12,791
                  
                  
                  
                  -
                  
                  
                  
                  254
                  
                  
                  
                  -
                  
                  
                  
                  2,244Recovery
      of project management fees
                  
                  
                  60,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Provision
      for potential legal claims (Notes 7, 8, 16 and 17)
                  
                  
                  (65,000
                  )
                  
                  
                  135,000
                  
                  
                  
                  -
                  
                  
                  
                  135,000
                  
                  
                  
                  -320,107
                  
                  
                  
                  136,713
                  
                  
                  
                  8,710
                  
                  
                  
                  141,855
                  
                  
                  
                  309,660Net
      operating loss and comprehensive loss for the period
                  
                  
                  (11,325,677
                  )
                  
                  
                  (1,801,407
                  )
                  
                  
                  (896,732
                  )
                  
                  
                  (4,452,013
                  )
                  
                  
                  (2,085,357
                  )Basic
      and diluted loss per common share
                  
                  
                  
                  0.030
                  
                  
                  
                  0.018
                  
                  
                  
                  0.074
                  
                  
                  
                  0.042Weighted
      average number of common shares used in per share
    calculations
                  
                  
                  
                  59,361,763
                  
                  
                  
                  50,343,244
                  
                  
                  
                  59,918,075
                  
                  
                  
                  49,758,162




The
accompanying notes are an integral  part of these consolidated financial
statements.


F -
2
 Table of Contents




Constitution
Mining Corp.


(An
Exploration Stage Company)


Consolidated
Statements of Cash Flows


(Expressed
in U.S. Dollars)
 (Unaudited)


For
      the
                period
      from the
                date
      of inception
                on
      6 March 2000
                to
      30 June
                2009
              
              
              For
      the
                three
      month
                period
      ended
                30
      June
                2009
              
              
              For
      the
                three
      month
                period
      ended
                30
      June
                2008
              
              
              For
      the
                six
      month
                period
      ended
                30
      June
                2009
              
              
              For
      the
                six
      month period ended
                30
      June
                2008$
              
              
              
              $
              
              
              
              $
              
              
              
              $
              
              
              
              $Cash
      flows used in operating activitiesLoss
      for the period
              
              
              (11,325,677
              )
              
              
              (1,801,407
              )
              
              
              (896,732
              )
              
              
              (4,452,013
              )
              
              
              (2,085,357
              )Adjustments
      to reconcile loss to net cash used by operating activitiesAccrued
      interest (Note 7)
              
              
              126,525
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Amortization
      (Notes 5 and 6)
              
              
              243,118
              
              
              
              21,115
              
              
              
              9,376
              
              
              
              42,237
              
              
              
              13,019Contributions
      to capital by related party – expenses (Notes 10 and 14)
              
              
              15,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
      shares issued for services (Note 11)
              
              
              24,199
              
              
              
              -
              
              
              
              49,452
              
              
              
              -
              
              
              
              49,452Value
      of common shares issued for mineral properties
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              560,000Warrant
      issued for services
              
              
              25,252
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Gain
      on sale of oil and gas property
              
              
              (307,115
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (307,115
              )Stock-based
      compensation (Note 12)
              
              
              4,930,136
              
              
              
              774,274
              
              
              
              -
              
              
              
              2,271,494
              
              
              
              -Changes
      in operating assets and liabilities(Increase)
      decrease in deposit and prepaid expenses
              
              
              (5,814
              )
              
              
              8,971
              
              
              
              -
              
              
              
              265,436
              
              
              
              53,708Increase
      (decrease) in amounts receivable
              
              
              (30,000
              )
              
              
              -
              
              
              
              -
              
              
              
              30,000
              
              
              
              -Increase
      (decrease) in accounts payable and accrued liabilities
              
              
              708,454
              
              
              
              (386,572
              )
              
              
              361,979
              
              
              
              160,563
              
              
              
              531,623Increase
      (decrease) in due to related parties
              
              
              156,918
              
              
              
              38,618
              
              
              
              (221,279
              )
              
              
              176,814
              
              
              
              640,291(5,439,004
              )
              
              
              (1,345,001
              )
              
              
              (697,204
              )
              
              
              (1,505,469
              )
              
              
              (544,379
              )Cash
      flows used in investing activitiesAcquisition
      of mineral property interests (Note 7)
              
              
              (975,260
              )
              
              
              -
              
              
              
              -
              
              
              
              (25,000
              )
              
              
              -Purchase
      of equipment (Note 5)
              
              
              (210,288
              )
              
              
              -
              
              
              
              (76,442
              )
              
              
              (85,258
              )
              
              
              (80,909
              )Website
      development costs (Note 6)
              
              
              (64,693
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (39,693
              )Purchase
      of oil and gas property
              
              
              (642,006
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -(1,892,247
              )
              
              
              -
              
              
              
              (76,442
              )
              
              
              (110,258
              )
              
              
              (120,602
              )Cash
      flows from financing activitiesCommon
      shares issued for cash (Note 11)
              
              
              1,491,068
              
              
              
              145,809
              
              
              
              706,447
              
              
              
              145,809
              
              
              
              706,447Increase
      in due to related parties
              
              
              32,275
              
              
              
              364
              
              
              
              -
              
              
              
              32,275
              
              
              
              -Issuance
      of warrants (Note 11)
              
              
              3,753,761
              
              
              
              14,191
              
              
              
              -
              
              
              
              14,191
              
              
              
              -Convertible
      debentures
              
              
              665,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Share
      subscriptions received in advance (Note 11)
              
              
              1,506,977
              
              
              
              1,266,977
              
              
              
              -
              
              
              
              1,506,977
              
              
              
              -7,449,081
              
              
              
              1,427,341
              
              
              
              706,447
              
              
              
              1,666,977
              
              
              
              706,447Increase
      (decrease) in cash and cash equivalents
              
              
              117,830
              
              
              
              82,340
              
              
              
              (67,199
              )
              
              
              51,250
              
              
              
              41,466Cash
      and cash equivalents, beginning of period
              
              
              -
              
              
              
              35,490
              
              
              
              163,307
              
              
              
              66,580
              
              
              
              54,642Cash
      and cash equivalents, end of period
              
              
              117,830
              
              
              
              117,830
              
              
              
              96,108
              
              
              
              117,830
              
              
              
              96,108


Supplemental Disclosures with Respect
of Cash Flows(Note 14)


The
accompanying notes are an integral  part of these consolidated financial
statements.


F -
3
 Table of Contents
  Constitution
Mining Corp.


(An
Exploration Stage Company)


Consolidated
Statements of Changes in Stockholders’ Equity (Deficiency)


(Expressed
in U.S. Dollars)


(Unaudited)


Number
      of
                                                                                  shares
      issued
                                                                                Share
                                                                                  capital
                                                                                Additional
                                                                                  paid-in
      capital
                                                                                Share
                                                                                  subscription
      received in
                                                                                  advance
                                                                                Warrants
                                                                                Deficit,
                                                                                  accumulated
                                                                                  during
      the
                                                                                  explorationstage
                                                                                Total
                                                                                  stockholders’
                                                                                  equity$
                                                                                
                                                                                $
                                                                                
                                                                                $
                                                                                $
                                                                                
                                                                                $
                                                                                
                                                                                $Balance
      at 6 March 2000 (inception)Common
      shares issued – cash
                                                                                
                                                                                2,000,000
                                                                                
                                                                                2,000
                                                                                
                                                                                1,000
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                3,000Net
      loss for the period
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                (2,291)
                                                                                
                                                                                (2,291)Balance
      at 31 December 2000
                                                                                
                                                                                2,000,000
                                                                                
                                                                                2,000
                                                                                
                                                                                1,000
                                                                                -
                                                                                -
                                                                                
                                                                                (2,291)
                                                                                
                                                                                709Common
      shares issued – cash
                                                                                
                                                                                5,000,000
                                                                                
                                                                                5,000
                                                                                
                                                                                42,000
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                47,000Net
      loss for the year
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                (10,571)
                                                                                
                                                                                (10,571)Balance
      at 31 December 2001
                                                                                
                                                                                7,000,000
                                                                                
                                                                                7,000
                                                                                
                                                                                43,000
                                                                                -
                                                                                -
                                                                                
                                                                                (12,862)
                                                                                
                                                                                37,138Net
      loss for the year
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                (12,097)
                                                                                
                                                                                (12,097)Balance
      at 31 December 2002
                                                                                
                                                                                7,000,000
                                                                                
                                                                                7,000
                                                                                
                                                                                43,000
                                                                                -
                                                                                -
                                                                                
                                                                                (24,959)
                                                                                
                                                                                25,041Net
      loss for the year
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                (11,019)
                                                                                
                                                                                (11,019)Balance
      at 31 December 2003
                                                                                
                                                                                7,000,000
                                                                                
                                                                                7,000
                                                                                
                                                                                43,000
                                                                                -
                                                                                -
                                                                                
                                                                                (35,978)
                                                                                
                                                                                14,0223
      for 1 forward split
                                                                                
                                                                                14,000,000
                                                                                
                                                                                14,000
                                                                                
                                                                                (14,000)
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -Net
      loss for the year
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                (6,451)
                                                                                
                                                                                (6,451)Balance
      at 31 December 2004
                                                                                
                                                                                21,000,000
                                                                                
                                                                                21,000
                                                                                
                                                                                29,000
                                                                                -
                                                                                -
                                                                                
                                                                                (42,429)
                                                                                
                                                                                7,5712
      for 1 forward split
                                                                                
                                                                                21,000,000
                                                                                
                                                                                21,000
                                                                                
                                                                                (21,000)
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -Net
      loss for the year
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                (18,338)
                                                                                
                                                                                (18,338)Balance
      at 31 December 2005
                                                                                
                                                                                42,000,000
                                                                                
                                                                                42,000
                                                                                
                                                                                8,000
                                                                                -
                                                                                -
                                                                                
                                                                                (60,767)
                                                                                
                                                                                (10,767)Common
      shares issued –  cash
                                                                                
                                                                                4,000,000
                                                                                
                                                                                4,000
                                                                                
                                                                                76,000
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                80,000Contributions
      to capital by related party – expenses (Notes 10 and 14)
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                14,400
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                14,400Net
      loss for the year
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                (289,343)
                                                                                
                                                                                (289,343)Balance
      at 31 December 2006
                                                                                
                                                                                46,000,000
                                                                                
                                                                                46,000
                                                                                
                                                                                98,400
                                                                                -
                                                                                -
                                                                                
                                                                                (350,110)
                                                                                
                                                                                (205,710)Contributions
      to capital by related party – expenses (Notes 10 and 14)
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                600
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                600Common
      shares issued –  debt (Notes 11 and 14)
                                                                                1,145,300
                                                                                
                                                                                1,145
                                                                                
                                                                                21,761
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                22,906Common
      shares issued –  cash (Note 11)
                                                                                1,437,000
                                                                                
                                                                                1,437
                                                                                
                                                                                501,513
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                502,950Stock-based
      compensation
                                                                                  (Note
      12)
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                625,035
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                625,035Net
      loss for the year
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                (1,218,721)
                                                                                
                                                                                (1,218,721)Balance
      at 31 December 2007
                                                                                
                                                                                48,582,300
                                                                                
                                                                                48,582
                                                                                
                                                                                1,247,309
                                                                                -
                                                                                -
                                                                                
                                                                                (1,568,831)
                                                                                
                                                                                (272,940)Common
      shares issued –  mineral properties (Notes 7, 11 and
      14)
                                                                                3,800,000
                                                                                
                                                                                3,800
                                                                                
                                                                                4,166,200
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                4,170,000Common
      shares issued –  cash (Note 11)
                                                                                
                                                                                6,016,511
                                                                                
                                                                                6,016
                                                                                
                                                                                4,706,272
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                4,712,288Common
      shares issued –  services (Notes 11 and 14)
                                                                                70,645
                                                                                
                                                                                71
                                                                                
                                                                                49,380
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                49,451Value
      assigned to warrants (Note 11)
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                (3,739,570)
                                                                                -
                                                                                
                                                                                3,739,570
                                                                                
                                                                                -
                                                                                
                                                                                -Share
      issuance costs
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                (517,702)
                                                                                -
                                                                                237,293
                                                                                
                                                                                -
                                                                                
                                                                                (280,409)Stock-based
      compensation (Note 12)
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                2,033,607
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                2,033,607Net
      loss for the year
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                (5,304,833)
                                                                                
                                                                                (5,304,833)Balance
      at 31 December 2008
                                                                                
                                                                                58,469,456
                                                                                
                                                                                58,469
                                                                                
                                                                                7,945,496
                                                                                -
                                                                                3,976,863
                                                                                
                                                                                (6,873,664)
                                                                                
                                                                                5,107,164Common shares issued -
                                                                                  mineralproperties
      (Notes 7, 11 and 14)
                                                                                
                                                                                4,300,000
                                                                                
                                                                                4,300
                                                                                
                                                                                2,974,7000
                                                                                -
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                2,979,000Common
      shares issued - cash(Note
      11)
                                                                                200,000
                                                                                
                                                                                200
                                                                                
                                                                                145,609
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                145,809Value assigned to warrants
                                                                                  (Note
      11)
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                14,191
                                                                                
                                                                                -
                                                                                
                                                                                14,191Warrants
      expired (Note 11)
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                367,267
                                                                                
                                                                                -
                                                                                
                                                                                (367,267)
                                                                                
                                                                                -
                                                                                
                                                                                -Agent comensation warrantsexpired (Note 11)
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                25,254
                                                                                
                                                                                -
                                                                                
                                                                                (25,254)
                                                                                
                                                                                -
                                                                                
                                                                                -Share subscription received
                                                                                  inadvance
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                1,506,977
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                1,506,977Stock-based
      compensation
                                                                                  (Note 12)
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                2,271,494
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                2,271,494Net loss for the period
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                -
                                                                                
                                                                                (4,452,013)
                                                                                
                                                                                (4,452,013)Balance
      at 30 June 2009
                                                                                
                                                                                62,969,456
                                                                                
                                                                                62,969
                                                                                
                                                                                13,729,820
                                                                                
                                                                                1,506,977
                                                                                
                                                                                3,598,533
                                                                                
                                                                                (11,325,677)
                                                                                
                                                                                7,572,622
 The
accompanying notes are an integral part of these consolidated financial
statements.


