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 March 31, 2010




OR





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







For the
transition period from ______________ to ______________




Commission
File No. 000-32429





GOLDSPRING, INC.


(Exact
name of small business issuer as specified in its charter)





NEVADA
              
              1081
              
              65-0955118(State or other jurisdiction of
              
              (Primary Standard Industrial
              
              (I.R.S. Employerincorporation or organization)
              
              Classification Code Number)
              
              Identification No.)





P.O. Box
1118


Virginia
City, NV 89440


(Address
of principal executive offices)


(775)
847-5272


(Registrant’s telephone number,
including area code)





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
definition of “accelerated filer and large accelerated filer” in Rule 12b-2
of the Exchange Act. (Check one):





Large
accelerated filer o        Accelerated
filer o


o Non-accelerated
filer       x Smaller reporting
company




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). Yes  
o   No 
o




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




The
number of shares of Common Stock, $0.000666 par value, of the registrant
outstanding at May 11, 2010 was 3,782,950,927.









TABLE OF
CONTENTS





PART
      I.
                F-1Item
      1. Financial Statements.
                F-1CONDENSED
      CONSOLIDATED BALANCE SHEETS
                F-1CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS
                F-3CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS
                F-4CONDENSED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
                F-6NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                1Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
                22Item
      4. Controls and Procedures.
                29PART
      II.
                30Item
      1. Legal Proceedings.
                30Item
      1A. Risk Factors.
                30Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.
                31Item
      3. Defaults Upon Senior Securities.
                31Item
      5. Other Information.
                31Item
      6. Exhibits.
                31SIGNATURES
                32EXHIBIT
      INDEXCertification
      of Principal Executive Officer and Principal Financial Officer Pursuant to
      Rule 15d-14(a)Certification
      of Principal Executive Officer and Principal Financial Officer Pursuant to
      Section 1350





Statement
Regarding Forward-Looking Statements





This
Form 10-Q contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. All statements contained in this report on
Form 10-Q, other than statements of historical facts, are forward-looking
statements within the meaning of applicable securities laws. Forward-looking
statements include statements about matters such as: future prices and sales of
and demand for our products; future industry market conditions; future changes
in our production capacity and operations; future production, operating and
overhead costs; recapitalization and balance sheet restructuring activities
(including stock splits, debt-for-equity exchanges, land-for-debt exchanges,
capital raising and other activities); operational and management restructuring
activities (including implementation of methodologies and changes in the board
of directors); future employment and contributions of personnel; tax and
interest rates; capital expenditures and their impact on us; nature and timing
of restructuring charges and the impact thereof; productivity, business process,
rationalization, restructuring, investment, acquisition, consulting,
operational, tax, financial and capital projects and initiatives; contingencies;
environmental compliance and changes in the regulatory environment; offerings,
sales and other actions regarding debt or equity securities; and future working
capital, costs, revenues, business opportunities, debt levels, cash flows,
margins, earnings and growth.  The words “believe,” “expect,”
“anticipate,” “estimate,” “project,” “plan,” “should,” “intend,” “may,” “will,”
“would,” “potential” and similar expressions identify forward-looking
statements, but are not the exclusive means of doing so.









These
statements are based on assumptions and assessments made by our management in
light of their experience and their perception of historical and current trends,
current conditions, possible future developments and other factors they believe
to be appropriate. Forward-looking statements are not guarantees,
representations or warranties and are subject to risks and uncertainties that
could cause actual results, developments and business decisions to differ
materially from those contemplated by such forward-looking
statements.  Some of those risks and uncertainties include the risk
factors set forth in this report and our Annual Report on Form 10-K for the
fiscal year ended December 31, 2009 and the following: the current global
economic downturn and capital markets weakness; the
speculative   nature of gold or mineral exploration, including
risks of diminishing quantities or grades of qualified resources and reserves;
operational or technical difficulties in connection with  exploration
or mining activities; contests over our title to properties; our ability to cure
defaults under our current indebtedness; our substantial indebtedness and the
impact such indebtedness may have on us; the possibility that our operating
performance and operating prospects, and capital market conditions will limit
our ability to timely meet our debt services obligations, comply with debt
covenants, obtain necessary financing or refinancing or restructure indebtedness
or our debt service obligations on acceptable terms or at all; potential
inability to continue to comply with government regulations; adoption of or
changes in legislation or regulation adversely  affecting our business
opportunities that my be presented to or pursued by us; changes in the United
States or other monetary o fiscal policies o regulations in response to the
recent capital markets and economic crises; interruptions in our production
capabilities due to unexpected equipment failures; fluctuation
of  prices for gold or certain other commodities (such as silver,
copper, diesel fuel and electricity);changes in generally accepted accounting
principles; geopolitical events; potential inability to implement our business
strategies; potential inability to commence production  unless
sufficient equity capital is raise; potential inability to grow revenues
organically; potential inability to attract and retain key personnel;
interruptions in delivery of critical supplies and equipment, raw materials due
to credit or other limitations imposed by vendors; assertion of claims, lawsuits
and proceedings against us; potential inability to list our securities on any
securities exchange or market; and work stoppages or other labor
difficulties.  Occurrence of such events or circumstances could have a
material adverse effect on our business, financial condition, results of
operations or cash flows or the market price of our securities.  All
subsequent written and oral forward-looking statements by or attributable to us
or persons action on our behalf are expressly qualified in their entirety by
these factors.  All forward-looking statements included in this report
are based on information available to us as of the filing date of this report.
We undertake no obligation to update or revise any  forward-looking
statement, whether as a result of new information, future events, changed
circumstances or otherwise.









PART I.


Item 1.Financial
Statements.





GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS




March 31,
                    2010
                  
                  
                  December 31,
                    2009(Unaudited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                  
                  $
                  406,791
                  
                  
                  $
                  246,214Prepaid
      expenses
                  
                  
                  149,000
                  
                  
                  
                  ―Total
      Current Assets
                  
                  
                  555,791
                  
                  
                  
                  246,214MINERAL
      RIGHTS, PLANT AND EQUIPMENTMineral
      rights
                  
                  
                  951,409
                  
                  
                  
                  1,270,547Plant
      and equipment, net
                  
                  
                  2,289,376
                  
                  
                  
                  2,301,013Total
      Mineral Rights, Plant and Equipment
                  
                  
                  3,240,785
                  
                  
                  
                  3,572,013RECLAMATION
      BOND DEPOSIT
                  
                  
                  766,768
                  
                  
                  
                  766,768LONG-LIVED
      DEFERRED RECLAMATION EXPENSE
                  
                  
                  323,151
                  
                  
                  
                  340,159TOTAL
      ASSETS
                  
                  $
                  4,886,495
                  
                  
                  $
                  4,925,154





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




F-1




GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS (Continued)




March 31,
                              2010
                            
                            
                            December 31,
                              2009(Unaudited)LIABILITIES AND STOCKHOLDERS’
      DEFICIENCYCURRENT
      LIABILITIESAccounts
      payable
                            
                            $
                            869,749
                            
                            
                            $
                            1,608,493Accrued
      expenses
                            
                            
                            257,054
                            
                            
                            
                            271,054Accrued
      interest payable
                            
                            
                            5,281,444
                            
                            
                            
                            4,870,713Convertible
      debentures
                            
                            
                            12,145,723
                            
                            
                            
                            12,495,698Other
      debt
                            
                            
                            3,740,000
                            
                            
                            
                            3,650,000Total
      Current Liabilities
                            
                            
                            22,293,970
                            
                            
                            
                            22,895,958LONG-TERM
      DEBT AND OTHER LONG-TERM LIABILITIESLong-term
      convertible debt obligation, net of current portion
                            
                            
                            4,336,783
                            
                            
                            
                            3,025,325Long-term
      debt obligation, net of current portion
                            
                            
                            150,000
                            
                            
                            
                            490,000Derivative
      liability
                            
                            
                            5,877,364
                            
                            
                            
                            4,500,189Long-term
      reclamation liability
                            
                            
                            1,207,372
                            
                            
                            
                            1,186,966Total
      Long-Term Debt and Other Long-Term Liabilities
                            
                            
                            11,571,519
                            
                            
                            
                            9,202,480Total
      Liabilities
                            
                            
                            33,865,489
                            
                            
                            
                            32,098,438COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      DEFICITCommon
      stock, $.000666 par value 3,950,000,000 shares authorized, shares issued
      and outstanding were 3,782,450,927 (March 31, 2010) and 3,622,067,844
      (Dec. 31, 2009)
                            
                            
                            2,519,112
                            
                            
                            
                            2,438,937Additional
      paid-in capital
                            
                            
                            26,059,593
                            
                            
                            
                            25,316,171Accumulated
      deficit
                            
                            
                            (57,557,699
                            )
                            
                            
                            (54,928,392
                            )Total
      Stockholders’ Deficiency
                            
                            
                            (28,978,994
                            )
                            
                            
                            (27,173,392
                            )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICIT
                            
                            $
                            4,886,495
                            
                            
                            $
                            4,925,154





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




F-2




GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)




Three Months Ended March
                  31,2010
                
                
                2009REVENUE
      FROM GOLD SALES, Net
                
                $
                ―
                
                
                $
                ―COST
      AND EXPENSESDepletion,
      depreciation and amortization
                
                
                108,236
                
                
                
                38,866Reclamation,
      exploration and test mining expenses
                
                
                491,324
                
                
                
                1,450,316General
      and administrative
                
                
                355,424
                
                
                
                382,554Consultants
      and professional fees
                
                
                149,306
                
                
                
                70,406Total
      Cost and Expenses
                
                
                1,104,290
                
                
                
                1,942,142LOSS
      FROM OPERATIONS
                
                
                (1,104,290
                )
                
                
                (1,942,142
                )OTHER
      INCOME (EXPENSE):Financing
      cost
                
                
                (86,914
                )
                
                
                ―Gain
      on sale of royalty
                
                
                300,000
                
                
                
                ―Derivative
      change in fair value
                
                
                (878,456
                )
                
                
                (1,326,682
                )Interest
      expense
                
                
                (859,647
                )
                
                
                (781,100
                )Total
      Other Expense
                
                
                (1,525,017
                )
                
                
                (2,107,962
                )NET
      LOSS
                
                $
                (2,629,307
                )
                
                $
                (4,050,104
                )Net
      loss per common share – basic
                
                $
                (0.01
                )
                
                $
                (0.01
                )Basic
      weighted average common shares outstanding
                
                
                3,704,345,691
                
                
                
                3,421,684,919





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




F-3




GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





Three
                              month Period Ended
                              March 31,2010
                            
                            
                            2009OPERATING
      ACTIVITIES:Net
      loss
                            
                            $
                            (2,629,307
                            )
                            
                            $
                            (4,050,104
                            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                            
                            
                            108,236
                            
                            
                            
                            38,886Stock
      warrants and stock based compensation
                            
                            
                            38,969
                            
                            
                            
                            ―G
      Gain of sale of royalty
                            
                            
                            (300,000
                            )
                            
                            
                            ―Interest
      paid through the issuance of stock
                            
                            
                            388,739
                            
                            
                            
                            76,250Accretion
      and debt discount interest
                            
                            
                            80,583
                            
                            
                            
                            20,406Payments
      through the issuance of company stock
                            
                            
                            34,000Financing
      costs
                            
                            
                            86,914
                            
                            
                            
                            83,500Derivative
      change fair value, net
                            
                            
                            878,456
                            
                            
                            
                            (1,299,931Net
      loss adjusted for non-cash operating activities
                            
                            
                            (1,313,410
                            )
                            
                            
                            (2,531,151
                            )Changes
      in operating assets and liabilities:Prepaid
      and other current assets
                            
                            
                            (149,000
                            )
                            
                            
                            (22,500
                            )Accounts
      payable
                            
                            
                            (738,745
                            )
                            
                            
                            644,978Accrued
      expenses
                            
                            
                            396,731
                            
                            
                            
                            (746,605
                            )NET
      CASH USED IN OPERATING ACTIVITIES
                            
                            
                            (1,804,423
                            )
                            
                            
                            (1,162,068
                            )INVESTING
      ACTIVITIES:Proceeds
      received from sale of royalty
                            
                            
                            550,000
                            
                            
                            
                            ―Acquisition  of
      plant and equipment
                            
                            
                            (10,000
                            )
                            
                            
                            (128,880
                            )NET
      CASH USED IN INVESTING ACTIVITIES
                            
                            
                            540,000
                            
                            
                            
                            (128,880
                            )FINANCING
      ACTIVITIES:Principal
      payments on note payable
                            
                            
                            (250,000
                            )
                            
                            
                            (2,986
                            )Net
      proceeds from the issuance of company stock
                            
                            
                            ―
                            
                            
                            
                            902,500Proceeds
      from the issuance of note payable, net of financing cost
                            
                            
                            1,675,000
                            
                            
                            
                            75,000NET
      CASH PROVIDED BY FINANCING ACIVITIES
                            
                            
                            1,425,000
                            
                            
                            
                            974,514INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALANTS
                            
                            
                            160,577
                            
                            
                            
                            (316,434
                            )CASH
      AND CASH EQUIVALENTS, BEGINNING OF QUARTER
                            
                            
                            246,214
                            
                            
                            
                            322,938CASH
      AND CASH EQUIVALENTS, END OF QUARTER
                            
                            $
                            406,791
                            
                            
                            $
                            6,504SUPPLEMENTAL
      CASH FLOW INFORMATION:INCOME
      TAXES
                            
                            $
                            ―
                            
                            
                            $
                            ―INTEREST
      PAID
                            
                            $
                            23,112
                            
                            
                            $
                            1,200




F-4




GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)





Three
                    month Period Ended
                    March 31,2010
                  
                  
                  2009Supplemental
      disclosure of non-cash investing and financing activities:Issuance
      of company stock for interest
                  
                  $
                  388,739
                  
                  
                  $
                  76,250Conversion
      of debt principal into company’s common shares
                  
                  $
                  349,975
                  
                  
                  $
                  ―Issuance
      of company stock to employees
                  
                  $
                  3,400
                  
                  
                  $
                  21,000Seller
      note for acquisition of land
                  
                  $
                  ―
                  
                  
                  $
                  120,000Issuance
      of company stock for consulting services
                  
                  $
                  34,000
                  
                  
                  $
                  ―





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




F-5




GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT


For
the Three months Ended March 31, 2010





(Common
Stock Par value $.000666 per share; 3,950,000,000 shares authorized


Preferred
Stock Par Value $.000666 per share; 50,000,000 shares authorized)





Common
                  Shares Issued
                
                
                Par value
                  $.000666
                  per share
                
                
                Additional
                  Paid-in
                  Capital
                
                
                Accumulated
                  Deficit
                
                
                TotalDecember
      31, 2008
                
                
                3,380,948,371
                
                
                $
                2,251,712
                
                
                $
                22,721,504
                
                
                $
                (48,863,723
                )
                
                $
                (17,579,653
                )Common
      stock issued for:Debenture
      principal
                
                
                26,652,890
                
                
                
                17,751
                
                
                
                174,517
                
                
                
                —
                
                
                
                192,268Debenture
      interest
                
                
                150,366,583
                
                
                
                100,144
                
                
                
                1,377,453
                
                
                
                —
                
                
                
                1,477,597Employees
                
                
                5,500,000
                
                
                
                3,663
                
                
                
                63,587
                
                
                
                —
                
                
                
                67,250Private
      placement
                
                
                98,600,000
                
                
                
                65,667
                
                
                
                836,833
                
                
                
                —
                
                
                
                902,500Subtotal
                
                
                281,119,473
                
                
                
                187,255
                
                
                
                2,452,390
                
                
                
                —
                
                
                
                2,639,284Warrant
      cost and stock based option compensation
                
                
                
                
                
                
                
                
                
                
                142,277
                
                
                
                
                
                
                
                142,277Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (6,064,669
                )
                
                
                (6,064,669
                )December
      31, 2009
                
                
                3,662,067,844
                
                
                $
                2,438,937
                
                
                $
                25,316,171
                
                
                $
                (54,928,392
                )
                
                $
                (27,173,284
                )Common
      stock issued for:Debenture
      principal
                
                
                53,802,122
                
                
                
                35,832
                
                
                
                314,143
                
                
                
                —
                
                
                
                349,975Debenture
      interest
                
                
                61,080,961
                
                
                
                40,680
                
                
                
                348,059
                
                
                
                —
                
                
                
                388,739Employees
                
                
                500,000
                
                
                
                333
                
                
                
                3,067
                
                
                
                —
                
                
                
                3,400Consultant
                
                
                5,000,000
                
                
                
                3,330
                
                
                
                30,670
                
                
                
                —
                
                
                
                34,000Subtotal
                
                
                120,383,083
                
                
                
                80,175
                
                
                
                695,939
                
                
                
                —
                
                
                
                776,114Stock
      based option compensation
                
                
                
                
                
                
                
                
                
                
                47,483
                
                
                
                —
                
                
                
                47,483Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (2,629,307
                )
                
                
                (2,629,307
                )March
      31, 2010
                
                
                3,782,450,927
                
                
                $
                2,438,937
                
                
                $
                26,059,593
                
                
                $
                (57,557,699
                )
                
                $
                (28,978,994
                )





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




F-6




GOLDSPRING,
INC.