F -
4
 Table of Contents
  Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009


1. Nature,
Basis of Presentation and Continuance of Operations





Constitution
Mining Corp. (the “Company”) was incorporated in the State of Nevada under the
name “Crafty Admiral Enterprises, Ltd.” on 6 March 2000. On 9 March 2007 the
Company changed their name to “Nordic Nickel Ltd.”. The Company changed their
name pursuant to a parent/subsidiary merger between the Company (as Crafty
Admiral Enterprises, Ltd.) and its wholly-owned non-operating subsidiary, Nordic
Nickel Ltd., which was established for the purpose of giving effect to this name
change. On 15 November 2007 the Company changed their name to “Constitution
Mining Corp.”. The Company changed their name pursuant to a parent/subsidiary
merger between the Company (as Nordic Nickel Ltd.) and its wholly-owned
non-operating subsidiary, Constitution Mining Corp., which was established for
the purpose of giving effect to this name change. The Company is in the
exploration stage as its operations principally involve the examination and
investigation of land that may contain valuable minerals, for the purpose of
discovering the presence of ore, if any, and its extent.





The
accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Constitution Mining Argentina SA, a
company incorporated under the laws of Argentina, since its date of
incorporation on 4 March 2008.





The
Company is an exploration stage enterprise, as defined in Statement of Financial
Accounting Standards (“SFAS”) No. 7. The Company is devoting all of its present
efforts in securing and establishing a new business, and its planned principle
operations have not commenced, and, accordingly, no revenue has been derived
during the organization period.





The
consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States of
America (“GAAP”) applicable to exploration stage enterprises, and are expressed
in U.S. dollars.  The Company’s fiscal year end is 31
December.





The
Company’s consolidated financial statements as at 30 June 2009 and for the six
month period then ended have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities and
commitments in the normal course of business.  The Company had a loss
of $4,452,013 for the six month period ended 30 June 2009 (30 June 2008 –
$2,085,357) and has working capital deficit of $744,003 at 30 June 2009 (31
December 2008 – $162,440).





Management
cannot provide assurance that the Company will ultimately achieve profitable
operations or become cash flow positive, or raise additional debt and/or equity
capital.  Management believes that the Company’s capital resources
should be adequate to continue operating and maintaining its business strategy
during the fiscal year ending 31 December 2009.  However, if the
Company is unable to raise additional capital in the near future, due to the
Company’s liquidity problems, management expects that the Company will need to
curtail operations, liquidate assets, seek additional capital on less favorable
terms and/or pursue other remedial measures.  These consolidated
financial statements do not include any adjustments related to the
recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.








F -
5
 Table of Contents


Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009


On 27
June 2006, the Company acquired a 100% interest in an oil and gas property lease
located in St. Francis County, Arkansas (the “Tombaugh Lease”) for cash payment
of $642,006.   In 2007, the Company shifted its focus from oil and gas
sector to mineral exploration.





Although
management is currently implementing its business plan, and seeking additional
sources of equity or debt financing and or a partner, there is no assurance
these activities will be successful.  This raises substantial doubt about
the ability of the Company to continue as a going concern.  The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.





Recent
accounting pronouncements





In June
2009, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 168,
“The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principle – a
replacement of FASB statement No. 162”.  SFAS  No.
168 replaces the sources of accounting principles and the framework for
selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles as stated with FASB Accounting Standards
Codification becoming the source of authoritative U.S. GAAP recognized by the
FASB to be applied by nongovernmental entities. Rules and interpretive releases
of the SEC under authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. SFAS No. 168 is effective for financial
statements issued for fiscal years and interim periods beginning after 15
September 2009.  The Company does not expect this adoption will have a
material impact on the Company’s interim consolidated financial
statements.





In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)”.  SFAS No. 167 is
intended to establish general standards of financial reporting for companies
with variable interest entities.  It requires timely and useful
disclosure of information related to the Company’s involvement with variable
interest entities.  This disclosure should alert all users to the
effects on specific provisions of FASB Interpretation No. 46 (revised December
2003), “Consolidation of
Variable Interest Entities”, related to the changes to
the special-purpose entity proposal in FASB Statement No. 166, “Accounting for Transfers of
Financial Assets”, and the treatment of
specific provisions of Interpretation 46(R).  SFAS No. 167 is
effective for financial statements issued for fiscal years and interim periods
beginning after 15 November 2009.  The Company has determined that the
adoption of SFAS No. 167 will have no impact will have on its consolidated
financial statements.





In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of
Financial Assets—an amendment of FASB Statement” (“SFAS
166”).  SFAS No. 166 is intended to establish standards of financial
reporting for the transfer of assets and transferred assets to improve the
relevance, representational faithfulness, and comparability.  SFAS 166 was
established to clarify derecognition of assets under FASB Statement No. 140,
Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities.SFAS No. 166 is effective for financial
statements issued for fiscal years and interim periods beginning after 15
November 2009.  The Company has determined that the adoption of SFAS
No. 166 will have no impact will have on its consolidated financial
statements.








F -
6
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009




International
Financial Reporting Standards





In
November 2008, the Securities and Exchange Commission (“SEC”) issued for comment
a proposed roadmap regarding potential use of financial statements prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board.  Under the proposed
roadmap, the Company would be required to prepare consolidated financial
statements in accordance with IFRS in fiscal year 2014, including comparative
information also prepared under IFRS for fiscal 2013 and 2012.  The
Company is currently assessing the potential impact of IFRS on its consolidated
financial statements and will continue to follow the proposed roadmap for future
developments.





2. Changes
in Accounting Policies





In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”. SFAS No.
165 is intended to establish general standards of accounting for and disclosure
of events that occur after the balance sheet date, but before financial
statements are issued or are available to be issued.  It requires the
disclosure of the date through which an entity has evaluated subsequent events
and the basis for that date–that is, whether that date represents the date the
financial statements were issued or were available to be issued. This disclosure
should alert all users of financial statements that an entity has not evaluated
subsequent events after that date in the set of financial statements being
presented.  SFAS No. 165 is effective for financial statements issued
for fiscal years and interim periods ending after 15 June 2009. The adoption of
this statement did not have a material impact on its interim consolidated
financial statements.





In May
2008, the FASB issued FSP Accounting Principles Board Opinion No. 14-1, “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)”.  FSP 14-1 requires issuers of convertible debt
instruments that may be settled in cash to separately account for the liability
and equity components in a manner that will reflect the entity’s nonconvertible
debt borrowing rate when interest cost is recognized in periods subsequent to
adoption.  Upon adoption of FSP 14-1, the Company will allocate a
portion of the proceeds received from the issuance of convertible notes between
a liability and equity component by determining the fair value of the liability
component using the Company’s non-convertible debt borrowing
rate.  The difference between the proceeds of the notes and the fair
value of the liability component will be recorded as a discount on the debt with
a corresponding offset to paid-in-capital.  The resulting discount
will be accreted by recording additional non-cash interest expense over the
expected life of the convertible notes using the effective interest rate
method.  The provisions of FSP 14-1 are to be applied retrospectively
to all periods presented upon adoption and are effective for fiscal years
beginning after 15 December 2008 and interim periods within those fiscal
years.  The adoption of this statement did not have a material impact
on its interim consolidated financial statements.








F -
7
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009




In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts – an interpretation of FASB Statement No.
60”.  SFAS No. 163 provides enhanced guidance on the
recognition and measurement to be used to account for premium revenue and claim
liabilities and related disclosures and is limited to financial guarantee
insurance (and reinsurance) contracts, issued by enterprises included within the
scope of FASB Statement No. 60, “Accounting and Reporting by
Insurance Enterprises.”SFAS No. 163 also requires that an
insurance enterprise recognize a claim liability prior to an event of default
when there is evidence that credit deterioration has occurred in an insured
financial obligation.  SFAS No. 163 is effective for financial
statements issued for fiscal years and interim periods beginning after 15
December 2008, with early application not permitted.  The adoption of
this statement did not have a material impact on its interim consolidated
financial statements.





In April
2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of
Intangible Assets”.  In determining the useful life of
intangible assets, FSP FAS 142-3 removes the requirement to consider whether an
intangible asset can be renewed without substantial cost of material
modifications to the existing terms and conditions and, instead, requires an
entity to consider its own historical experience in renewing similar
arrangements.  FSP FAS 142-3 also requires expanded disclosure related
to the determination of intangible asset useful lives.  FSP FAS 142-3
is effective for financial statements issued for fiscal years beginning after 15
December 2008.  The adoption of this statement did not have a material
impact on its interim consolidated financial statements.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement No.
133”.  SFAS No. 161 is intended to improve transparency in
financial reporting by requiring enhanced disclosures of an entity’s derivative
instruments and hedging activities and their effects on the entity’s financial
position, financial performance, and cash flows.  SFAS No. 161 applies
to all derivate instruments within the scope of SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities”.  It also applies to
non-derivative hedging instruments and all hedged items designated and
qualifying as hedges under SFAS No. 133.  SFAS No. 161 is effective
prospectively for financial statements issued for fiscal years beginning after
15 November 2008, with early application encouraged.  The adoption of
SFAS No. 161 did not have a material impact on the Company’s consolidated
financial statements.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”. SFAS
No. 141(R) establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the acquiree
and the goodwill acquired. SFAS No. 141(R) also establishes disclosure
requirements to enable the evaluation of the nature and financial effects of the
business combination. SFAS No. 141(R) is effective for fiscal years beginning
after 15 December 2008.  The adoption of SFAS No. 141(R) did
not  have a material impact on the Company’s consolidated financial
statements.











F -
8
 Table of Contents


Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009




In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of Accounting Research Bulletin
No. 51”.  SFAS No. 160 establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable and to the
noncontrolling interest, changes in a parent’s ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated.  SFAS No. 160 also establishes disclosure requirements
that clearly identify and distinguish between the interests of the parent and
the interests of the noncontrolling owners.  SFAS No. 160 is effective
for fiscal years beginning after 15 December 2008.  The adoption of
SFAS No. 160 did not have a material impact on the Company’s consolidated
financial statements.





3. Significant
Accounting Policies





The
following is a summary of significant accounting policies used in the
preparation of these consolidated financial statements.





Principles
of consolidation





All
inter-company balances and transactions have been eliminated in these
consolidated financial statements.





Cash
and cash equivalents





Cash and
cash equivalents include highly liquid investments with original maturities of
three months or less.





Financial
instruments





The
carrying value of cash and cash equivalents, amounts receivable, accounts
payable and accrued liabilities and amounts due to related parties approximates
their fair value because of the short maturity of these
instruments.  The Company’s operations are in the U.S. and Argentina
and virtually all of its assets and liabilities are giving rise to significant
exposure to market risks from changes in foreign currency rates.  The
Company’s financial risk is the risk that arises from fluctuations in foreign
exchange rates and the degree of volatility of these
rates.  Currently, the Company does not use derivative instruments to
reduce its exposure to foreign currency risk.





Derivative
financial instruments





The
Company has not, to the date of these consolidated financial statements, entered
into derivative instruments to offset the impact of foreign currency
fluctuations.








F -
9
 Table of Contents


Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009




Income
taxes





Deferred
income taxes are reported for timing differences between items of income or
expense reported in the financial statements and those reported for income tax
purposes in accordance with SFAS No. 109, “Accounting for Income Taxes”,
which requires the use of the asset/liability method of accounting for income
taxes.  Deferred income taxes and tax benefits are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and for tax losses and credit
carry-forwards.  Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled.  The Company provides for deferred taxes for the estimated
future tax effects attributable to temporary differences and carry-forwards when
realization is more likely than not.





Basic
and diluted net loss per share





The
Company computes net income (loss) per share in accordance with SFAS No.128,
“Earnings per
Share”.  SFAS No. 128 requires presentation of both basic and
diluted earnings per share (“EPS”) on the face of the income
statement.  Basic EPS is computed by dividing net income (loss)
available to common shareholders (numerator) by the weighted average number of
shares outstanding (denominator) during the period.  Diluted EPS gives
effect to all dilutive potential common shares outstanding during the period
using the treasury stock method and convertible preferred stock using the
if-converted method.  In computing diluted EPS, the average stock
price for the period is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants.  Diluted EPS
excluded all dilutive potential shares if their effect is
anti-dilutive.





Comprehensive
loss





SFAS No.
130, “Reporting Comprehensive
Income”, establishes standards for the reporting and display of
comprehensive loss and its components in the financial statements.  As
at 30 June 2009, the Company has no items that represent a comprehensive loss
and, therefore, has not included a schedule of comprehensive loss in the
consolidated financial statements.





Mineral
property costs





Mineral
property acquisition costs are initially capitalized as tangible assets when
purchased in accordance with Emerging Issues Task Force (“EITF”) 04-2, “Whether Mineral Rights Are Tangible
or Intangible Assets”. At the end of each fiscal quarter end, the Company
assesses the carrying costs for impairment.  If proven and probable
reserves are established for a property and it has been determined that a
mineral property can be economically developed, costs will be amortized using
the units-of-production method over the estimated life of the probable
reserve.





Mineral
property exploration costs are expensed as incurred.








F -
10
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009




Estimated
future removal and site restoration costs, when determinable are provided over
the life of proven reserves on a units-of-production basis.  Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards.  Any charge
is included in exploration expense or the provision for depletion and
depreciation during the period and the actual restoration expenditures are
charged to the accumulated provision amounts as incurred.





As of the
date of these consolidated financial statements, the Company has not established
any proven or probable reserves on its mineral properties and incurred only
acquisition and exploration costs.





Although
the Company has taken steps to verify title to mineral properties in which it
has an interest, according to the usual industry standards for the stage of
exploration of such properties, these procedures do not guarantee the Company’s
title.  Such properties may be subject to prior agreements or
transfers and title may be affected by undetected defects.