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


March 31,
2010 and 2009





Note
1 - Basis of Presentation




GoldSpring,
Inc. is a North American precious metals mining company, focused on a Comstock
Mine Project in Nevada, with extensive, contiguous property in the Comstock Lode
Mining District. The Comstock Mine Project is located in Storey County, Nevada,
approximately 3 miles south of Virginia City and 30 miles southeast of Reno,
Nevada. Access to the property is by State Route 342, a paved highway. The
Comstock District is located within the western portion of the Basin and Range
Province of Nevada, between Reno and Carson City. The majority of our activities
occur in three major structural zones: (1) the northeast striking, (2) the east
dipping Comstock and Occidental fault zones and (3) the northwest striking, east
dipping Silver City fault zone.





The
Company began acquiring properties in the Comstock in 2003. Since then, the
Company has secured permits, built an infrastructure and brought the exploration
project into test mining production. We began further consolidating the Comstock
Lode in 2005, by acquiring additional properties in the district, expanding our
footprint and creating opportunities for exploration and mining. Because of the
Comstock District’s historic significance during the American Civil War and its
world- class bonanza precious metal grades, the geology is well known and has
been studied in detail by the Company and many independent researchers. We have
accumulated a vast library of historical data and detailed surface mapping and,
in conjunction with drilling programs designed for expanding the known
historical data base, we have invested in our understanding of the Comstock’s
broader geological footprint.





The
Comstock Mine Project now consists of 4,238 acres of active lode mining claims
in the Comstock Lode Mining District. The acreage is comprised of 590 acres of
patented claims (private lands) and 3,648 acres of unpatented claims, Bureau of
Land Management (BLM) administered. The project includes the Comstock Mine heap
leach processing facility, which will be redesigned and constructed to
accommodate our new production plans.




Note
2 — Interim Financial Statements




The
accompanying interim unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 8 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In our opinion, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 2010 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2010. For further information, refer to the financial
statements and footnotes thereto included in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2009.




Note
3 — Going Concern




The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America
which contemplate continuation of the Company as a going concern. However, the
Company has year-end losses from operations and had no revenues from operations
during the three months ended March 31, 2010. During the three months ended
March 31, 2010, the Company incurred a net loss of $2,629,307. Further, the
Company has inadequate working capital to maintain or develop its operations,
and is dependent upon funds from private investors and the support of certain
stockholders.





These
factors raise substantial doubt about the ability of the Company to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of these uncertainties. In this regard, management
is proposing to raise any necessary additional funds through sale of royalties,
loans, additional sales of its common stock other equity or equity-linked
instruments and / or strategic joint venture arrangements. There is no assurance
that the Company will be successful in raising additional capital especially
given the current general economic conditions domestically and
abroad.




1




Note
4 — Summary of Significant Accounting Policies




Terms
and Definitions




Company
              
              Goldspring,
      Inc. and SubsidiariesAPB
              
              Accounting
      Principles BoardARB
              
              Accounting
      Review BoardASC
              
              Accounting
      Standards Codification TopicASU
              
              Accounting
      Standards UpdateEITF
              
              Emerging
      Issues Task ForceFASB
              
              Financial
      Accounting Standards BoardFSP
              
              FASB
      Staff PositionPlum
      LLC
              
              Plum
      Mining Company, LLCSAB
              
              SEC
      Staff Accounting BulletinSEC
              
              Securities
      Exchange CommissionSOP
              
              Statement
      of Position




Summarized
below are the significant accounting policies of Goldspring, Inc.





Principles
of Consolidation




The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries: GoldSpring, LLC, Ecovat Copper Nevada, LLC, The Plum
Mining Company, LLC, and the Plum Mine Special Purpose Company LLC. All material
inter-company transactions and balances have been eliminated in
consolidation.





Cash
and Cash Equivalents




We
consider all highly liquid debt securities purchased with original or remaining
maturities of three months or less to be cash equivalents. The carrying value of
cash equivalents approximates fair value.




Fair
Value of Financial Instruments




The
carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable, and accrued expenses approximate fair market value because of the short
maturity of those instruments. Furthermore, convertible debenture and other
notes payable amounts approximate fair value at March 31, 2010 and December 31,
2009.





Credit
Risk




It is our
practice to place our cash equivalents in high-quality money market securities
with a major banking institution. Certain amounts of such funds are not insured
by the Federal Deposit Insurance Corporation. However, we consider our credit
risk associated with cash and cash equivalents to be minimal.





Impairment
of Long Lived Assets and Long Lived Assets to be Disposed Of




The
Company accounts for impairment and disposal of long-lived assets in accordance
with ASC 360 Property, Plant, and Equipment. This ASC establishes the accounting
model for long-lived assets to be disposed of by sale and applies to all
long-lived assets, including discontinued operations. This statement requires
those long-lived assets be measured at the lower of carrying amount or fair
value less cost to sell, whether reported in continuing operations or
discontinued operations.




2




We
implemented ASC 360 in our evaluation of the fair value of certain assets
described in Notes 5 and 6.




Revenue Recognition




The
Company recognizes revenue in accordance with the provisions of ASC 600 Revenue,
which states that revenue is realized or realizable and earned when all of the
following four criteria are met:




1)
            Persuasive evidence of an
      arrangement exists,


2)
            Delivery has occurred or services
      have been rendered,


3)
            The seller’s price to the buyer
      is fixed or determinable,
and


4)
            Collectability is reasonably
      assured.





Specifically,
when we are in operational status, sales of gold and silver dore are recorded
when we issue a sales order to our refiner, Johnson Matthey, to sell a specified
quantity of metals. Sales orders are typically executed within 48 hours of
receipt. Upon receipt of the sale order, Johnson-Matthey confirms quantities
available and executes the sale at the current market price of the metals on the
day and time of the sales order. We record revenues on the day the sales order
is issued based on the confirmed quantity of metal at the confirmed market
price. Proceeds from the sale of metals are typically wired to our bank within
twenty-four hours.





Stock Issued For
Services




We base
the value of stock issued for services on the market value of our common stock
at the date of issue and our estimate of the fair value of the services
received.




Plant and
Equipment




We state
plant and equipment at cost. We provide depreciation and amortization in amounts
sufficient to recognize the expense of depreciable assets to operations over
their estimated service lives.




We
capitalize expenditures for renewals and improvements that significantly extend
the useful life of an asset. We charge expenditures for maintenance and repairs
to operations when incurred. When assets are sold or retired, the cost of the
asset and the related accumulated depreciation are removed from the accounts and
any gain or loss is recognized at such time. We use the straight-line method of
depreciation for financial reporting purposes, depreciating assets over useful
lives ranging from 3 to 15 years.




We review
the carrying value of our plant and equipment assets on a quarterly basis. Where
information and conditions suggest impairment, we write-down these assets to net
recoverable amount, based on estimated future cash flows that may be attained
from them.




Mineral
Rights




We defer
acquisition costs until we determine the viability of the property. Since we do
not have proven and probable reserves as defined by SEC Industry Guide 7,
exploration expenditures are expensed as incurred.




We
expense holding costs to maintain a property on a care and maintenance basis as
incurred.




We review
the carrying value of our interest in each mineral claim on a quarterly basis to
determine whether impairment has incurred in accordance with ASC 360 (formerly
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.”)




3




Where
information and conditions suggest impairment, we write-down these properties to
net recoverable amount, based on estimated future cash flows. Our estimate of
gold price, mineralized materials, operating capital, and reclamation costs are
subject to risks and uncertainties affecting the recoverability of our
investment in property, plant, and equipment. Although we have made our best
estimate of these factors based on current conditions, it is possible that
changes could occur in the near term that could adversely affect our estimate of
net cash flows expected to be generated from our operating properties and the
need for possible asset impairment write-downs.




Where
estimates of future net operating cash flows are not available and where other
conditions suggest impairment, we assess if carrying value can be recovered from
net cash flows generated by the sale of the asset or other means.




Reclamation
Liabilities and Asset Retirement Obligations




Minimum
standards for site reclamation and closure have been established by various
government agencies that affect certain of our operations. We calculate our
estimates of reclamation liability based on current laws and regulations and the
expected undiscounted future cash flows to be incurred in reclaiming, restoring,
and closing our operating mine sites. When we incur reclamation liabilities that
are not related to asset retirements we recognize the obligations in accordance
with ASC 410.30 (formerly SOP No. 96-1).




The
Company accounts for its reclamation liabilities and asset retirement
obligations in accordance with ASC 410 Asset Retirement and Environmental
Obligations (ASC 410). This ASC requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred. ASC 410 requires us to record a liability for the present value of our
estimated environmental remediation costs and the related asset created with it
when a recoverable asset (long-lived asset) can be realized.





Share
Based Compensation





The
Company accounts for share based compensation in accordance with ASC 718
Compensation – Stock Compensation. Accordingly, the Company measures the cost of
employee services received in exchange for an award of equity instruments based
on the grant date fair value of the award and recognizes cost over the requisite
service period.




Earnings
Per Common Share




In
calculating earnings per common share, we compute basic earnings per share by
dividing net loss by the weighted average number of common shares outstanding,
excluding the dilutive effects of common stock equivalents. For the three months
ended March 31, 2010 and 2009, we had net losses for which the effect of common
stock equivalents would be anti-dilutive. Accordingly only basic loss per share
is presented.




Use
of Estimates




In
preparing financial statements in conformity with generally accepted accounting
principles, we are required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenditures during the reported periods. Actual results could differ materially
from those estimates. Estimates may include those pertaining to the estimated
useful lives of property and equipment and software, determining the estimated
net realizable value of receivables, and the realization of deferred tax
assets.




Risks and Uncertainties




We
regularly evaluate risks and uncertainties and, when probable that a loss or
expense will be incurred, record a charge to current period
operations.




Income
Taxes




We
recognize deferred tax assets and liabilities based on differences between the
condensed consolidated financial statement carrying amounts and tax bases of
assets and liabilities (using the applicable enacted tax rates and laws). We
provide a valuation allowance for deferred tax assets for which we do not
consider realization of such assets to be likely.




4




ACCOUNTING
STANDARDS UPDATES




Other
ASUs, not effective until after March 31, 2010, are not expected to have a
significant effect on the Company’s consolidated financial position or results
of operations.





Note
4 — Mineral Rights




Mineral
rights at March 31, 2010 and December 31, 2009 consisted of the
following:





March 31,
                          2010
                        
                        
                        December 31,
                          2009Comstock
      Placer Claims
                        
                        $
                        100,000
                        
                        
                        $
                        100,000Big
      Mike Copper Claims
                        
                        
                        —
                        
                        
                        
                        69,138Comstock
      Lode Claims
                        
                        
                        761,409
                        
                        
                        
                        1,011,409Water
      rights
                        
                        
                        90,000
                        
                        
                        
                        90,000$
                        951,409
                        
                        
                        $
                        1,270,547




In
January 2010, we sold a 0.61% net smelter royalty on our Obester Property for
$550,000 to Precious Royalties, LLC, resulting in a gain of $300,000.
Accordingly, we adjusted our mining claim values to reflect the impact of the
net smelter royalty.





During
the three months ended March 31, 2010, we determined the Big Mike copper project
in Northern Nevada to be impaired and to have no fair value. In accordance with
ASC 360, we recorded an impairment expense of $69,138, which is included in the
depreciation, depletion and amortization expense on the Statement of
Operations..




Note
5 — Property and Equipment, net




Plant and
equipment at March 31, 2010 and December 31, 2009, consisted of the
following:




March 31,
                          2010
                        
                        
                        December 31,
                          2009Land
      and Building
                        
                        $
                        2,327,443
                        
                        
                        $
                        2,327,443Vehicle
      and Equipment
                        
                        
                        302,094
                        
                        
                        
                        302,094Processing
      and Lab
                        
                        
                        714,528
                        
                        
                        
                        704,528Furniture
      and Fixtures
                        
                        
                        49,390
                        
                        
                        
                        49,3903,393,455
                        
                        
                        
                        3,383,455Less
      accumulated depreciation
                        
                        
                        (1,104,079
                        )
                        
                        
                        (1,081,989
                        )$
                        2,289,376
                        
                        
                        $
                        2,301,466





During
the first fiscal quarter of 2010, we purchased additional processing equipment
for $10,000. This has been included under Processing and Lab.





Depreciation
expense for the quarters ended March 31, 2010 and 2009 was $22,090 and $21,858,
respectively.





We use
the straight-line method of depreciation for financial reporting purposes,
depreciating buildings over 15 years and other assets over useful lives ranging
from 3 to 10 years.




5




Note
6 – Reclamation Bond Deposit





We are
generally required to mitigate long-term environmental impacts by stabilizing,
contouring, resloping, and revegetating various portions of a site after mining
and mineral processing operations are completed. These reclamation efforts are
conducted in accordance with detailed plans, which must be reviewed and approved
by the appropriate regulatory agencies.




The
Nevada Revised Statutes and regulations promulgated thereunder by the Nevada
State Environmental Commission and the Nevada Division of Environmental
Protection, Bureau of Mining and Reclamation require a bond to be posted for
mining projects to assure we will leave the site safe, stable and capable of
providing for a productive post-mining land use. Pursuant to the approved
Reclamation Plans we secured a $1,106,882 mine reclamation financial assurance
instrument through the Nevada Division of Minerals' Bond Pool Program. As
required by the bond pool program, a cash deposit of $766,768 was
made.




Note
7 — Long-term Reclamation Liability and Deferred Reclamation
Expense





We have
an accrued long-term liability of $1,207,372 and $1,186,966 as of March 31, 2010
and December 31, 2009 respectively, with regard to our obligations to reclaim
our Comstock Mine facility based on our reclamation plan submitted and approved
by the Nevada State Environmental Commission and Division of Environmental
Protection. In conjunction with recording the reclamation liability we recorded
a deferred reclamation expense of which the value is being amortized over the
period of the anticipated land disturbance. Costs of future expenditures for
environmental remediation are discounted to their present value. Such costs are
based on management’s current estimate of amounts expected to be incurred when
the remediation work is performed within current laws and regulations. It is
reasonably possible that, due to uncertainties associated with the application
of laws and regulations by regulatory authorities and changes in reclamation or
remediation technology, the ultimate cost of reclamation and remediation could
change in the future. We periodically review accrued liabilities for such
reclamation and remediation costs as evidence becomes available indicating that
our liabilities have potentially changed. The reclamation liability accretion
expense and the amortization of defined reclamation expense as of March 31, 2010
and 2009 were $20,406 and $17,008 respectively.





Following
is a reconciliation of the aggregate retirement liability associated with our
reclamation plan for our Comstock Project:




3/31/10
                              
                              
                              12/31/09Long-term
      reclamation obligation beginning of period
                              
                              $
                              1,186,966
                              
                              
                              $
                              1,105,342Additional
      obligations incurred
                              
                              
                              ―
                              
                              
                              
                              ―Liabilities
      settled during the period
                              
                              
                              ―
                              
                              
                              
                              ―Increase
      in present value of the reclamation obligation (accretion
      expense)
                              
                              
                              20,406
                              
                              
                              
                              81,624Long-term
      asset retirement obligation
                              
                              $
                              1,207,372
                              
                              
                              $
                              1,186,966





Following
is a reconciliation of the aggregate long-lived deferred reclamation expense
associated with on our reclamation plan for our Comstock Project:




3/31/10
                        
                        
                        12/31/09Net
      long-lived deferred reclamation expense beginning of
period
                        
                        $
                        340,159
                        
                        
                        $
                        408,190Additional
      obligations incurred
                        
                        
                        ―
                        
                        
                        
                        ―Amortization
      of deferred reclamation expense
                        
                        
                        (17,008
                        )
                        
                        
                        (68,031
                        )Long—lived
      deferred reclamation expense
                        
                        $
                        323,151
                        
                        
                        $
                        340,159





Note
8 - Convertible Debentures




The
following is a summary of the Convertible debentures as of March 31, 2010 and
December 31, 2009:




6




3/31/10
                                      
                                      
                                      12/31/09Convertible
      Debentures Payable – Investors
                                      
                                      $
                                      1,105,908
                                      
                                      
                                      $
                                      1,105,908Convertible
      Debentures Payable - Mandatory Redemption payment
                                      
                                      
                                      4,412,058
                                      
                                      
                                      
                                      4,412,058Convertible
      Notes Payable - 2006 & 2007
                                      
                                      
                                      2,170,000
                                      
                                      
                                      
                                      2,170,000Convertible
      Notes Payable:  June – November 2008
                                      
                                      
                                      2,500,000
                                      
                                      
                                      
                                      2,500,000Convertible
      Notes Payable – July 2008 Longview Amended and Restated
    Note
                                      
                                      
                                      2,782,563
                                      
                                      
                                      
                                      2,782,563Convertible
      Notes Payable – December 2008
                                      
                                      
                                      500,000
                                      
                                      
                                      
                                      500,000Convertible
      Notes Payable – May – August 2009
                                      
                                      
                                      1,457,757
                                      
                                      
                                      