Equipment





Equipment
is recorded at cost and depreciation is provided over its estimated economic
life at 30%.





Website
development costs





The costs
of computer software developed or obtained for internal use, during the
preliminary project phase, as defined under AICPA Statement of Position 98-1
“Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use”, will be
expensed as incurred.  The costs of website development during the
planning stage, as defined under EITF No. 00-2 “Accounting for Web Site Development
Costs”, will also be expensed as incurred.





Computer
software, website development incurred during the application and infrastructure
development stage, including external direct costs of materials and services
consumed in developing the software and creating graphics and website content,
will be capitalized and amortized over the estimated useful life, beginning when
the software is ready for use and after all substantial testing is completed and
the website is operational.





Segments
of an enterprise and related information





SFAS No.
131, “Disclosures about
Segments of an Enterprise and Related Information”, supersedes SFAS No. 14,
“Financial Reporting for
Segments of a Business Enterprise.”  SFAS No. 131 establishes
standards for the way that public companies report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public.  It also establishes standards for disclosures regarding
products and services, geographic areas and major customers.  SFAS No.
131 defines operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance.  The Company has evaluated this SFAS and does not believe
it is applicable at this time.








F -
11
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009


Start-up
expenses





The
Company has adopted Statement of Position No. 98-5, “Reporting the Costs of Start-up
Activities”, which requires that costs associated with start-up
activities be expensed as incurred.  Accordingly, start-up costs associated
with the Company's formation have been included in the Company’s expenses for
the period from the date of inception on 6 March 2000 to 30 June
2009.





Foreign
currency translation





The
Company’s functional and reporting currency is U.S. dollars.  The
consolidated financial statements of the Company are translated to U.S. dollars
in accordance with SFAS No. 52, “Foreign Currency
Translation.”  Monetary assets and liabilities denominated in
foreign currencies are translated using the exchange rate prevailing at the
balance sheet date.  Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are included
in the determination of income.  The Company has not, to the date of
these consolidated financial statements, entered into derivative instruments to
offset the impact of foreign currency fluctuations.





Use
of estimates





The
preparation of consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenditures during the reporting period.  Actual results
could differ from these estimates.





Comparative
figures





Certain
comparative figures have been adjusted to conform to the current period’s
presentation.





Stock-Based
Compensation





Effective
1 January 2006, the Company adopted the provisions of SFAS No. 123(R), “Share-Based Payment”, which
establishes accounting for equity instruments exchanged for employee services.
Under the provisions of SFAS No.123(R), stock-based compensation cost is
measured at the grant date, based on the calculated fair value of the award, and
is recognized as an expense over the employees’ requisite service period
(generally the vesting period of the equity grant). Before 1 January 2006, the
Company accounted for stock-based compensation to employees in accordance with
Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees,” and complied with the disclosure requirements of SFAS No.
123, “Accounting for
Stock-Based Compensation”.  The Company adopted SFAS No. 123(R)
using the modified prospective method, which requires the Company to record
compensation expense over the vesting period for all awards granted after the
date of adoption, and for the unvested portion of previously granted awards that
remain outstanding at the date of adoption.  Accordingly, financial
statements for the periods prior to 1 January 2006 have not been restated to
reflect the fair value method of expensing share-based compensation.
 Adoption of SFAS No. 123(R) does not change the way the Company accounts
for share-based payments to non-employees, with guidance provided by SFAS No.
123 (as originally issued) and EITF No. 96-18, “Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services”.






F -
12
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009





4. Amounts
Receivable





Amounts
receivable are non-interest bearing, unsecured and have settlement dates within
one year.





5. Equipment





Net
      Book ValueCost
                            
                            
                            Accumulated
                              amortization
                            
                            
                            30
      June 2009
                            
                            
                            31
      December 2008$
                            
                            
                            
                            $
                            
                            
                            
                            $
                            
                            
                            
                            $Equipment
                            
                            
                            210,288
                            
                            
                            
                            54,436
                            
                            
                            
                            155,852
                            
                            
                            
                            102,049





During
the six month period ended 30 June 2009, total additions to equipment were
$85,258 (30 June 2008 - $80,909).





6. Website
Development Cost





Net
      Book ValueCost
                            
                            
                            Accumulated
                              amortization
                            
                            
                            30
      June 2009
                            
                            
                            31
      December 2008$
                            
                            
                            
                            $
                            
                            
                            
                            $
                            
                            
                            
                            $Website
      development
                            
                            
                            64,693
                            
                            
                            
                            28,180
                            
                            
                            
                            36,513
                            
                            
                            
                            47,295





During
the six month period ended 30 June 2009, total additions to website development
were $Nil (30 June 2008 - $39,693).





7. Mineral
Property Costs





Peruvian
Gold Sands





On 29
September 2008, the Company entered into a Mineral Right option agreement with
Temasek Investments Inc. (“Temasek”) to acquire mining properties totalling 382
km2
in Northeastern Peru (the “Peruvian Agreement”).  Pursuant to this
Peruvian Agreement, the company acquired four separate options from Temasek,
each providing for the acquisition of a 25% interest in certain mining
properties.





The
Company may exercise the initial 25% option by fulfilling the following
conditions:





a.
            Pay
      a non-refundable $375,000 on the date the Peruvian Agreement is executed
      (paid);


b.
            Issue
      2,000,000 common shares within 5 business days (issued and valued at
      $1.01) (Notes 11 and 14); and


c.
            Pay
      an additional $375,000 prior to 28 December 2008
  (paid).








F -
13
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009


The
Company entered into an amending agreement dated 12 May 2009 (the “Peruvian
Amendment”) with Temasek.  Under the Peruvian Amendment, the Company
may now exercise the second 25% option resulting in the acquisition of a 50%
interest in the Mineral Rights by fulfilling the following conditions as set out
in the Peruvian Amendment as soon as practicable thereafter:





a.Exercise
and complete the initial 25% option (completed);
 b.Pay
an additional $1,250,000;
 c.Issue
an additional 2,000,000 common shares (issued and valued at $0.65) (Notes 11 and
14); and
 d.The Company must also pay interest on any unpaid amount of the option payment of
$1,250,000 at 5% per
 annum
accruing from 12 May 2009 to the date that payment is made (Note
14).





The
Company may exercise the third 25% option by fulfilling the following conditions
by 29 September 2009:





a.
            Exercise
      and complete the initial and second 25%
options;


b.
            Pay
      an additional $3,000,000; and


c.
            Issue
      an additional 2,000,000 common
shares.





The
Company may exercise the final 25% option by fulfilling the following conditions
by 29 March 2010:





a.
            Exercise
      and complete the initial, second and third 25%
  options;


b.
            Pay
      an additional $5,000,000; and


c.
            Issue
      an additional 4,000,000 common
shares.





The
property is subject to a 2.5% net returns royalty that the Company can reduce to
1.0% upon payment of a further $2,000,000 within 90 days of the exercise and
completion of the final 25% option (Note 15).




During
the six month period ended 30 June 2009, the Company incurred $796,852 in
exploration costs for the Peruvian Agreement.




Atena
Gold Project





On 12
December 2007, the Company entered into an assignment agreement (the “Atena
Agreement”) to acquire the right to explore and option to purchase the 3,676
hectare Atena Gold Project located in the Salta Province of
Argentina.   Pursuant to the Atena Agreement, the Company is
required to issue 500,000 common shares (issued and valued at $0.70 per common
share) and pay $60,000 (paid). The Company will acquire 100% of the option if it
incurs a minimum of $3,740,000 in work commitment expenditures on the property
and issue 7,000,000 common shares according to the following schedule (Notes 11,
14 and 15):





a.
            $240,000
      in expenditures (incurred) plus a further issuance of 1,000,000 common
      shares (issued and
              valued
      at $1.59 per common share) on or before 15 March
  2008;


b.
            a
      further $500,000 in expenditures plus a further issuance of 2,000,000
      commonshares
      on or before
              15
      March 2009 (issued and valued at
$0.73);


c.
            a
      further $1,000,000 in expenditures plus a further issuance of 4,000,000
      common shares on or before 15
              March
      2010; and


d.
            a
      further $2,000,000 in expenditures on or before 15 March
    2011.







F -
14
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009


The
Company entered into an amending agreement dated 5 May 2009 (the “Atena
Amendment”) with Proyectos Mineros S.A. (“PMSA”).  Under the Atena
Amendment, the $500,000 in expenditures originally required to be made by the
Company on the Atena Gold Project property by 15 March 2009 is waived upon the
issuance of the 2,000,000 common shares (issued) of the Company as required
under the Atena Agreement.





The
option is subject to a 1% net smelter returns royalty.
  During
the six month period ended 30 June 2009, the Company incurred $79,980 in
exporation costs for the Atena Agreement.




During the six month
period ended 30 June 2009, the Company announced that is was suspending their
exploration program on the Atena Gold Project for at least the remainder of 2009
and would allocated their resources exclusively to pursue the exploration and
development of their property interests in Northeastern Peru, the Peruvian
Agreement, as a result of the Company's decision to seek disposal of their
interest in the Atena Gold Project.





Cerro
Amarillo Property





On 8
January 2008, the Company entered into an assignment agreement (the “Cero
Amarillo Agreement”) to explore and option the 14,221 hectare Cerro Amarillo
Property located in the Province of Mendoza, Argentina with a company related to
the Company by way of a director and shareholder in common.  Pursuant
to the terms of the Cero Amarillo Agreement, the Company issued 300,000 common
shares (issued and valued at $0.70 per common share) and pay $10,000
(paid).  The Company is to acquire a 100% of the option if it incurs a
minimum of $450,000 in work commitment expenditures on the property and issues
2,100,000 common shares according to the following schedule (Notes 11, 14 and
15):





a.
            $200,000
      in expenditures (incurred $25,000) plus a further issuance of 300,000
      common shares on or
              before
      8 January 2009 (issued and valued at
$0.73);


b.
            a
      further $250,000 in expenditures plus a further issuance of 600,000 common
      shares on or before 8
              January
      2010;


c.
            a
      further issuance of 600,000 common shares on or before 8 January 2011;
      and


d.
            a
      further issuance of 600,000 common shares on or before 8 January
      2012.





The
Company entered into an amending agreement dated 5 May 2009 (the “Cerro Amarillo
Amendment”) with PMSA.  Under the Cerro Amarillo Amendment, the
$200,000 in expenditures originally required to be made by the Company on the
Cerro Amarillo property by 8 January 2009 is waived upon the issuance of the
300,000 common shares (issued) of the Company as required under the Cerro
Amarillo Agreement.





To
exercise the option the company is required to issue a further 3,000,000 common
shares.  The option is subject to a 1% net smelter returns
royalty.




During
the six month period ended 30 June 2009, the Company incurred $Nil in
exploration costs for the Cerro Amarillo Agreement.




During
the six month period ended 30 June 2009, the Company announced that is was
suspending their exploration program on the Cerro Amarillo Property for at least
the remainder of 2009 and would allocated their resources exclusively to pursue
the exploration and development of their property interests in northeastern
Peru, the Peruvian Agreement, as a result of the Company's decision to seek
disposal of their interest in the Cerro Amarillo
Property.





F -
15
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009


Amira,
Amira Norte and Esparta II





On 17
March 2008, the Company entered into an assignment agreement with PMSA (the
“Amira Agreement”), a company related to the Company by way of a director and
shareholder in common. Under the Agreement,  PMSA assigned to the
Company PMSA’s right to explore and option to purchase a 90% interest in three
mining properties referred to as “Amira”, “Amira Norte” and “Esparta II”
(collectively, the "Properties"), which are located in the Province of Salta,
Argentina. In order for the Company to keep its interest in good standing and to
exercise the option to acquire a 90% interest in the Properties, the Company
must make the following payments to the Titleholder, as set forth in the Amira
Agreement (Note 15):




a.         US$75,000
by 19 January 2009;


b.         a
further US$150,000 by 19 January 2010;


c.         a
further US$200,000 by 19 January 2011; and


d. a further US$1,000,000 by 19 January
2012, by means of which final payment the Option to acquire a


90% interest in the Properties will have been automatically
exercised.





The
Company entered into an amending  assignment agreement dated 5 May
2009 (the “Amira Amendment”)  with Silvia Rodriguez, owner of the
Properties, whereby the payment originally due on 19 January 2009 under the
Amira Agreement is due as follows:





a. US$25,000
on or by the end on 30 June 2009 (not paid); and


b. US$50,000
on or before by the end of 30 September 2009.





During
the six month period ended 30 June 2009, the Company incurred $216 in
exploration costs for the Amira Agreement.




During
the six month period ended 30 June 2009, the Company announced that is was
suspending their exploration program on the Properties for at least the
remainder of 2009 and would allocated their resources exclusively to pursue the
exploration and development of their property interests in Northeastern Peru,
the Peruvian Agreement, as a result of the Company's decision to seek disposal
of their interest in the Properties.





8. Accounts Payable and Accrued
Liabilities





Accounts
payable and accrued liabilities are non-interest bearing, unsecured and have
settlement dates within one year.





Included
in accounts payable and accrued liabilities at 30 June 2009 is $45,000 (31
December 2008 - $200,000) related to settlement of potential legal claims on
incidents arising from the mineral property interests  and $20,000 for
the legal fees relating to it (Notes  7, 16 and 17).





9. Due
to Related Parties





As at 30
June 2009, the amount due to related parties consists of $189,193 (31 December
2008 - $12,379) payable to the directors of the Company.  This balance
is non-interest bearing, unsecured and has no fixed terms of
repayment.





F -
16
 Table of Contents


Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009




10. Related
Party Transactions





During
the six month period ended 30 June 2009, the Company paid or accrued management
and consulting fees of $154,958 (30 June 2008 - $173,312) to directors and
officers of the Company or companies controlled by directors and
officers.





During
the six month period ended 30 June 2009, director and shareholder of the Company
made contributions to capital for management fees and rent of $Nil (30 June 2008
- $Nil, cumulative - $12,000) and $Nil (30 June 2008 - $Nil, cumulative -
$3,000) respectively.  This amount has been recorded as an increase in
expenditures and an increase in additional paid-in capital (Note
14).





11. Capital
Stock





Authorized





The total
authorized capital consists of:





·
            300,000,000
      of common shares with par value of
$0.001


·
            50,000,000
      of preferred shares with par value of
$0.001





Issued
and outstanding





As at 30
June 2009, the total issued and outstanding capital stock is 62,969,456 common
shares with a par value of $0.001 per common share.





29 June
2009, the Company issued 2,000,000 common shares valued at $0.65 per common
share pursuant to the Peruvian Gold Sands assignment agreement (Notes 7 and
14).





On 2 June
2009, the Company issued 2,000,000 common shares valued at $0.73 per common
share pursuant to the Atena Agreement (Notes 7 and 14).





On 2 June
2009, the Company issued 300,000 common shares valued at $0.73 per common share
pursuant to the Cerro Amarillo Agreement (Notes 7 and 14).





On 17
April 2009, the Company issued 200,000 Units at a price of $0.80 per Unit for
proceeds of $160,000. Each unit consists of one common share and one share
purchase warrant. Each share purchase warrant entitles the holder to purchase an
additional common share at a price of $0.70 up to 17 April 2009, commencing 17
October 2009.





On 7
April 2009, a total of 1,009,211 previously outstanding share purchase warrants
expired.





On 7
April 2009, a total of 70,645 previously outstanding agent compensation warrants
expired.





During
the year ended 31 December 2008, the company issued 2,000,000 common shares
valued at $1.01 per common share in pursuant to the Peruvian Gold Sands
assignment agreement (Notes 7 and 14).






F -
17
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009


During
the year ended 31 December 2008, the Company issued 350,511 agent compensation
warrants for services rendered by a private placement agent.  Each
share purchase warrant entitles the holder to purchase one common share at a
price of $1.40 up to 19 August 2009, commencing 19 February 2009 (Note
14).





During
the year ended 31 December 2008, the Company issued 5,007,300 Units at a price
of $0.80 per Unit for proceeds of $3,725,431, net of issue costs of
$280,409.  Each unit consists of one common share and one share
purchase warrant.  Each share purchase warrant entitles the holder to
purchase an additional common share at a price of $1.40 up to 19 August 2009,
commencing 19 February 2009.





During
the year ended 31 December 2008, the Company issued 1,000,000 common shares
valued at $1.59 per common share pursuant to the Atena Gold Project assignment
agreement (Notes 7 and 14)





During
the year ended 31 December 2008, the Company issued an additional 70,645 Units
at a price of $0.70 per Unit for services rendered by a private placement agent.
Each Unit consists of one common share and one share purchase warrant. Each
share purchase warrant entitles the holder to purchase an additional common
share at a price of $1.40 up to 7 April 2009, commencing 7 October 2008 (Note
14).





During
the year ended 31 December 2008, the Company issued 1,009,211 Units at a price
of $0.70 per Unit.  Each Unit consists of one common share and one
share purchase warrant.  Each share purchase warrant entitles the
holder to purchase an additional common share at a price of $1.40 up to 7 April
2009, commencing 7 October 2008.





During
the year ended 31 December 2008, the Company issued 300,000 common shares valued
at $0.70 per common share pursuant to the Cerro Amarillo assignment agreement
(Notes 7 and 14).





During
the year ended 31 December 2008, the Company issued 500,000 common shares valued
at $0.70 per common share pursuant to the Atena Gold Project assignment
agreement (Notes 7 and 14).





During
the year ended 31 December 2007, the Company issued 1,145,300 common shares for
convertible debentures of $22,906 (Note 14).





During
the year ended 31 December 2007, the Company issued 1,437,000 common shares for
cash proceeds of $502,950.





Share
Subscriptions Received in Advance





Share
subscriptions received in advance consists of $1,506,977 cash received by the
Company for 4,305,648 common shares valued at $0.35 that were not yet issued at
30 June 2009.








F -
18
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009




Share
Purchase Warrants





The
following share purchase warrants were outstanding at 30 June 2009:





Exercise
      price
                            
                            
                            Number
                              of
      warrants
                            
                            
                            Remaining
                              contractual
      life (years)$Warrants
                            
                            
                            1.40
                            
                            
                            
                            5,007,300
                            
                            
                            
                            0.13Agent
      compensation warrants
                            
                            
                            1.40
                            
                            
                            
                            350,511
                            
                            
                            
                            0.13Warrants
                            
                            
                            0.70
                            
                            
                            
                            200,000
                            
                            
                            
                            1.85,557,811





The
following is a summary of warrant activities during the six month periods ended
30 June 2009 and 2008:





Number
      of warrants
                          
                          
                          Weighted
      average exercise price$Outstanding
      at 1 January 2009
                          
                          
                          6,437,667
                          
                          
                          
                          1.40Granted
                          
                          
                          200,000
                          
                          
                          
                          0.70Exercised
                          
                          
                          -
                          
                          
                          
                          -Cancelled
                          
                          
                          (1,079,856
                          )
                          
                          
                          1.40Outstanding
      at 30 June 2009
                          
                          
                          5,557,811
                          
                          
                          
                          1.40Weighted
      average fair value of warrants granted during the period
                          
                          
                          
                          
                          
                          
                          0.07







F -
19
 Table of Contents





Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009








Number
      of warrants
                          
                          
                          Weighted
      average exercise price$Outstanding
      at 1 January 2008
                          
                          
                          -
                          
                          
                          
                          -Granted
                          
                          
                          -
                          
                          
                          
                          -Exercised
                          
                          
                          -
                          
                          
                          
                          -Cancelled
                          
                          
                          -
                          
                          
                          
                          -Outstanding
      at 30 June 2008
                          
                          
                          -
                          
                          
                          
                          -Weighted
      average fair value of warrants granted during the period
                          
                          
                          
                          
                          
                          
                          -





The
weighted average grant date fair value of warrants issued during the six month
period ended 30 June 2009, amounted to $0.07 per warrant (31 December 2008 -
$0.62). The fair value of each warrant granted was determined using the
Black-Scholes warrant pricing model and the following weighted average
assumptions:





2009
                              
                              
                              2008Risk
      free interest rate
                              
                              
                              0.57
                              %
                              
                              
                              2.02
                              %Expected
      life
                              
                              1
      years
                              
                              1
      yearAnnualized
      volatility
                              
                              
                              91.00
                              %
                              
                              
                              120.80
                              %Expected
      dividends
                              
                              
                              -
                              
                              
                              
                              -





Stock
Options





The following incentive stock options
were outstanding at 30 June 2009:





Exercise
      price
                            
                            
                            Number
                              of
      options
                            
                            
                            Remaining
                              contractual
      life (years)$Options
                            
                            
                            1.05
                            
                            
                            
                            1,425,000
                            
                            
                            
                            9.36Options
                            
                            
                            1.00
                            
                            
                            
                            3,210,000
                            
                            
                            
                            8.60Options
                            
                            
                            0.70
                            
                            
                            
                            5,440,000
                            
                            
                            
                            9.8910,075,000








F -
20
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009


The
following is a summary of stock-based compensation activities during the six
month periods ended 30 June 2009 and 2008:





Number
      of shares
                          
                          
                          Weighted
      average exercise price$Outstanding
      at 1 January 2009
                          
                          
                          4,835,000
                          
                          
                          
                          1.02Granted
                          
                          
                          5,440,000
                          
                          
                          
                          0.70Exercised
                          
                          
                          -Cancelled
                          
                          
                          (200,000
                          )
                          
                          
                          1.03Outstanding
      at 30 June 2009
                          
                          
                          10,075,000
                          
                          
                          
                          0.84Weighted
      average fair value of options granted during the period
                          
                          
                          
                          
                          
                          
                          0.63





Number
      of shares
                          
                          
                          Weighted
      average exercise price$Outstanding
      and exercisable at 1 January 2008
                          
                          
                          3,200,000
                          
                          
                          
                          0.30Granted
                          
                          
                          6,380,000
                          
                          
                          
                          1.00Exercised
                          
                          
                          -Cancelled
                          
                          
                          (3,200,000
                          )
                          
                          
                          0.30Outstanding
      and exercisable at 30 June 2008
                          
                          
                          6,380,000
                          
                          
                          
                          1.00Weighted
      average fair value of options granted during the period
                          
                          
                          
                          
                          
                          
                          1.00





12. Stock-Based
Compensation





During
the six month period ended 30 June 2009, the Company granted 5,440,000 stock
options (30 June 2008 – 6,380,000) entitling the holders to purchase common
shares of the Company for proceeds of $0.70 per common share expiring 20 May
2019. A total of 200,000 of the outstanding stock options were cancelled during
the six month period ended 30 June 2009 (30 June 2008 – 3,200,000) (Note
11).





F -
21
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009





The total
estimated fair value of the 2,380,000 stock options which vested during the six
month period ended 30 June 2009 was $2,271,494 ($0.95 per
option).  During the six month period ended 30 June 2009, stock-based
compensation of $2,271,494 (30 June 2008 - $Nil, cumulative - $4,930,136) has
been recorded in the consolidated statement of operations with a corresponding
amount recorded as contributed surplus in stockholders’ equity.





The fair
value of each option was estimated on the date of grant using Black-Scholes
option pricing model. The assumptions about stock-price volatility have been
based exclusively on the implied volatilities of publicly traded options to buy
the Company’s stock with contractual terms closest to the expected life of
options granted to employees, directors or consultants applying the guidance
provided by SAB 107.





The
following assumptions were used for the Black-Scholes valuation of stock options
granted:





2009
                                
                                
                                2008Risk
      free interest rate
                                
                                
                                3.19
                                %
                                
                                
                                3.65
                                %Expected
      life
                                
                                10
      years
                                
                                10
      yearsAnnualized
      volatility
                                
                                
                                120
                                %
                                
                                
                                149
                                %Expected
      dividends
                                
                                
                                -
                                
                                
                                
                                -





13. Income
Taxes





The
Company has losses carried forward for income tax purposes to 30 June
2009.  There are no current or deferred tax expenses for the six month
period ended 30 June 2009 due to the Company’s loss position. The Company has
fully reserved for any benefits of these losses. The deferred tax consequences
of temporary differences in reporting items for consolidated financial statement
and income tax purposes are recognized, as appropriate. Realization of the
future tax benefits related to the deferred tax assets is dependent on many
factors, including the Company’s ability to generate taxable income within the
net operating loss carryforward period.  Management has considered
these factors in reaching its conclusion as to the valuation allowance for
financial reporting purposes.








F -
22
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009


The
provision for refundable federal income tax consists of the
following:





For
      the six month period ended 30 June 2009
                            
                            
                            For
      the six month period ended 30 June 2008$
                            
                            
                            
                            $Deferred
      tax asset attributable to:Current
      operations
                            
                            
                            1,515,810
                            
                            
                            
                            709,021Amortization
                            
                            
                            (14,473
                            )
                            
                            
                            (4,426
                            )Stock-based
      compensation
                            
                            
                            (772,308
                            )
                            
                            
                            -Provision
      for potential legal claims
                            
                            
                            45,900
                            
                            
                            
                            -Less:
      Change in valuation allowance
                            
                            
                            (774,929
                            )
                            
                            
                            (704,595
                            )Net
      refundable amount
                            
                            
                            -
                            
                            
                            
                            -





The
composition of the Company’s deferred tax assets as at 30 June 2009 and 31
December 2008 is as follows:





As
      at 30 June
                            2009
                          
                          
                          As
      at 31 December 2008
                            (Audited)$
                          
                          
                          
                          $Net
      income tax operating loss carryforward
                          
                          
                          (6,072,267
                          )
                          
                          
                          (3,799,141
                          )Statutory
      federal income tax rate
                          
                          
                          34.15
                          %
                          
                          
                          34.15
                          %Effective
      income tax rate
                          
                          
                          0.00
                          %
                          
                          
                          0.00
                          %Deferred
      tax assetsTax
      loss carryforward
                          
                          
                          2,073,679
                          
                          
                          
                          1,296,269Less:
      Valuation allowance
                          
                          
                          (2,073,679
                          )
                          
                          
                          (1,296,269
                          )Net
      deferred tax asset
                          
                          
                          -
                          
                          
                          
                          -





The
potential income tax benefit of these losses has been offset by a full valuation
allowance.





As at 30
June 2009, the Company has an unused net operating loss carryforward balance of
approximately $6,072,267 that is available to offset future taxable
income.  This unused net operating loss carryforward balance for
income tax purposes expires between the years 2009 to 2029.








F -
23
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009


14. Supplemental
Disclosures with Respect to Cash Flows





For
      the period from the date of inception on 6 March 2000 to 30 June
      2009
                            
                            
                            For
                              the
      three month period ended 30 June
                              2009
                            
                            
                            For
                              the
      three
                              month
      period ended 30 June
                              2008
                            
                            
                            For
                              the
      six month period ended
                              30
      June
                              2009
                            
                            
                            For
                              the
      six month period ended
                              30
      June
                              2008$
                            
                            
                            
                            $
                            
                            
                            
                            $
                            
                            
                            
                            $
                            
                            
                            
                            $Supplemental
      cash flows informationInterest
      expense
                            
                            
                            3,042
                            
                            
                            
                            3,042
                            
                            
                            
                            -
                            
                            
                            
                            3,042
                            
                            
                            
                            -Foreign
      exchange (gain) loss
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -





During
the six month period ended 30 June 2009, the Company accrued interest of $3,042
(30 June 2008 2007 - $Nil, cumulative – $3,042) on a mineral property (Note
7).





During
the six month period ended 30 June 2009, the Company issued 2,000,000 common
shares valued at $0.65 per common share pursuant to the Peruvian Gold Sands
assignment agreement (Notes 7 and 11).





During
the six month period ended 30 June 2009, the Company issued 2,000,000 common
shares valued at $0.73 per common share pursuant to the Atena Agreement (Notes 7
and 11).





During
the six month period ended 30 June 2009, the Company issued 300,000 common
shares valued at $0.73 per common share pursuant to the Cerro Amarillo Agreement
(Notes 7 and 11).