                                      1,807,732Convertible
      Notes Payable – December 2009, net
                                      
                                      
                                      1,554,220
                                      
                                      
                                      
                                      242,762Subtotal
                                      
                                      
                                      16,482,506
                                      
                                      
                                      
                                      15,521,023Less
      current portion of convertible debentures
                                      
                                      
                                      (12,145,723
                                      )
                                      
                                      
                                      (12,495,698
                                      )Long
      term portion of convertible debentures
                                      
                                      $
                                      4,336,783
                                      
                                      
                                      $
                                      3,025,325





The terms
of the convertible debentures included above are as follows:




Convertible Debentures
Payable – Investors


During
March 2004, we completed a private placement of securities transaction (the
“March Offering”), which generated $10 million in gross proceeds from a group of
accredited institutional and individual investors. On November 30, 2004, we
restructured the March Offering and entered into a new agreement (the
“Subscription Agreement”) whereby we exchanged 21,739,129 shares of common stock
and 21,739,129 warrants issued for 8% convertible notes, with the following
terms;





ConvertibleLoan
      Amount:
                
                $11.1
      million, which includes the initial $10 million investment and
      approximately $1.1 million in accrued penalties resulting from the delay
      in the registration of common stock held by investors. Since initial
      funding, approximately $10 million has been paid or refinanced leaving a
      balance of $1,105,908.Interest
      Rate:
                
                15%,
      payable in arrears in cash or stock at the lender’s
  optionConversion:
                
                The
      conversion price is equal to the lesser of: (i) eighty-five percent (85%)
      of the average of the five (5) lowest closing bid prices of the common
      stock as reported by Bloomberg L.P. for the twenty (20) trading days
      preceding the date the Company was obligated to pay the debenture; or (ii)
      eighty-five percent (85%) of the average of the five (5) lowest closing
      bid prices of the common stock as reported by Bloomberg L.P. for the
      twenty (20) trading days preceding the date of any such conversion. In no
      event shall the conversion price be higher than $.01, as noted
      below.Term:
                
                Note
      is currently due and in
default.





As a
result of the Company completing other financing arrangements at a lower
conversion price, the reset provision clause was triggered and established a new
fixed maximum conversion rate of $0.01 in February 2008.




Convertible Debentures
Payable – Mandatory Redemption Payment





John V.
Winfield, a major shareholder and note holder, and his affiliates elected to
convert approximately $3.3 million of their convertible debentures under the
November 30, 2004 Subscription Agreement into common stock . In March 2005,
because we did not deliver the share certificates within the period required in
the November 30, 2004 subscription agreement, John V. Winfield and his
affiliates (“Winfield Group”) elected to demand payment of approximately $6.9
million pursuant to the mandatory redemption payment provisions of the November
30, 2004 subscription agreement and consequently forfeited his right to receive
shares in lieu of payment.




7




The
Company did not have sufficient funds to meet this obligation. On March 31,
2005, the Winfield Group entered into a Settlement Agreement with the Company
whereby he agreed to convert the $6.9 million obligation into Convertible
Debentures (“the Debentures”).




The terms
of the Debentures are noted below:





ConvertibleLoan
      Amount:
              
              $6.9
      million, of which approximately $2.5 million has been paid or refinanced
      since initial funding leaving a remaining balance of
      $4,412,058.Interest
      Rate:
              
              18%,
      payable in arrears in cash or stock at the lender’s
  optionPayments:
              
              Monthly
      installments of principal and interest over a 24 month period with the
      remaining entire balance of unpaid principal and interest due on March 31,
      2007.Conversion:
              
              The
      Debentures are convertible, in all or in part, into shares of our common
      stock (“Conversion Shares”) at any time. The conversion price is equal to
      the lesser of: (i) eighty-five percent (85%) of the average of the five
      (5) lowest closing bid prices of the common stock as reported by Bloomberg
      L.P. for the twenty (20) trading days preceding the date the Company was
      obligated to pay the mandatory redemption Payment; or (ii) eighty-five
      percent (85%) of the average of the five (5) lowest closing bid prices of
      the common stock as reported by Bloomberg L.P. for the twenty (20) trading
      days preceding the date of any such conversion. In no event shall the
      conversion price be higher than $.01.Term:
              
              Note
      is currently due and in default.Security
      interest:
              
              Pursuant
      to the terms of the Settlement Agreement, the Debentures are granted a
      priority collateralized position, second only to our note payable to the
      Brockbank Trust in substantially all of our
  assets.




As a
result of the Company completing other financing arrangements at a lower
conversion price, the reset provision clause was triggered and established a new
fixed conversion rate of $0.01 in February 2008.




Convertible Notes Payable –
2006 & 2007




The
convertible notes payable as of December 31, 2009 and 2008 were as
follows:




Face amountWinfield
      Group Debentures Payable
                    
                    $
                    1,620,000Longview
      Debentures Payable
                    
                    
                    550,000$
                    2,170,000




8




The terms
of the agreement are as follows:




ConvertibleLoan
      Amount:
              
              $2,170,000Interest
      Rate:
              
              18%,
      payable in arrears in cash or stock at the lender’s
  optionConversion:
              
              The
      principal amount of the Note and interest is convertible into GoldSpring
      Common Stock at the lesser of (A) $.01 per share, or (B) .85 multiplied by
      the “Volume Weighted Average Price” for the Borrower’s Common Stock for
      the five trading days immediately prior to the Conversion
      Date.Term:
              
              Note
      is currently due and in defaultWarrants:
              
              20,000,000Security:
              
              Secured
      by a lien on the assets of GoldSpring, Inc. and a pledge of all of the
      interests in Plum Mine Special Purpose, LLC, which owns the Plum Mine
      operation




In
February 2008, as a result of the Company completing other financing
arrangements at a lower conversion price, the reset provision clause was
triggered and established a new fixed conversion rate of $0.01.




Convertible Notes Payable:
June – November 2008




In June
2008, the Company entered into a Loan Agreement with Winfield Group pursuant to
which Winfield Group agreed to loan the Company $2,500,000 no later than
December 31, 2008 through issuance of a series of secured notes (“Notes”). In
each month, during the five months ended December 2008, Winfield Group lent the
Company $500,000 pursuant to this Loan Agreement. These notes have been in
default since late 2008 because we failed to make any monthly payment on the
notes. Pursuant to the terms and conditions of this Loan Agreement, the notes
become immediately payable upon default and thus the note balance has been
recorded as a current liability.




The terms
of the agreement are as follows:




Convertible
      Loan Amount:
                
                $2,500,000Interest
      Rate:
                
                9%,
      payable in arrears in cash or stock at the lender’s
  optionConversion:
                
                The
      principal amount of the Note and interest is convertible into GoldSpring
      Common Stock at the lesser of (A) $.01 per share, or (B) .85 multiplied by
      the “Volume Weighted Average Price” for the Borrower’s Common Stock for
      the five trading days immediately prior to the Conversion
      Date.Term:
                
                Three
      YearsWarrants:
                
                50%
      Stock warrant coverage (Maximum warrants: 80,000,000) with an exercise
      price of $0.02 and a term of four (4) yearsSecurity:
                
                Security
      interest in all of the Company’s assets, pari passu with the
      existing security
interests





On
December 22, 2008, as a result of the Company completing other financing
arrangements at a lower conversion price, the reset provision clause was
triggered and established a new fixed conversion rate of $0.01.




9




Convertible Notes Payable –
July 2008 (Longview Amended and Restated Note)




On July
10, 2008, the Company amended $2,175,000 principal amount of unsecured
promissory notes issued to Longview Fund, L.P. through the issuance of an
Amended and Restated Promissory Note issued by the Company in favor of Longview
Fund, L.P. The amended terms are as follows:




Convertible
      Loan Amount:
              
              $2,782,563
      (Includes an initial principal amount of $2,175,000 and accrued interest
      of $607,563)Expiration
      Date:
              
              July
      10, 2011Interest
      Rate:
              
              11%,
      payable per annumConversion:
              
              The
      principal amount of the Note and interest is convertible into GoldSpring
      Common Stock at the lesser of (A) $.01 per share, or (B) .85 multiplied by
      the “Volume Weighted Average Price” for the Borrower’s Common Stock for
      the five trading days immediately prior to the Conversion
      Date.Term:
              
              Three
      Years




On
December 22, 2008, as a result of the Company completing other financing
arrangements at a lower conversion price, the reset provision clause was
triggered and established a new fixed conversion rate of $0.01.




Convertible Notes Payable
–December 2008


On
December 8, 2008, we completed a financing transaction with Winfield Group which
provided us with $500,000 in funding. Pursuant to the terms and conditions of
the note agreement, the notes became immediately payable upon default and thus
the note balance has been recorded as a current liability since December 31,
2009.