During
the six month period ended 30 June 2009, director and shareholder of the Company
made contributions to capital for management fees and rent of $Nil (30 June 2008
- $Nil, cumulative - $12,000) and $Nil (30 June 2008 - $Nil, cumulative -
$3,000) respectively.  This amount has been recorded as an increase in
expenditures and an increase in additional paid-in capital (Note
10).





During
the year ended 31 December 2008, the Company issued 500,000 common shares valued
at $0.70 per common share in pursuant to the Atena Gold Project assignment
agreement (Notes 7 and 11).





During
the year ended 31 December 2008, the Company issued 2,000,000 common shares
valued at $1.01 per common share in pursuant to the Peruvian Gold Sands
assignment agreement (Notes 7 and 11).





During
the year ended 31 December 2008, the Company issued 300,000 common shares valued
at $0.70 per common share pursuant to the Cerro Amarillo assignment agreement
(Notes 7 and 11).





During the year ended 31 December
2008, the Company issued 70,645 common shares valued at $49,252 and 70,645
warrants valued at $25,252 for agent services rendered (Note 11).





During
the year ended 31 December 2008, the Company issued 1,000,000 common shares
valued at $1.59 per common share pursuant to the Atena Gold Project assignment
agreement (Notes 7 and 11).






F -
24
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009




During
the year ended 31 December 2008, the Company issued 350,511 agent compensation
warrants valued at $237,293 for agent services rendered (Note 11).





By
agreements effective 18 January 2008, the Company assigned all of its rights,
title and interest in the Tombaugh Lease with a book value of $481,504 to a
purchaser in consideration for the purchaser assuming the Company’s outstanding
payment obligations of $788,619 related to its convertible debentures. The
Company recorded a gain of $307,115 upon completion of the
transaction.





During
the year ended 31 December 2008, the Company issued $Nil common shares (31
December 2007 – 1,145,300) for convertible debentures of $Nil (31 December 2007
- $22,906) (Note 11).




During
the period ended 31 December 2008 the Company accrued interest of $Nil (31
December 2007 - $74,770, cumulative – $126,525) on convertible
debentures.





15. Commitments





The Company is subject to certain
outstanding and future commitments related to its mineral property interest
(Note 7).





16. Subsequent
Events





Subsequent
to the six month period ended 30 June 2009 to the date the financial statements
were available to be issued on 4 August 2009, the following events
occurred:





a.
            On
      20 July 2009, the Company announced that the management and the Board of
      Directors of the Company have adopted, approved, confirmed and ratified
      the merger (the “Merger”) of the Company with and into its proposed wholly
      owned subsidiary, Constitution Mining Corp., a Delaware Corporation
      (“CMC-Delaware”) which shall be created for the sole purpose of
      reincorporating the Company from the State of Nevada to the State of
      Delaware.  The Merger will be submitted to a vote by the Company's
      shareholders at a special meeting of the Company's shareholders for the
      sole purpose of the approval of the plan of the Merger and its
      transactions contemplated thereby.





b.
            On
      13 July 2009 the Company entered into a lawsuit settlement agreement that
      requires the Company to pay a total of $65,000, $45,000 for the settlement
      and $20,000 for legal expenses (Notes 7, 8 and
  17).





c.
            On
      9 July 2009, the Company announced a non-brokered private placement for
      4,129,639 Units at a price of $0.35 per Unit for total proceeds of
      $1,445,374. As a result, the Company issued a total of 4,129,639 Units
      where each Unit consist of one common share and one share purchase
      warrant. Each share purchase warrant entitles the holder to purchase an
      additional common share at the price of $0.70 up to 9 July 2011,
      commencing 9 January 2010 (Note
11).








F -
25
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 (Unaudited)
 30 June 2009


17. Contingency





In January 2008, a contractor of the
Company was critically injured in an automobile accident while working for the
Company in the area referred to as the Atena Project located in northwestern
Argentina.  The contractor’s family has filed a claim in the Argentina
court system seeking monetary damages from the driver of the automobile, who is
considered an employee under Argentina labor law.  Although the
Company has not been named as a party in this action, the Company anticipates
that the Company may be named as a defendant in this
action.  Subsequent to period end, the Company has settled the legal
claims for a total amount of $65,000, $45,000 for the settlement and $20,000 for
legal expenses, in the consolidated financial statements (Notes 7, 8, and
16).









F -
26
 Table of Contents





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




This Quarterly Report on Form 10-Q
contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934.  The words “believe,” “expect,” “anticipate,” “intend,”
“estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue,” and
other expressions that are predictions of or indicate future events and trends
and that do not relate to historical matters identify forward-looking
statements.  These forward-looking statements are based largely on our
expectations or forecasts of future events, can be affected by inaccurate
assumptions, and are subject to various business risks and known and unknown
uncertainties, a number of which are beyond our control.  Therefore,
actual results could differ materially from the forward-looking statements
contained in this document, and readers are cautioned not to place undue
reliance on such forward-looking statements.  We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.  A wide
variety of factors could cause or contribute to such differences and could
adversely impact revenues, profitability, cash flows and capital
needs.  There can be no assurance that the forward-looking statements
contained in this document will, in fact, transpire or prove to be
accurate.




Factors that could cause or contribute
to our actual results differing materially from those discussed herein or for
our stock price to be adversely affected include, but are not limited
to: (i) risk that we fail to meet the requirements of the agreement
under which we acquired our options, including any payments or any exploration
obligations that we have regarding these properties, which could result in the
loss of our right to exercise the options to acquire the mineral and mining
rights underlying these properties as well as the ability to recover any
consideration paid to date; (ii) risk that we cannot attract, retain and
motivate qualified personnel, particularly employees, consultants and
contractors for our operations in Peru; (iii) risk that we will be unable to
dispose of our interests in the properties located in the Salta and Mendoza
provinces of Argentina and be unable to recover any consideration paid
concerning these property interests; (iv) our short operating history; (v) our
ability to manage business expansion; (vi) risks and uncertainties relating to
the interpretation of drill results, the geology, grade and continuity of
mineral deposits; (vii) results of initial feasibility, pre-feasibility and
feasibility studies, and the possibility that future exploration, development or
mining results will not be consistent with our expectations; (viii) mining and
development risks, including risks related to accidents, equipment breakdowns,
labor disputes or other unanticipated difficulties with or interruptions in
production; (ix) the potential for delays in exploration or development
activities or the completion of feasibility studies; (x) risks related to the
inherent uncertainty of production and cost estimates and the potential for
unexpected costs and expenses; (xi) risks related to commodity price
fluctuations; (xii) the uncertainty of profitability based upon our history of
losses; (xiii) risks related to failure to obtain adequate financing on a timely
basis and on acceptable terms for our planned exploration and development
projects; (xiv) risks related to environmental regulation and liability; (xv)
risks that the amounts reserved or allocated for environmental compliance,
reclamation, post-closure control measures, monitoring and on-going maintenance
may not be sufficient to cover such costs; (xvi) risks related to tax
assessments; (xvii) political and regulatory risks associated with mining
development and exploration; (xviii) other risks and uncertainties related to
our prospects, properties and business strategy; (xix) potential that
stockholders may lose all or part of their investment if we are unable to
compete in our industry; (xx)  our dependence on key personnel;
(xxi) sale of substantial amounts of our common stock that may have a
depressive effect on the market price of the outstanding shares of our common
stock; (xxii) possible issuance of common stock subject to options and
warrants that may dilute the interest of stockholders; (xxiii) our ability
to comply with Sarbanes-Oxley Act of 2002 Section 404; (xxiv) our
nonpayment of dividends and lack of plans to pay dividends in the future;
(xxv) future sale of a substantial number of shares of our common stock
that could depress the trading price of our common stock, lower our value and
make it more difficult for us to raise capital; (xxvi) our additional
securities available for issuance, which, if issued, could adversely affect the
rights of the holders of our common stock; (xxvii) our stock price which is
likely to be highly volatile because of several factors, including a
relatively  limited public float; and (xxviii) indemnification of
our officers and directors.




- 4
-
 Table of Contents




As used
in this Quarterly Report, the terms “we,” “us,” “our,” and “Constitution Mining”
mean Constitution Mining Corp. and our subsidiaries, unless otherwise
indicated.




Overview




We were incorporated in the state of
Nevada under the name Crafty Admiral Enterprises, Ltd. on March 6,
2000.  Our original business plan was to sell classic auto parts to
classic auto owners all over the world through an Internet site and online
store; however, we were unsuccessful in implementing the online store and were
unable to afford the cost of purchasing, warehousing and shipping the initial
inventory required to get the business started.  As a result, we
ceased operations in approximately July 2002.




During our fiscal year ended December
31, 2006, we reorganized our operations to pursue the exploration, development,
acquisition and operation of oil and gas properties.  On June 27,
2006, we acquired a leasehold interest in a mineral, oil and gas property
located in St. Francis County, Arkansas for a cash payment of $642,006, pursuant
to an oil and gas agreement we entered into on April 29, 2006 (the “Tombaugh
Lease”).  Shortly after acquiring the Tombaugh Lease, we suspended our
exploration efforts on the property covered by the Tombaugh Lease in order to
pursue business opportunities developing nickel deposits in Finland, Norway and
Western Russia.  On January 18, 2008, we assigned all of our right,
title and interest in and to the Tombaugh Lease to Fayetteville Oil and Gas,
Inc., which agreed to assume all of our outstanding payment obligations on the
Tombaugh Lease as consideration for the assignment.  On March 9, 2007,
we changed our name to better reflect our business to “Nordic Nickel Ltd.”
pursuant to a parent/subsidiary merger with our wholly-owned non-operating
subsidiary, Nordic Nickel Ltd., which was established for the purpose of giving
effect to this name change.  We were not successful pursuing business
opportunities developing nickel deposits in Finland, Norway and Western Russia
and again sought to reorganize our operations in November 2007.




In November 2007, we reorganized our
operations and changed our name to “Constitution Mining Corp.” to better reflect
our current focus which is the acquisition, exploration, and potential
development of mining properties.  Since November 2007, we entered
into agreements to secure options to acquire the mineral and mining rights
underlying properties located in the Salta and Mendoza provinces of Argentina
and in northeastern Peru.




We are considered an exploration or
exploratory stage company because we are involved in the examination and
investigation of land that we believe may contain valuable minerals, for the
purpose of discovering the presence of ore, if any, and its
extent.  There is no assurance that a commercially viable mineral
deposit exists on any of the properties underlying our mineral property
interests, and a great deal of further exploration will be required before a
final evaluation as to the economic and legal feasibility for our future
exploration is determined.  We have no known reserves of any type of
mineral.  To date, we have not discovered an economically viable
mineral deposit on any of the properties underlying our mineral property
interests, and there is no assurance that we will discover one.  If we
cannot acquire or locate mineral deposits, or if it is not economical to recover
any mineral deposits that we do find, our business and operations will be
materially and adversely affected.




Our current business plan calls for
investing any surplus operating capital resulting from retained earnings into
bullion accounts and does not include holding retained earnings, if any, in cash
or cash equivalents.  In the event that commercially exploitable
reserves of minerals exist on any of our property interests and we are able to
make a profit, our business plan is to sell enough mineral reserves to satisfy
all of our expenses and invest all retained mineral reserves in bullion accounts
established in Zurich, Switzerland.  The price of precious and base
metals such as gold and silver has fluctuated widely in recent years, and is
affected by numerous factors beyond our control, including international,
economic and political trends, expectations of inflation, currency exchange
fluctuations, interest rates, global or regional consumptive patterns,
speculative activities and increased production due to new extraction
developments and improved extraction and production methods.  The
effect of these factors on the price of base and precious metals, and,
therefore, the change in the value of our retained earnings, if any, held in
bullion accounts cannot accurately be predicted and is subject to significant
fluctuation.  There can be no assurance that the value of any bullion
accounts established by us in the future to hold retained mineral reserves, if
any, will not be adversely impacted by fluctuations in the price of base and
precious metals resulting in significant losses.




- 5
-
 Table of Contents




In light of the current economic
environment, our management in this second quarter of fiscal 2009 determined
that it was necessary to reassess the Company’s current direction and proposed
plans for exploration.   In connection with this review, we
announced that we were suspending our exploration program on the properties
located in the Salta and Mendoza provinces of Argentina for at least the
remainder of 2009 and would allocate our resources exclusively to pursue the
exploration and development of our property interests in northeastern
Peru.




We
continued to monitor the current economic environment globally and within
Argentina and have noted an increasing trend toward instability within
Argentina.  Rising and excessive inflation rates in Argentina have
significantly increased the costs of the proposed operations in Argentina beyond
our initial expectations.  We believe, after further evaluation, that
Argentinean governmental bodies are pursing policies and regulations which would
adversely impact our planned operations in Argentina.  We currently
have a working capital deficiency and believe that it is presently not the best
allocation of our resources to conduct exploration activities in two different
countries.  For the foregoing reasons, we have determined it to be in
our best interest to seek to dispose of our interests in the properties located
in the Salta and Mendoza provinces of Argentina as soon as practicable so as to
prevent any default on any of these underlying option agreements.




We are
reviewing our available alternatives to dispose of our interests in the
Argentinean properties for value.  We will continue to canvass a
number of qualified parties with respect to a possible transaction and one party
has requested information regarding the Atena Property.  At the
present time, there is no certainty that we will successfully be able to
complete a disposition for value of any or all of our interests in the
properties located in the Salta and Mendoza provinces of
Argentina.  In the event that we cannot complete a disposition of our
interests in these Argentinean properties and we default on any of these
underlying option agreements, our rights to acquire the underlying mineral and
mining rights will revert back to Proyectos Mineros S.A. (“PMSA”) (formerly
Recursos Maricunga S.A.), the assignor, and we may not be entitled to recover of
any consideration we have paid to date, an aggregate of 4,100,000 shares of our
common stock and $70,000.




The
assignor for the properties located in the Salta and Mendoza provinces of
Argentina is PMSA.  Dr. Willem Fuchter, our Chief Executive
Officer and board member, is also the president and director of PMSA and holds a
50% ownership interest in the voting securities of PMSA.  As a result
of this conflict of interest, Dr. Fuchter abstained from the board of director’s
vote approving the decision to seek to dispose of our interests in the
Argentinean properties.




Peru
Property




Our properties located in Peru are in
the exploration state.  These properties are without known reserves
and the proposed plan of exploration detailed below is exploratory in
nature.  These properties are described below.




On September 29, 2008 (the
“Effective Date”), we entered into a Mineral Right Option Agreement (the “Option
Agreement”) with Temasek Investments Inc. (“Temasek”), a company incorporated
under the laws of Panama in relation to the Peru property.  Pursuant
to the Option Agreement, we acquired four separate options from Temasek, each
providing for the acquisition of a twenty-five percent interest in certain
mineral rights in Peru described in Annex 1 of the Option Agreement (the
“Mineral Rights”), pursuant to which we could potentially acquire one hundred
percent of the Mineral Rights.  The Mineral Rights are owned by
Compañía Minera Marañón S.A.C. (“Minera Marañón”).  Bacon Hill Invest
Inc. (“Bacon Hill”), a corporation incorporated under the laws of Panama and a
wholly-owned subsidiary of Temasek, owns 999 shares of the 1,000 shares of
Minera Marañón that are issued and outstanding.  Temasek owns the
single remaining share of Minera Marañón.  The acquisition of each
twenty-five percent interest in the Mineral Rights will occur through the
transfer to us of twenty-five percent of the outstanding shares of Bacon
Hill.




- 6
-
 Table of Contents




A description of the Mineral Rights is
set forth below:




Name
              Area
                (hectares)
              Dept.
              Province
              District
              ObservationAixa
      2
              1000
              Loreto
              Datem
      del Marañon
              MansericheAlana
      10
              900
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      11
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      12
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      13
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      14
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      15
              800
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      16
              800
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      17
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      18
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      19
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      4
              900
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      5
              700
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      6
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      7
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      8
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPAlana
      9
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
              Fully
      overlap Zona de Amortiguamiento ANPBianka
      5
              1000
              Loreto
              Datem
      del Marañon
              MansericheCastalia
      1
              1000
              Loreto
              Datem
      del Marañon
              MansericheCastalia
      2
              1000
              Loreto
              Datem
      del Marañon
              MansericheCastalia
      3
              500
              Loreto
              Datem
      del Marañon
              MansericheDelfina
      1
              900
              Amazonas
              Condorcanqui
              Nieva
              Partially
      overlap Zona de Amortiguamiento ANPDelfina
      2
              900
              Amazonas
              Condorcanqui
              Nieva
              Partially
      overlap Zona de Amortiguamiento ANPDelfina
      3
              1000
              Amazonas
              Condorcanqui
              Nieva
              Partially
      overlap Zona de Amortiguamiento ANPDelfina
      4
              700
              Amazonas
              Condorcanqui
              Nieva
              Partially
      overlap Zona de Amortiguamiento ANPDelfina
      5
              1000
              Amazonas
              Condorcanqui
              Nieva
              Partially
      overlap Zona de Amortiguamiento ANPMika
      1
              600
              Loreto
              Datem
      del Marañon
              MansericheMika
      10
              900
              Loreto
              Datem
      del Marañon
              Manseriche
              Partially
      overlap Zona de Amortiguamiento ANPMika
      2
              1000
              Loreto
              Datem
      del Marañon
              MansericheMika
      3
              900
              Loreto
              Datem
      del Marañon
              MansericheMika
      4
              1000
              Loreto
              Datem
      del Marañon
              MansericheMika
      5
              1000
              Loreto
              Datem
      del Marañon
              MansericheMika
      6
              1000
              Loreto
              Datem
      del Marañon
              MansericheMika
      7
              900
              Loreto
              Datem
      del Marañon
              MansericheMika
      8
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
              Partially
      overlap Zona de Amortiguamiento ANPMika
      9
              1000
              Loreto
              Datem
      del Marañon
              MansericheRosalba
      1
              900
              Loreto
              Datem
      del Marañon
              MansericheRosalba
      2
              900
              Loreto
              Datem
      del Marañon
              MansericheRosalba
      3
              1000
              Loreto
              Datem
      del Marañon
              MansericheRosalba
      4
              1000
              Loreto
              Datem
      del Marañon
              MansericheRosalba
      5
              1000
              Loreto
              Datem
      del Marañon
              Manseriche
      - Barranca




- 7
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We may exercise the initial twenty-five
percent option, which provides for the acquisition of a twenty-five percent
interest in the Mineral Rights, after fulfilling the following
conditions:
 
 · Payment
of $375,000 to Temasek upon execution of the Option Agreement;
  · Issuance
of 2,000,000 shares of our common stock to Temasek within five business days
from the Effective Date; and
  · Payment
of an additional $375,000 to Temasek within ninety days of the Effective
Date.


Since the
execution of the Option Agreement, we have paid a total of $750,000 and have
issued 2,000,000 shares of our common stock to Temasek in accordance with the
terms of the Option Agreement, enabling us to exercise the initial twenty-five
percent option and acquire a twenty-five percent interest in the Mineral
Rights.




The Option Agreement provided that we
may exercise the second twenty-five percent option, resulting in our acquisition
of a fifty percent interest in the Mineral Rights, after fulfilling the
following conditions within six months of the Effective Date:





· Payment
of an additional $1,250,000 to Temasek, and
  · Issuance
of 2,000,000 additional shares of our common stock to
Temasek.





On May
12, 2009, we entered into an agreement with Temasek to amend the Temasek Option
Agreement (the “Amended Option Agreement”) in order to revise the conditions
required by us to exercise the second twenty-five percent
option.  Under the terms of the Amended Option Agreement, we may
exercise the second twenty-five percent option, resulting in our acquisition of
a fifty percent interest in the Mineral Rights, after fulfilling the following
conditions:





· Issuance
of 2,000,000 additional shares of our common stock to Temasek within six months
from the Effective Date
 or as soon as practicable thereafter (which shares were issued in June 2009),
and
  · Payment
within 12 months from the Effective Date of an additional $1,250,000 to Temasek
plus interest at a rate of 5%
 per annum accruing from the date of the Amended Option Agreement to the date
such payment is made.





On June
29, 2009, we issued 2,000,000 shares of common stock to Temasek and its
designees as partial consideration for the exercise of the second twenty-five
percent option to acquire an aggregate fifty percent interest in the Mineral
Rights.  We will be able to exercise the second twenty-five percent
option, resulting in the acquisition of an aggregate fifty percent interest in
the Mineral Rights, if on or before September 29, 2009, we pay $1,250,000 to
Temasek, plus interest at a rate of 5% per annum accruing from May 12, 2009, the
date of the Amended Option Agreement, to the date that payment is
made.  We will require additional financing in order to be able to
exercise the second twenty-five percent option.  There can be no
assurance that we will be successful in securing the necessary funding to
exercise the second twenty-five percent option.  Provided we are
successful in securing additional financing, we intend to exercise the second
twenty-five percent option.  In the event that we are unable to secure
additional financing in order to be able to exercise the second twenty-five
percent option in the time frame set forth above, our ownership interest in the
Mineral Rights may be limited to our twenty-five percent interest.





We may
exercise the third twenty-five percent option, resulting in our acquisition of a
seventy-five percent interest in the Mineral Rights, after fulfilling the
following conditions within twelve months of the Effective Date (September 29,
2009):





· Payment
of an additional $3,000,000 to Temasek, and
  · Issuance
of 2,000,000 additional shares of our common stock to
Temasek.





We will
require additional financing in order to be able to exercise the third
twenty-five percent option.  There can be no assurance that we will be
successful in securing the necessary funding to exercise the third twenty-five
percent option.  Provided we are successful in securing additional
financing, we intend to exercise the third twenty-five percent
option.  In the event that we have exercised the second twenty-five
percent option, but are unable to secure sufficient financing in order to be
able to exercise the third twenty-five percent option in the time frame set
forth above, our ownership interest in the Mineral Rights may be limited to a
fifty percent interest.




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We may exercise the fourth twenty-five
percent option, resulting in our acquisition of a one hundred percent interest
in the Mineral Rights, after fulfilling the following conditions within eighteen
months of the Effective Date (March 29, 2010):





·
            Payment
      of an additional $5,000,000 to Temasek,
and




·
            Issuance
      of 4,000,000 additional shares of our common stock to
    Temasek.





We will
require additional financing in order to be able to exercise the fourth
twenty-five percent option.  There can be no assurance that we will be
successful in securing the necessary funding to exercise the fourth twenty-five
percent option.  Provided we are successful in securing additional
financing, we intend to exercise the fourth twenty-five percent
option.  In the event that we have exercised the third twenty-five
percent option, but are unable to secure sufficient financing in order to be
able to exercise the fourth twenty-five percent option in the time frame set
forth above, our ownership interest in the Mineral Rights may be limited to a
seventy-five percent interest.





Upon our fulfillment of the conditions
set forth above resulting in our acquisition of a one hundred percent interest
in the Mineral Rights, Temasek will hold its single share of Minera Marañón in
trust for our sole benefit and hold the share strictly in accordance with our
instructions.





In the event that we acquired a one
hundred percent interest in the Mineral Rights, Temasek is entitled to an annual
2.5% net returns royalty related to the Mineral Rights.  However, if
we pay Temasek $2,000,000 within ninety days of our acquisition of a one hundred
percent interest in the Mineral Rights, Temasek will only be entitled to an
annual 1.0% net returns royalty related to the Mineral Rights.





If we exercise the second twenty-five
percent option, resulting in our acquisition of a fifty percent interest in the
Mineral Rights, but we fail to acquire a one hundred percent interest in the
Mineral Rights, the Option Agreement provides that we and Temasek will form
a joint venture for the purpose of placing the Peru Property into commercial
production.  In the event that this condition is satisfied and we
enter into a joint venture agreement with Temasek, our responsibilities under
the joint venture would include developing a feasible mining project and all
necessary facilities and Temasek shall retain a carried free interest in the
mining rights.  If we enter into a joint venture with Temasek, but do
not develop a feasible mining project within three years of the Effective Date
(September 29, 2011), we will be required to pay Temasek an advance minimum
mining royalty of $500,000 per year, which will be deducted from Temasek’s net
return royalty on the Mineral Rights.





Proposed
Exploration Program




Shortly after our acquisition of the
Peru property in September 2008, we commenced the initial stages of our
exploration and development program and have carried out the following
activities:





·
            Completed
      an initial social base line study to document all surface rights owners
      and people resident in the project
area;




·
            Implemented
      a community relations program to inform local communities of the
      project and what potential opportunities that may exist for
      community involvement in the implementation phases of the development
      program;




·
            Submitted
      a Declaración de Impacto
      Ambiental to the Ministry of Mines and Energy in Peru and received
      approval to start the exploration;




·
            Completed
      the field work for the Evaluación de Impacto
      Ambiental semidetallado which, if approved by the Peruvian Ministry
      of Mines & Energy,  will allow us to undertake extensive
      drilling and bulk sampling
programs;




·
            Acquired
      churn drilling equipment for further evaluation and development of
      resources;




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·
            Set-up
      an operational base in the project area in the town of
      Saramiriza;




·
            Contracted
      various consulting firms and experienced and knowledgeable individuals
      with specific skills in the exploration of alluvial deposits to assist us
      with the exploration and development of the Peru property;
    and




·
            Commissioned
      and subsequently received a preliminary master plan which indicated the
      size and scope of our projected operations and areas where more
      information is required.





The principle objective of our planned
exploration and development program is to bring a dredger and appropriately
matched floating plant onto the property to assist us in conducting trial mining
tests which requires that we undertake the following actions:





·
            Drill
      an area on the property where known mineralization exists at
      closely-spaced centers in accordance with mining industry
      standards;




·
            Extend
      the resource though a wider-spaced program of reconnaissance drilling so
      as to indicate the potential size of the
  deposit;




·
            Perform
      additional geotechnical and metallurgical studies to complement existing
      information in order to prepare the optimum processing route to be adopted
      in the exploitation phase; and




·
            Prepare
      scoping, prefeasibility, and full feasibility
  studies.





An exploration base was set up in the
town of Saramiriza.  Provided we are successful in securing additional
financing, a seismic survey is anticipated to be conducted along selected lines
across the Marañón gravels in order to define the limit of the gold bearing
sands and gravels and be completed by December 2009.  The selection of
seismic lines will be made on the basis of interpretation of aerial photos and
satellite images, as well as from reconnaissance-scale mapping of sedimentary
features.  Scout drilling utilizing churn drills will be undertaken on
favorable areas, and anomalous zones will be followed up with reverse
circulation drilling in order to fully develop resources and
reserves.





We recently purchased churn drilling
equipment in the United States and had it shipped to Peru.  The
equipment cost approximately $85,000 and we acquired such funds through the
issuance of securities in private equity offerings.  The drill is now
in place on the project and our plans are to commence drilling in August 2009
and continue drilling for a period of 18 months.  If we are unable to
secure additional financing in the near future, we will be unable to sustain any
drilling activity and be forced to cease our exploration and development
program.  Our plans currently anticipate that 200 holes will be
drilled to a depth of 50m at 100m centers in the area of known mineralization,
with a view to developing a reserve which will sustain trial or pilot mining by
a bucket wheel dredge connected to a floating processing plant by December
2010.  At the same time, we anticipate that an additional 300 holes
will be drilled to a depth of 50m at one-kilometer spacing along fences of holes
spaced 5 kilometers apart across the 20km-wide alluvial field in order to extend
the mineralization and the resource potential.  The objective of this
drilling is to define additional resources in order to sustain a fleet of high
capacity dredges and floating plants in the future.  Bulk samples collected
by excavating small pits and shafts will be required for metallurgical testing
as well as to confirm drill results.  At the same time, mine development
planning, process design, and other engineering studies will be conducted with a
view to completing a feasibility study within a twenty-four month period. 
Permitting is anticipated to be initiated as early in the exploration and
development cycle as possible, so that trial or pilot dredging can be started as
soon as feasibility has been established.