The terms
of the agreement are as follows:




Convertible
      Loan Amount:
                
                $500,000Interest
      Rate:
                
                11%,
      payable quarterly in cash or stock at the Company’s
  optionConversion:
                
                The
      principal amount of the Note and interest is convertible into GoldSpring
      Common Stock at the lesser of (A) $.01 per share, or (B) .85 multiplied by
      the “Volume Weighted Average Price” for the Borrower’s Common Stock for
      the five trading days immediately prior to the Conversion
      Date.Term:
                
                Note
      is currently in defaultWarrants:
                
                12,500,000Security:
                
                Security
      interest in all of the Company’s assets, pari passu with the
      existing security
interests




Convertible Notes Payable –
May 2009- August 2009




On May 1,
2009, the Company secured a $2,000,000 commitment for additional convertible
debt financing. The agreement, upon 30 days prior written notice, permitted the
Company to request financing in tranches between $250,000 and $500,000 per
request. Funding requests were permitted at any time between May 1, 2009 and
August 28, 2009. The Company requested and received $2,000,000 from this
financing. The notes are in default because we do not have sufficient authorized
and unissued shares. Pursuant to the terms and conditions of the loan agreement,
the notes became immediately payable upon default and thus the note balance has
been recorded as a current liability.




10




The terms
of the agreement are as follows:




Convertible
      Loan Amount:
                
                $2,000,000Interest
      Rate:
                
                9%,
      payable in arrears in cash or stock at the lender’s
  optionConversion:
                
                The
      principal amount of the Note and interest is convertible into GoldSpring
      Common Stock at the lesser of (A) $.0125 per share, or (B) .85 multiplied
      by the “Volume Weighted Average Price” for the Borrower’s Common Stock for
      the five trading days immediately prior to the Conversion
      Date.Term:
                
                Note
      is currently in defaultWarrants:
                
                50%
      Stock warrant coverage (Maximum warrants: 80,000,000) with an exercise
      price of $0.02 and a term of four (4) yearsSecurity:
                
                Security
      interest in all of the Company’s assets, pari passu with the
      existing security
interests




11




Note Balance
                                          3/31/10
                                        
                                        
                                        Note Balance
                                          12/31/09Balances
      beginning of period
                                        
                                        $
                                        1.807,732
                                        
                                        
                                        $
                                        —Convertible
      Note
                                        
                                        
                                        —
                                        
                                        
                                        
                                        2,000,000Principal
      Payments
                                        
                                        
                                        (349,975
                                        )
                                        
                                        
                                        (192,268
                                        )Note
      Balance
                                        
                                        
                                        1,457,757
                                        
                                        
                                        
                                        1,807,732




The
Convertible Notes Payable –May 2009 through August 2009 contained both an
embedded beneficial conversion feature and detachable warrants at the commitment
dates. Accordingly, we applied the accounting guidance of ASC 470-20 which
covers convertible instruments with beneficial conversion features to determine
the fair value of these items. Specifically, it states that when an instrument
contains both a detachable instrument (warrants) and an embedded beneficial
conversion feature, the proceeds of issuance should be allocated among the
detachable instrument and the convertible instrument based on their relative
fair values. Accordingly, we applied 470-20-35 to determine the amount allocated
to the convertible instrument.




Regarding
the freestanding warrants, applied the guidance of ASC 815-40. These warrants
are cashless and only require settlement in shares, not cash or transfer of
assets, and there is no obligation for the Company to repurchase the shares. The
warrants are indexed solely to our own stock. We determined that the warrants
were not within the scope of ASC 480-10-25-15. The value of the warrants was
determined to be $545,404. In general, the fair value of the warrants is
recorded as a debt discount and amortized over the term of the note, but since
we were in default, the entire amount has been recognized as interest expense in
2009. The fair value of the convertible feature, based on the intrinsic value
methodology, was $897,867 and has been recognized as interest expense in
2009.




Because
we do not have sufficient authorized shares to physically settle all outstanding
potential conversions, should they occur, we may not be able to deliver the
required shares. The guidance offered in ASC 815-40, indicates that “if share settlement is not within
the control of the Company an asset or liability classification is
required.” Consequently, we finally classified its warrants as
liabilities and began to measure them at fair value in each subsequent reporting
period.





The following summarizes
the activity for Convertible Notes Payable – May 2009 – August
2009:





Note Principal
                                  
                                  Debt Discount
                                    (*)
                                  
                                  Conversion
                                    Price per
                                    Share
                                  
                                  
                                  Number of
                                    Shares
                                    Underlying
                                    Convertible
                                    Note
                                  
                                  
                                  Effective
                                    Interest Rate
                                  
                                  
                                  Earnings per
                                    Share Impact$
                                  2,000,000
                                  
                                  1,443,271
                                  
                                  $
                                  0.0125
                                  
                                  
                                  
                                  160,000,000
                                  
                                  
                                  
                                  33.1
                                  %
                                  
                                  
                                  0.01





(*) - The
debt was in default and immediately due and payable, therefore the entire
unamortized debt discount was recognized as interest expense in 2009. The
unamortized debt discount that was included in 2009 interest expense consists of
the fair value of the warrants of $545,404 and the convertible feature of
$897,867, for a total of $1,443,271.




Convertible Notes Payable–
December 2009




On
December 10, 2009, we secured $4,500,000 commitment for additional convertible
debt financing. The agreement provided initial funding of $750,000 and on each
30th
day thereafter another tranche of $750,000 through May 2010. As of March 31,
2010, we have received $2,500,000 from this financing.




12




The terms
of the agreement are as follows:




Convertible
      Loan Amount:
                  
                  $4,500,000
      total commitment, of which $750,000 was funded through December 31, 2009
      and $2,500,000 through March 31, 2010Interest
      Rate:
                  
                  8%,
      payable in arrears in cash or stock at the lender’s
  optionConversion:
                  
                  The
      principal amount of the Note and interest is convertible into GoldSpring
      Common Stock at the lesser of (A) $.01 per share, or (B) .85 multiplied by
      the “Volume Weighted Average Price” for the Borrower’s Common Stock for
      the five trading days immediately prior to the Conversion
      Date.Term:
                  
                  Three
      YearsWarrants:
                  
                  50%
      Stock warrant coverage (Maximum warrants: 257,142,857) with an exercise
      price of $0.0175 and a term of three (3) yearsSecurity:
                  
                  Security
      interest in all of the Company’s assets, subject to(a) Seller
      Note – plum Mine; (b) certain lenders (the “Additional
      Lenders”) as of March 31, 2005, July 15, 2005, September 26, 2005,
      December 12, 2007, June 27, 2008, December 8, 2008, May 1, 2009 and May
      13, 2009.





The
Convertible Notes Payable –December 2009 contained both an embedded beneficial
conversion feature and detachable warrants at the commitment dates. Accordingly,
we applied the accounting guidance of ASC 470-20 which covers convertible
instruments with beneficial conversion features to determine the fair value of
these items. Specifically, it states that when an instrument contains both a
detachable instrument (warrants) and an embedded beneficial conversion feature,
the proceeds of issuance should be allocated among the detachable instrument and
the convertible instrument based on their relative fair values. Accordingly, we
applied 470-20-35 to determine the amount allocated to the convertible
instrument.




Regarding
the freestanding warrants, applied the guidance of ASC 815-40. These warrants
are cashless and only require settlement in shares, not cash or transfer of
assets, and there is no obligation for the Company to repurchase the shares. The
warrants are indexed solely to our own stock. We determined that the warrants
were not within the scope of ASC 480-10-25-15. The value of the warrants issued
during the three month period ended March 31, 2010 was determined to be
$124,948. The fair value of the warrants is recorded as a debt discount and
amortized over the term of the note. The fair value of the convertible feature,
based on the intrinsic value methodology, was $316,602. In the three month
period ended March 31, 2010, $20,855 of the fair value of the warrants was
recognized as interest expense and $39,322 of the fair value of the convertible
feature was recognized as interest expense.





Because
we do not have sufficient authorized shares to physically settle all outstanding
potential conversions, should they occur, we may not be able to deliver the
required shares. The guidance offered in ASC 815-40, indicates that “if share settlement is not within
the control of the Company an asset or liability classification is
required.”  Consequently, we finally classified its warrants as
liabilities and began to measure them at fair value in each subsequent reporting
period.




13


The
following summarizes the activity for Convertible Notes
Payable:  December 2009
  Note Balance
                              as of 3/31/10
                            
                            
                            Note Balance
                              as of 12/31/09Beginning
      of period
                            
                            $
                            242,762
                            
                            
                            $
                            —Convertible
      Note
                            
                            
                            1,750,000
                            
                            
                            
                            750,000Debt
      Discount, net
                            
                            
                            (945,782
                            )
                            
                            
                            (507,238
                            )End
      of period
                            
                            $
                            1,554,220
                            
                            
                            $
                            242,762
 
 Note Principal
                          
                          
                          Debt Discount
                          
                          
                          Conversion
                            Price per
                            Share
                          
                          
                          Number of
                            Shares
                            Underlying
                            Convertible
                            Note
                          
                          
                          Effective
                            Interest Rate
                          
                          
                          Earnings per
                            Share Impact$
                          750,000
                          
                          
                          $
                          518,030
                          
                          
                          $
                          0.01
                          
                          
                          
                          75,000,000
                          
                          
                          
                          31.0
                          %
                          
                          
                          0.011,750,000
                          
                          
                          
                          498,720
                          
                          
                          
                          0.01
                          
                          
                          
                          175,000,000
                          
                          
                          
                          17.5
                          %
                          
                          
                          0.01$
                          2,500,000
                          
                          
                          $
                          1,016,750
                          
                          
                          $
                          0.01
                          
                          
                          
                          250,000,000
                          
                          
                          
                          22.2
                          %
                          
                          
                          0.01
 
 The debt
discount consists of  the fair value of the warrants of ($301,224) and
the convertible feature of ($644,458), for a total of $(945,782).
 
 Debt
Discount at March 31, 2010 and December 31, 2009:
  3/31/10
                  
                  
                  12/31/09Debt
      discount beginning balance – beginning of period
                  
                  $
                  (507,238
                  )
                  
                  $
                  —Debt
      discount – embedded conversion feature
                  
                  
                  (373,773
                  )
                  
                  
                  (316,602
                  )Debt
      discount – detachable warrants
                  
                  
                  (124,948
                  )
                  
                  
                  (201,428
                  )Less
      amortization of debt discount
                  
                  
                  60,177
                  
                  
                  
                  10,792Unamortized
      debt discount
                  
                  $
                  (945,782
                  )
                  
                  $
                  (507,238
                  )
 
 Note
9 —Debt Obligation
 
 Our debt
obligations as of March 31, 2010 and December 31, 2009 include the
following:
  3/31/10
                  
                  
                  12/31/09Promissory
      Notes Payable - 2005 through 2008
                  
                  $
                  2,400,000
                  
                  
                  $
                  2,400,000Debt
      –Note (Plum Mine)
                  
                  
                  250,000
                  
                  
                  
                  250,000Debt
      –Note (Obester Property)
                  
                  
                  1,150,000
                  
                  
                  
                  1,400,000Debt  -
      Note (Petrini)
                  
                  
                  90,000
                  
                  
                  
                  90,000Subtotal
                  
                  
                  3,890,000
                  
                  
                  
                  4,140,000Less
      current portion
                  
                  
                  (3,740,000
                  )
                  
                  
                  (3,650,000
                  )Long
      term portion of debt obligations
                  
                  $
                  150,000
                  
                  
                  $
                  490,000
 
 The terms
of the debt obligations listed above are as follows;
 
 Promissory Notes Payable
–2005 through 2008
 
 The
Company has the following promissory notes payable as of March 31, 2010 and
December 31, 2009:
  14
 
 12/31/10
                  
                  
                  12/31/09Promissory
      Notes Payable-July 2005 Financing
                  
                  $
                  1,200,000
                  
                  
                  $
                  1,200,000Promissory
      Notes Payable-December 2007 Financing
                  
                  
                  600,000
                  
                  
                  
                  600,000Promissory
      Notes Payable-January 2008 Financing
                  
                  
                  600,000
                  
                  
                  
                  600,000$
                  2,400,000
                  
                  
                  $
                  2,400,000
 
 Promissory
Notes Payable - July 2005 Financing
 
 In July
of 2005, we borrowed $1.2 million from companies controlled by Winfield.
Proceeds from the notes were reduced by a 33.3% original issue discount and
other origination fees. Net proceeds received by the Company from the borrowing
were $740,000. The notes accrued interest at 17% per annum and were payable in
monthly installments of principal and interest over a 24 month period with the
remaining entire balance of unpaid principal and interest was due on July 15,
2007.  The notes are collateralized by substantially all of the
Company’s assets subject to the security interest of the Brockbank Trust. We
failed to make any payments on the notes;  hence, they are in default
and the original issue discount is fully amortized as of March 31,
2010.
 
 Promissory
Notes Payable – December 2007 Financing
 
 In
December 2007, we completed a financing transaction with Winfield which provided
us with $500,000 in funding. In consideration for the financing, we issued
promissory notes with a face value of $600,000, reflecting an original discount
of sixteen and seventeen hundreds (16.17%) percent. The notes evidencing the
loan bear interest at the rate of 18% per annum, payable on or prior to the one
year anniversary of the respective loan date. We failed to make any payments on
the notes;  hence, they are in default and the original issue discount
is fully amortized as of March 31, 2010.
 
 Promissory
Notes Payable – January 2008 Financing
 
 On
January 31, 2008, we completed a financing transaction with Winfield which
provided us with $500,000 in funding. In consideration for the financing, we
issued promissory notes with a face value of $600,000, reflecting an original
discount of sixteen and seventeen hundreds (16.17%) percent. The notes
evidencing the loan bear interest at the rate of 18% per annum, payable on or
prior to the one year anniversary of the respective loan date.  We failed
to make any payments on the notes;  hence, they are in default and the
original issue discount is fully amortized as of March 31,
2010.
 
 Debt – Note (Plum
Mine)
 
 We have a
5% bearing note payable note related to our purchase of the Plum Mining
property. The note was payable on June 2006 and we are in default on this note.
As of March 31, 2010 and December 31, 2009, we still had a $250,000 note balance
due.  There is a first security interest on the assets of Plum Mining
Property for this note.
 
 Debt - Note (Obester
Property)
 
 In
December 2009, we purchased mineral properties, which we had been leasing, from
Claire Obester, Jim Obester, Alan Obester, and Julian Smith (“sellers”) for
$1,650,000 plus a 1% royalty.  Pursuant to the purchase agreement, we
made initial payments of $250,000 and we issued a note to the “sellers” for
$1,400,000.  The note bears interest of six percent (6%) per annum.
Interest and principal payments shall be made in quarterly installments of
$250,000 with the first payment due on or before April 1, 2010 and continuing on
the same day of each consecutive quarter, until July 1, 2011, when the then
unpaid principal and accrued interest is due and payable.
  15
 
 Debt –
Note (Obester Property) at March 31, 2010 and December 31, 2009:
  3/31/10
                        
                        
                        12/31/09Beginning
      balance – beginning of period
                        
                        $
                        1,400,000
                        
                        
                        $
                        —Seller
      Note
                        
                        
                        —
                        
                        
                        
                        1,400,000Payments
                        
                        
                        (250,000
                        )
                        
                        
                        —Note
      balance
                        
                        $
                        1,150,000
                        
                        
                        $
                        1,400,000
 
 Debt - Note (Petrini
Property)
 
 On
February 17, 2009 we purchased 4.79 acres in the Comstock District for
$130,000.  We paid $40,000 in cash and financed the balance of $90,000
through a first deed of trust.  The note is interest only for two
years and bears interest at 16% per annum. We have made our scheduled
interest payments to date.  The note is due and payable on February
17, 2011.
 
 Note
10 - Debt Concentration
 
 The
Winfield Group is the largest lender to the Company.  At March
31, 2010, we had approximately $21.3 million of outstanding note principal
of which $13,869,986 or 65%, was held by Winfield.  In addition to the
$13,869,986 principal owed to Winfield Group, $4,582,945 of unpaid interest was
also due.  Had the Winfield Group converted all of its convertible
principal and interest  of  $13,921,754 into our common
stock at March 31, 2010, we would have been obligated to issue the Winfield
Group 2,027,000,000 of our common shares representing 37% of our outstanding
common shares.   The amounts listed below have been reflected in
the schedules presented in Note 8 and Note 9.
 