Our current cash on hand is
insufficient to complete any of the activities set forth in our planned
exploration program.  If we are unable to secure additional financing
in the near future, we will be forced to cease our exploration and development
program.  Provided we are able to secure additional financing through
ongoing private equity offerings, we anticipate that we will incur the following
costs for the next twelve months:




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Activity
                        USD 000sMINERAL
      PROPERTY COSTS:Surface
      Rights Access
                        150EXPLORATIONMapping
                        230Geophysics
      - Seismic
                        400DRILLINGReconnaissance
                        1,500Resource
      Definition
                        2,000GEOTECHNICAL
                        200Pits
      & ShaftsTECHNICAL
      SERVICESConsultants
                        580Personnel
                        430CAMP
      AND FIELD EXPENSESCamp
                        630Field
                        250TRANSPORT
      AND LOGISTICSAir
      Transport
                        480Water
      Transport
                        120Ground
      Transport
                        150EQUIPMENT
      & PERMITTING
                        210COMMUNITY
      OUTREACH
                        300ADMINISTRATION
                        150TOTAL
                        7,780




Atena
Property




On
December 12, 2007, we entered into an assignment agreement with Proyectos
Mineros S.A. (“PMSA”) (formerly Recursos Maricunga S.A.) to acquire PMSA’s right
to explore and an option (the “Atena Option”) to purchase certain mineral rights
on properties known as the Atena Gold Project (“Atena”) located in the Salta
Province of Argentina (the “Atena Property”).  The Atena Property
consists of an aggregate 3,676 hectares.  PMSA acquired its right to
explore and the Atena Option to purchase the mineral rights to these properties
from Rio Tinto Mining & Exploration Ltd., Argentine Branch.





The mineral rights on the Atena
Property consist of mining claims referred to in Argentina as “minas” which
remain valid so long as the annual fee referred to as “canon minero” is
paid.





Pursuant to the terms of the assignment
agreement, we issued to either PMSA or its designees 3,500,000 shares of our
common stock and paid PMSA $60,000.  In order to acquire 100% of this
Atena Option, we must incur a minimum of an additional $3,500,000 in work
commitment expenditures on the Atena Property (the “Atena Expenditures”) and
issue 4,000,000 shares of our common stock to PMSA in accordance with the
following schedule:





·
            $1,500,000
      in Atena Expenditures, plus a further issuance of 4,000,000 shares of our
      common stock on or before March 15, 2010;
and




·
            a
      final $2,000,000 payment in Atena Expenditures on or before March 15,
      2011.





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In the event that we completed the acquisition and payment of the consideration
set forth above, we would be required to grant PMSA a 1% net smelter returns
royalty.  The Atena Option grants us the exclusive possession of the
properties for mineral exploration, together with the right to purchase the
minerals rights to these properties upon exercise of the Atena
Option.





We do not
expect to incur any additional expenditures related to the Atena Property as a
result of our decision to seek to dispose of our interests in the properties
located in the Salta and Mendoza provinces of Argentina as was described
above.  In the event that we cannot complete a disposition of our
interests in the Atena Property and we default on the underlying option
agreement, our rights to acquire the underlying mineral and mining rights will
revert back to the assignor and we may not be entitled to recover of any
consideration we have paid to date, an aggregate of 3,500,000 shares of our
common stock and $60,000.  The assignor for the Atena Property is
PMSA.  Dr. Willem Fuchter, our Chief Executive Officer and board
member, is also the president and director of PMSA and holds a 50% ownership
interest in the voting securities of PMSA.  As a result of this
conflict of interest, Dr. Fuchter abstained from the board of director’s vote
approving the decision to seek to dispose of our interests in the Atena
Property.





Amira,
Amira Norte and Esparta II Properties





Effective March 17, 2008, we entered
into an assignment agreement with PMSA, whereby PMSA assigned to us PMSA’s right
to explore and an option (the “Amira-Esparta Option”) to purchase a 90% interest
in the mineral rights of three mining properties referred to as “Amira”, “Amira
Norte” and “Esparta II”, located in the Province of Salta, Argentina (the
“Amira-Esparta Properties”).  Pursuant to the terms of our agreement
with PMSA, PMSA has assigned to us all of PMSA’s rights and obligations under an
option agreement by and between PMSA and the registered titleholder to the
Amira-Esparta Properties, Ms. Silvia Rene Rodriguez, in consideration of our
recognizing to PMSA a 1% net smelter returns royalty on the Amira-Esparta
Properties.  The mineral rights underlying the Amira-Esparta
Properties consist of manifestations of discovery (referred to as
“manifestciones de descubrimientos”), which are a form of mineral title that
allows the conversion of exploration concessions (referred to as “cateos”)to
mining claims (referred to as “minas”). The manifestations of discovery are used
as a basis for location of mining claims, but do not have a definite area until
the claims are proposed.  Within a period following designation of a
manifestation of discovery, the claimant may do further exploration, if
necessary, to determine the size and shape of the ore body.   All of
these forms of mineral title require the payment of an annual fee referred to as
“canon minero.”





In order
for us to keep our interest in good standing and to exercise the Amira-Esparta
Option, we must make the following payments to Ms. Rodriguez, as set forth in
the underlying option agreement:





·
            $75,000
      on or before January 19, 2009;




·
            an
      additional payment of $150,000 on or before January 19,
    2010;




·
            an
      additional payment of $200,000 on or before January 19, 2011;
      and




·
            a
      final payment of $1,000,000 on or before January 19, 2012, which shall
      also be the final payment required and such payment will cause the
      Amira-Esparta Option to have been automatically
  exercised.





As of January 19, 2009, we had not paid
Ms. Rodriguez the $75,000 payment required in order to be able to exercise the
Amira-Esparta Option.    Ms. Rodriguez agreed to modify the
payment terms for this payment.  As a result of this modification to
the payment terms, Ms. Rodriguez was due to be paid $25,000 on or before June
30, 2009 and $50,000 on or before September 30, 2009 in order to satisfy this
obligation.  We did not make our scheduled $25,000 payment which was
required to be paid to Ms. Rodriguez prior to June 30, 2009 and are currently in
default on the Amira-Esparta Option.  At the present time, we have not
received any notice of default from Ms. Rodriguez.  In the event that
we were to receive a notice of default from Ms. Rodriguez, we would have 30
calendar days to cure the default.  In the event that we failed to
cure the default within 30 calendar days of being provided with such notice, we
could lose our entire interest in the Amira-Esparta Option.




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We do not
expect to incur any additional expenditures related to the Amira-Esparta
Properties as a result of our decision to seek to dispose of our interests in
the properties located in the Salta and Mendoza provinces of Argentina as was
described above.  In the event that we cannot complete a disposition
of our interests in the Amira-Esparta Properties and we are unable to cure our
default of the underlying option agreement, our rights to acquire the underlying
mineral and mining rights will revert back to the assignor.  The
assignor for the Amira-Esparta Properties is PMSA.  Dr. Willem
Fuchter, our Chief Executive Officer and board member, is also the president and
director of PMSA and holds a 50% ownership interest in the voting securities of
PMSA.  As a result of this conflict of interest, Dr. Fuchter abstained
from the board of director’s vote approving the decision to seek to dispose of
our interests in the Amira-Esparta Properties.





Cerro
Amarillo Property





On January 8, 2008, we entered into an
assignment agreement with PMSA to acquire PMSA’s right to explore and option
(the “Cero Amarillo Option”) to purchase certain mineral rights on properties
known as the Cerro Amarillo Property located in the Departamento Malargue,
Province of Mendoza, Argentina (the “Cerro Amarillo Property”).  The
Cerro Amarillo Property consists of an aggregate 14,221.7 hectares.





The mineral rights underlying the Cerro
Amarillo Property consist of manifestations of discovery (referred to as
“manifestciones de descubrimientos”), which are a form of mineral title that
allows the conversion of exploration concessions (referred to as “cateos”)to
mining claims (referred to as “minas”). The manifestations of discovery are used
as a basis for location of mining claims, but do not have a definite area until
the claims are proposed.  Within a period following designation of a
manifestation of discovery, the claimant may do further exploration, if
necessary, to determine the size and shape of the ore body.   All of
these forms of mineral title require the payment of an annual fee referred to as
“canon minero.”





Pursuant to the terms of the assignment
agreement, we issued to either PMSA or its designees 600,000 shares of our
common stock and paid PMSA $10,000 in July 2008.  In order to acquire
100% of this Cerro Amarillo Option, we must incur a minimum of an additional
$450,000 in work commitment expenditures on the Cerro Amarillo Property (the
“Cerro Amarillo Expenditures”) and issue 1,800,000 shares of our common stock to
PMSA in accordance with the following schedule:





·
            $450,000
      in Cerro Amarillo Expenditures, plus a further issuance of 600,000 shares
      of our common stock on or before January 8,
  2010;




·
            an
      additional issuance of 600,000 shares of our common stock on or before
      January 8, 2011; and




·
            a
      final issuance of 600,000 shares of our common stock on or before January
      8, 2012.





In the event that we exercised the
Cerro Amarillo Option and acquired 100% of the Cerro Amarillo Property, we would
be required to issue an additional 3,000,000 shares of our common stock to
PMSA.  The Cerro Amarillo Option is subject to a 1% net smelter
returns royalty on the Cerro Amarillo Property in favor of the underlying
titleholder.  The Cerro Amarillo Option contains certain work
expenditure obligations, which are intended to be satisfied by the Cerro
Amarillo Expenditures.








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We do not
expect to incur any additional expenditures related to the Cerro Amarillo
Property as a result of our decision to seek to dispose of our interests in the
properties located in the Salta and Mendoza provinces of Argentina as was
described above.  In the event that we cannot complete a disposition
of our interests in the Cerro Amarillo Property and we default on the underlying
option agreement, our rights to acquire the underlying mineral and mining rights
will revert back to the assignor and we may not be entitled to recover of any
consideration we have paid to date, an aggregate of 600,000 shares of our common
stock and $10,000.  The assignor for the Cerro Amarillo Property is
PMSA.  Dr. Willem Fuchter, our Chief Executive Officer and board
member, is also the president and director of PMSA and holds a 50% ownership
interest in the voting securities of PMSA.  As a result of this
conflict of interest, Dr. Fuchter abstained from the board of director’s vote
approving the decision to seek to dispose of our interests in the Cerro Amarillo
Property.





Results
of Operations for the Three and Six Months Ended June 30, 2009 and
2008




We have not generated any revenues from operations since our
inception.




We incurred operating expenses in the
amount of $1,938,130 for the three months ended June 30, 2009, as compared to
operating expenses of $905,442 for the three months ended June 30,
2008.  We incurred operating expenses in the amount of $4,593,868 for
the six months ended June 30, 2009, as compared to operating expenses of
$2,395,017 for the six months ended June 30, 2008.  The substantial
increase in our operating expenses for the three and six months ended June 30,
2009, as compared to the three and six months ended June 30, 2008, relates to
stock-based compensation expenditures incurred during the three and six months
ended June 30, 2009.  We reported stock-based compensation of
$774,274 for the three months ended June 30, 2009 and $2,271,494 for the six
months ended June 30, 2009, compared to nil stock-based compensation for the
three or six months ended June 30, 2008.




We
reported other income of $136,713 during the three months ended June 30, 2009,
as compared to other income of $8,710 for the three months ended June 30,
2008.  The increase in other income for the three months ended June
30, 2009, as compared to the three months ended June 30, 2009, relates to us
entering into a settlement agreement of potential legal claims in an amount
which was $135,000 less than the provision amount for potential legal claims
which we had previously recorded.




We
reported other income of $141,855 during the six months ended June 30, 2009, as
compared to other income of $309,660 for the six months ended June 30,
2008.  The substantial decrease in other income for the six months
ended June 30, 2009, as compared to the six months ended June 30, 2009, is
attributable to a one time event in 2008 where we assigned all of our right,
title and interest in and to a leasehold interest in an oil and gas property
located in St. Francis County, Arkansas to an assignee who agreed to assume all
of our outstanding payment obligations as consideration for the
assignment.  In connection with this assignment, we reported other
income of $307,115 during the six months ended June 30, 2008.




As a
result of the above, for the three months ended June 30, 2009, we reported a net
loss of $1,801,407, as compared to a net loss of $896,732 for the three months
ended June 30, 2008.  We reported a net loss of $4,452,013 for the six
months ended June 30, 2009, as compared to a net loss of $2,085,357 for the six
months ended June 30, 2008.  The increase in our net loss was
primarily attributable to increased operating expenses incurred as a result of
stock-based compensation expenditures incurred during the three and six months
ended June 30, 2009, as compared to nil stock-based compensation expenditures
incurred during the three or six months ended June 30, 2008.




As a
result of the above, the basic and diluted loss per common share was $0.030 and
$0.018 for the three months ended June 30, 2009 and 2008,
respectively.  The basic and diluted loss per common share was $0.074
and $0.042 for the six months ended June 30, 2009 and 2008,
respectively.







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Liquidity
and Capital Resources




At
June 30, 2009, we had cash and cash equivalents of $117,830 (December 31, 2008 -
$66,580) and a working capital deficit of $744, 003 (December 31, 2008 -
$162,440).




During
the three month period following the date of this report, we anticipate
that we will not generate any revenue.  Our proposed plan of
exploration anticipates that we will incur exploration related expenditures of
$7,780,000 over the next twelve months.  We anticipate spending
approximately $200,000 in ongoing general and administrative expenses per month
for the next twelve months, for a total anticipated general and administrative
expenditures of $2,400,000 over the next twelve months.  The general
and administrative expenses for the year will consist primarily of professional
fees for the audit and legal work relating to our regulatory filings throughout
the year, investor relations related expenditures, as well as transfer agent
fees and general office expenses.  Our current cash on hand is
insufficient to be able to make our planned exploration expenditures and to pay
for our general administrative expenses over the next twelve
months.  Accordingly, we must obtain additional financing in order to
continue our plan of operations during and beyond the next twelve
months.  We believe that debt financing will not be an alternative for
funding additional phases of exploration as we do not have limited tangible
assets to secure any debt financing.  We anticipate that additional
funding will be in the form of equity financing from the sale of our common
stock.  We are currently seeking additional funding in the form of
equity financing from the sale of our common stock, but cannot provide investors
with any assurance that we will be able to raise sufficient funding from the
sale of our common stock to fund our complete exploration program.  In
the absence of such financing, we will not be able to pursue our exploration
program and maintain our mineral property interests in good
standing.  If we do not fulfill the terms of any of these option
agreements according to our business plan, then our ability to commence or
continue operations could be materially limited.  We also may be
forced to abandon our mineral property interests and cease
operations.




Due to
our ongoing need to obtain additional financing to fund our operations in the
current economic environment, our management determined during this reporting
period initially that it would be in our best interest to postpone indefinitely
our exploration program on the properties located in the Salta and Mendoza
provinces of Argentina for at least the remainder of 2009 and exclusively pursue
the exploration and development of our property interests in northeastern
Peru.  Following further review, we determined it to be in our best
interest to seek to dispose of our interests in the properties located in the
Salta and Mendoza provinces of Argentina as soon as practicable so as to prevent
any default on any of these underlying option agreements.  If we are
unable to raise additional capital in the near future, we will continue to
experience liquidity problems and management expects that we will need to
further curtail operations, liquidate assets, seek additional capital on less
favorable terms and/or pursue other remedial measures.




We may
also consider entering into a joint venture arrangement to provide the required
funding to explore the properties underlying our mineral property
interests.  We have not undertaken any efforts to locate a joint
venture participant.  Even if we determine to pursue a joint venture
participant, there is no assurance that any third party would enter into a joint
venture agreement with us in order to fund exploration of the properties
underlying our mineral property interests.  If we enter into a joint
venture arrangement, we would likely have to assign a percentage of our interest
in our mineral property interests to the joint venture participant.




Cash
Used in Operating Activities




Operating
activities for the six months ended June 30, 2009 and 2008 used cash of
$1,505,469 and $544,379, respectively, which reflect our recurring operating
losses.  Our net loss of $4,452,013 for six months ended June 30, 2009
was the primary reason for our negative operating cash flow, as compared to our
net loss of $2,085,357 for the six months ended June 30, 2008.







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Cash
Used in Investing Activities




For the
six months ended June 30, 2009, we used $110,258 in investing activities, as
compared to $120,602 used in investing activities during the six months ended
June 30, 2008.  For the six months ended June 30, 2009, we purchased
$85,258 in equipment, and expended $25,000 in connection with the acquisition of
mineral property interests, as compared to $80,909 in purchased equipment and
$39,693 in website development costs during the six months ended June 30,
2008.




Cash
from Financing Activities




As we
have had no revenues since inception, we have financed our operations primarily
by using existing capital reserves and through private placements of our common
stock.  Net cash flows provided by financing activities for the six
months ended June 30, 2009 was $1,666,977 as compared to $706,447 for the six
months ended June 30, 2008.  An increase in the cash flow provided by
financing activities was primarily due to an increase in equity financing
secured during the six months ended June 30, 2009, as compared to the six months
ended June 30, 2008.




During
the six months ended June 30, 2009, we completed a private equity offering of
4,129,639 units at $0.35 per Unit.  Each unit consisted of one (1) share of
common stock, par value $0.001, and one (1) common stock purchase warrant (the “
Warrant”) to purchase one (1) share of common stock, exercisable commencing six
months from the closing date of the offering and terminating two years from the
closing date of the offering.  As a result, we issued a total of 4,129,639
shares of common stock and warrants to purchase 4,129,639 shares of common stock
in connection with this private equity offering.  The exercise price
for the Warrant is priced at $0.70.  The gross proceeds we received
from this private equity offering was $1,445,374.  During the six
months ended June 30, 2009, we also sold to a single investor 200,000 units at
$0.80 per unit.  Each unit consisted of one (1) share of common stock, par
value $0.001, and one (1) Warrant to purchase one (1) share of common stock,
exercisable commencing six months from the issuance date and terminating one
year from the issuance date.  As a result, we issued a total of 200,000
shares of common stock and warrants to purchase 200,000 shares of our common
stock in connection with this sale of securities.  The exercise price
for the Warrant is $0.70 per share of common stock.  The gross proceeds we
received from this sale of securities was $160,000.





Off
Balance Sheet Arrangements





We do not
have any off-balance sheet debt nor did we have any transactions, arrangements,
obligations (including contingent obligations) or other relationships with any
unconsolidated entities or other persons that may have material current or
future effect on financial conditions, changes in the financial conditions,
results of operations, liquidity, capital expenditures, capital resources, or
significant components of revenue or expenses.





Going
Concern





We have
incurred net losses for the period from inception on March 6, 2000 to June 30,
2009 of $11,325,677and
have no source of revenue.  The continuity of our future operations is
dependent on our ability to obtain financing and upon future acquisition,
exploration and development of profitable operations from our mineral
properties.  These conditions raise substantial doubt about our
ability to continue as a going concern.








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Critical
Accounting Policies





In
December 2001, the SEC requested that all registrants list their most “critical
accounting polices” in the Management Discussion and Analysis.  The
SEC indicated that a “critical accounting policy” is one which is both important
to the portrayal of a company’s financial condition and results, and requires
management’s most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain.  We believe the following critical accounting estimates
affect our more significant judgments and estimates used in the preparation of
our consolidated financial statements:





Mineral
Property Costs




Mineral
property acquisition costs are initially capitalized as tangible assets when
purchased.  At the end of each fiscal quarter end, we assess the
carrying costs for impairment.  If proven and probable reserves are
established for a property and it has been determined that a mineral property
can be economically developed, costs will be amortized using the
units-of-production method over the estimated life of the probable
reserve.




Mineral
property exploration costs are expensed as incurred.





Estimated
future removal and site restoration costs, when determinable are provided over
the life of proven reserves on a units-of-production basis.  Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards.  Any charge
is included in exploration expense or the provision for depletion and
depreciation during the period and the actual restoration expenditures are
charged to the accumulated provision amounts as incurred.




As of the
date of these financial statements, we have not established any proven or
probable reserves on our mineral properties and incurred only acquisition and
exploration costs.




Although
we have taken steps to verify title to mineral properties in which it has an
interest, according to the usual industry standards for the stage of exploration
of such properties, these procedures do not guarantee our title.  Such
properties may be subject to prior agreements or transfers and title may be
affected by undetected defects.




Stock-Based
Compensation




Effective
January 1, 2006, we adopted the provisions of SFAS No. 123(R), “Share-Based Payment”, which
establishes accounting for equity instruments exchanged for employee
services.  Under the provisions of SFAS No.123(R), stock-based
compensation cost is measured at the grant date, based on the calculated fair
value of the award, and is recognized as an expense over the employees’
requisite service period (generally the vesting period of the equity
grant).  Before January 1, 2006, we accounted for stock-based
compensation to employees in accordance with Accounting Principles Board Opinion
No. 25, “Accounting for Stock
Issued to Employees,” and complied with the disclosure requirements of
SFAS No. 123, “Accounting for
Stock-Based Compensation”.  We adopted SFAS No. 23(R) using the
modified prospective method, which requires us to record compensation expense
over the vesting period for all awards granted after the date of adoption, and
for the unvested portion of previously granted awards that remain outstanding at
the date of adoption.  Accordingly, financial statements for the periods
prior to 1 January 2006 have not been restated to reflect the fair value method
of expensing share-based compensation.  Adoption of SFAS No. 123(R) does
not change the way we account for share-based payments to non-employees, with
guidance provided by SFAS No. 123 (as originally issued) and Emerging Issues
Task Force Issue No. 96-18, “Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services”.




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Foreign
Currency Translation




Our
functional and reporting currency is U.S. dollars.  Our consolidated
financial statements are translated to U.S. dollars in accordance with SFAS No.
52, “Foreign Currency
Translation.”  Monetary assets and liabilities denominated in
foreign currencies are translated using the exchange rate prevailing at the
balance sheet date.  Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are included
in the determination of income.  We have not, to the date of these
consolidated financial statements, entered into derivative instruments to offset
the impact of foreign currency fluctuations.




International
Financial Reporting Standards




In
November 2008, the Securities and Exchange Commission (“SEC”) issued for comment
a proposed roadmap regarding potential use of financial statements prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board.  Under the proposed
roadmap, we would be required to prepare financial statements in accordance with
IFRS in fiscal year 2014, including comparative information also prepared under
IFRS for fiscal 2013 and 2012.  We are currently assessing the
potential impact of IFRS on its financial statements and will continue to follow
the proposed roadmap for future developments.




Item 3.   Quantitative and
Qualitative Disclosures About Market Risk




Not
Applicable.




Item 4T.Controls and Procedures




Evaluation
of Disclosure Controls and Procedures




We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of June 30, 2009.  This evaluation was
carried out under the supervision and with the participation of our Chief
Executive Officer, Mr. Willem Fuchter, and our Chief Financial Officer, Mr.
Kenneth Phillippe.  Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that, as of June 30, 2009, our
disclosure controls and procedures are effective.




Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and
forms.  Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in our reports filed under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required
disclosure.




Limitations
on the Effectiveness of Internal Controls




Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error.  Our disclosure controls and procedures are designed
to provide reasonable assurance of achieving our objectives and our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective at that reasonable assurance
level.  Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs.  Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within our company have been detected.  These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or
mistake.  Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the internal control.  The design of any system of
controls also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future
conditions.  Over time, control may become inadequate because of
changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate.




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Changes in Internal Control
Over Financial Reporting




There have been no changes in our
internal controls over financial reporting during the quarter ended June 30,
2009 that have materially affected or are reasonably likely to materially affect
such controls.







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PART
II – OTHER INFORMATION




Item 1.     Legal
Proceedings.




In January 2008, a contractor was
critically injured in an automobile accident while working for us in the area
referred to as the Atena Project located in northwestern
Argentina.  The contractor’s family has filed a claim in the Argentina
court system seeking monetary damages in the amount of $300,000 from the driver
of the automobile, who is considered an employee under Argentinean labor
law.  Although we were not been named as a party in this action, we
have anticipated that we may be named as a defendant in this
action.  During the year ended December 31, 2008, we recorded
provisions for potential legal claims relating to this incident in the amount of
$200,000.  Subsequent to the reporting period, we agreed to make
scheduled payments totaling $65,000 in settlement of any potential legal claims
arising out of the accident described above.




Item 1A.  Risk
Factors.




Not
Applicable.




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




Pursuant to the terms of the assignment
agreement we entered into with PMSA relating to the Atena Property, we issued to
PMSA and its designees a total of 2,000,000 shares of our common stock as part
of the consideration required to exercise the Atena Option.  These
shares were issued pursuant to Section 4(2) of the Securities Act. We did not
engage in any general solicitation or advertising. The stock certificate will be
issued with the appropriate legends affixed to the restricted
stock.





Pursuant
to the terms of the assignment agreement we entered into with PMSA relating to
the Cerro Amarillo Property, we issued to PMSA and its designees a total of
300,000 shares of our common stock as part of the consideration required to
exercise the Cerro Amarillo Option.  These shares were issued pursuant
to Section 4(2) of the Securities Act. We did not engage in any general
solicitation or advertising. The stock certificate will be issued with the
appropriate legends affixed to the restricted stock.





Item
3.        Defaults upon Senior
Securities.




None.




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




We held
our Annual Meeting of Shareholders on April 27, 2009.  The director
nominees named below were each elected to a term expiring at the 2010 Annual
Meeting of Shareholders by the indicated votes cast for and withheld with
respect to each nominee.




Name
      of Nominee
                    
                    For
                    
                    WithheldWillem
      Fuchter
                    
                    30,805,871
                    
                    0Patrick
      Gorman
                    
                    31,270,772
                    
                    0Hernan
      Zaballa
                    
                    30,806,486
                    
                    0Gary
      Artmont
                    
                    30,806,871
                    
                    0Robert
      Van Tassell
                    
                    31,270,772
                    
                    0Alois
      Wiget
                    
                    30,805,871
                    
                    0Michael
      Stocker
                    
                    30,806,871
                    
                    0





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All of
the other proposals, as set forth in our proxy statement for the 2009 Annual
Meeting of Shareholders, were approved by our shareholders as
follows:




For
                    
                    Against
                    
                    AbstainApproval
      of the Stock Incentive Plan, as amended.
                    
                    31,200,127
                    
                    100,525
                    
                    70,645Ratification
      of the selection of James Stafford, Inc., Chartered Accountants to serve
      as our independent registered public accounting firm for
    2009.
                    
                    25,382,572
                    
                    20,385
                    
                    0





Item 5.   Other
Information.




None.




Item
6.   Exhibits.




See the
Exhibit Index following the signatures page of this report, which is
incorporated herein by reference.







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SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.




Constitution
      Mining Corp.Date:
            August
      14, 2009By:
      /s/ Willem
      Fuchter
              Willem
      Fuchter
              Title:Chief
      Executive Officer and DirectorDate:
            August
      14, 2009By:/s/ Kenneth
      Phillippe
              Kenneth
      Phillippe
              Title:Chief
      Financial Officer













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CONSTITUTION
MINING CORP.


(the
“Registrant”)


(Commission
File No. 000-49725)


Exhibit Index


to


Quarterly
Report on Form 10-Q


for
the Quarter Ended June 30, 2009





Exhibit
              No.
            Description
            Incorporated
      Herein by Reference to
            Filed
      Herewith10.1
            Amendment
      to Mineral Right Option Agreement,
              dated
      May 12, 2009
            Exhibit
      10.1 of Form 10-Q
              filed
      on May 15, 200931.1
            Certification of Chief Executive Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
            
            X31.2
            Certification of Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
            
            X32.1
            Certification of Chief Executive Officer and Chief
      Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to Section 906 of the Sarbanes-Oxley Act of 2002
            
            X











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