 Debt Position with the Winfield
      GroupAt March 31, 2010Note Descriptions (Winfield)
                                  
                                  Principal
                                  
                                  
                                  Unpaid
                                    Interest
                                  
                                  
                                  Total15%
      Convertible Notes Payable – Investors
                                  
                                  $
                                  687,928
                                  
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  687,92918%
      Convertible Debentures Payable - Mandatory Redemption
    Payment
                                  
                                  
                                  4,412,058
                                  
                                  
                                  
                                  1,067,824
                                  
                                  
                                  
                                  5,479,88218%
      Convertible Notes Payable - 2006 – 2007
                                  
                                  
                                  1,620,000
                                  
                                  
                                  
                                  1,005,538
                                  
                                  
                                  
                                  2,625,53811%
      Convertible Notes Payable - June - November 2008
                                  
                                  
                                  2,500,000
                                  
                                  
                                  
                                  471,128
                                  
                                  
                                  
                                  2,971,12811%
      Convertible Notes Payable - December 2008
                                  
                                  
                                  500,000
                                  
                                  
                                  
                                  77,196
                                  
                                  
                                  
                                  577,1969%
      Convertible Notes Payable - May - August 2009
                                  
                                  
                                  1,000,000
                                  
                                  
                                  
                                  70,681
                                  
                                  
                                  
                                  1,070.6818%
      Convertible Notes Payable - December 2009
                                  
                                  
                                  500,000
                                  
                                  
                                  
                                  9,401
                                  
                                  
                                  
                                  509,40117%
      Promissory Note Payable - July 2005
                                  
                                  
                                  1,200,000
                                  
                                  
                                  
                                  1,455,618
                                  
                                  
                                  
                                  2,655,61818%
      Promissory Note Payable - December 2007 Financing
                                  
                                  
                                  600,000
                                  
                                  
                                  
                                  190,092
                                  
                                  
                                  
                                  790,09218%
      Promissory Note Payable - January 2008 Financing
                                  
                                  
                                  600,000
                                  
                                  
                                  
                                  176,092
                                  
                                  
                                  
                                  776,0925%
      Debt Seller Note (Plum Mine)
                                  
                                  
                                  250,000
                                  
                                  
                                  
                                  59375
                                  
                                  
                                  
                                  309,375Total
      at March 31, 2010
                                  
                                  $
                                  13,869,986
                                  
                                  
                                  $
                                  4,582,945
                                  
                                  
                                  $
                                  18,452,931
 
 Note
11 – Financial Instruments
 
 The
Company issues various note instruments with various terms but they are
typically convertible into the Company’s common stock and issued with detachable
warrants.  The following sections discuss in general those conversion
features and warrants.
  16
 
 Conversion
Features
 
 The terms
of the conversion feature of our debt instruments will differ between specific
notes but their typical terms contain the following
characteristics.  Specific terms for each note are discussed in Notes
8 – 11 as appropriate.
 
 ·
              The conversion feature is an
      embedded beneficial conversion feature, whereby debt is convertible into
      GoldSpring’s common stock at approximately 85% of market price (based on a
      “lookback” formula),
 ·
              The embedded beneficial
      conversion feature is immediately
  exercisable,
 ·
              Exercising the embedded
      beneficial conversion feature is not contingent on a future
      event,
 ·
              Exercising the embedded
      beneficial conversion feature may be converted into cash or stock at the
      discretion of the issuer
(GoldSpring),
 ·
              The conversion price is a fixed
      discount, there is no stated price floor or shares issued cap to the
      potential number of shares that can be converted to satisfy the conversion
      feature
 
 Although
such conversion features are typically considered equity instruments, because
the conversion feature is a fixed discount from our traded stock price without a
limit to the number of shares that may be issued, the Company cannot be assured
that it has sufficient authorized shares to execute the conversion if
presented.  Accordingly, the Company is not “in control” of the
conversion and recognition of the value of the conversion feature is deemed a
liability for financial reporting purposes under the guidance offered in ASC
505.  As liabilities related to financial instruments, we therefore
apply fair value measurement to each conversion feature liability at each
reporting period.  See Note 12 for a discussion of fair value
measurement.
 
 Warrants
 
 The terms
of the warrants attached to our debt instruments will differ between specific
notes but their typical terms contain the following
characteristics.  Specific terms for each note are discussed in Notes
8 – 11 as appropriate.
 
 ·
              Detachable warrants are included
      with the debt offering, as debt “sweetener”, that generally provide for
      conversion at a fixed price,
 ·
              There is no active trading market
      for our warrants
 ·
              Goldspring lacks sufficient
      authorized shares to satisfy all conversion options if
      presented.
 
 Although
such warrants are typically considered equity instruments, because the Company
cannot be assured that it has sufficient authorized shares to execute the
conversion if presented.  Accordingly, the Company is not “in control”
of the conversion and recognition of the value of the conversion feature is
deemed a liability for financial reporting purposes under the guidance offered
in ASC 505.  In addition, the guidance offered in ASC 815, indicates
that “if share settlement is
not within the control of the Company an asset or liability classification is
required.”  Consequently, we classified our warrants as
liabilities and began to measure them at fair value in each subsequent reporting
period.  See Note 12 for a discussion of fair value
measurement.
 
 Note
12 – Fair Value Measurements
 
 ASC 820
defines fair value as the price that would be received upon sale of an asset or
paid upon transfer of a liability in an orderly transaction between market
participants at the measurement date and in principal or most advantageous
market for that asset or liability.  The fair value should be
calculated based on assumptions that market participants would use in pricing
the asset or liability, not on assumptions specific to the entity.  In
addition, the fair value of liabilities should include consideration of
non-performance risk, including the Company’s own credit risk.
 
 In
addition to defining fair value, ASC 820 expands the disclosure requirements
around fair value and establishes a fair value hierarchy for valuation
inputs.  The hierarchy prioritizes the inputs into three levels based
on the extent to which inputs used in measuring fair value are observable in the
market.  Each fair value measurement is reported in one of three
levels, which is determined by the lowest level input that is significant to the
fair value measurement in its entirety.  These levels
are:
  17
 
 ·
              Level 1 – inputs are based upon
      unadjusted quoted prices for identical instruments traded in active
      markets.
 ·
              Level 2 – inputs are based upon
      quoted prices for similar instruments in active markets, quoted prices for
      identical or similar instruments in markets that are not active, and
      model-based valuation techniques for which all significant assumptions are
      observable in the market or can be corroborated by observable market data
      for substantially the full term of the assets or
      liabilities.
 ·
              Level 3 – inputs are generally
      unobservable and typically reflect management’s estimates of assumptions
      that market participants would use in pricing the asset or
      liability.  The fair values are therefore determined using
      model-based techniques that include option pricing models, discontinued
      cash flow models, and similar
techniques.
 
 The
following describes the valuation methodologies the Company uses to measure
financial assets and liabilities at fair value.
 
 Liabilities Measured at Fair
Value on a Recurring Basis
 
 The
following table presents our liabilities at March 31, 2010 and December 31,
2009, which are measured at fair value on a recurring basis:
 
 Fair Value Measurements atMarch 31, 2010Total
                    
                    
                    Level 1
                    
                    
                    Level 2
                    
                    
                    Level 3Liabilities:Convertible
      features and warrants
                    
                    $
                    5,877,364
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    5,877,364Total
      Liabilities
                    
                    $
                    5,877,364
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    5,877,364
  Fair Value
      Measurements atDecember 31, 2009Total
                    
                    
                    Level 1
                    
                    
                    Level 2
                    
                    
                    Level 3Liabilities:Convertible
      features and warrants
                    
                    $
                    4,500,189
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    4,500,189Total
      Liabilities
                    
                    $
                    4,500,189
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    4,500,189
 
 As
discussed in Note 11, conversion feature liability represents the discount on
convertible notes proceeds associated with the fair value of the embedded
conversion features of our notes.  Warrant liabilities represent
detachable warrants issued in association with various notes
payable.
 
 The fair
values for the conversion feature and warrant liabilities included in Level 3
are estimated using industry standard valuation models, such as the
Black-Scholes-Merton model.  Level 3 derivative liabilities primarily
include certain over-the-counter options.
  18
 
 Gains
(losses) from changes in fair values of the conversion feature and warrant
liabilities that are not designated as hedges are recognized in other income
(expense).   The amounts recognized during the fiscal quarter
ended March 31, 2010 and the year ended December 31, 2009 are as
follows:
 
 LiabilitiesAs of March 31, 2010
                                              
                                              As of December 31, 2009Balance Sheet
                                                Location
                                              
                                              Fair Value
                                              
                                              Balance Sheet
                                                Location
                                              
                                              Fair ValueDerivative
      not designated as hedging Instruments under ASC 815Convertible
      features and warrants
                                              Long-term
      Debt
                                              
                                              $
                                              5,877,364
                                              
                                              Long-term
      Debt
                                              
                                              $
                                              4,500,189Total
      Instruments not designated as hedging instruments under ASC
      815
                                              
                                              
                                              $
                                              5,877,364
                                              
                                              
                                              
                                              $
                                              4,500,189
  Amount of Loss Recognized in Income on
                        DerivativeDerivatives Not
                        Designated as Hedging
                        Instruments under ASC
                        815
                      
                      Location of Loss
                        Recognized in income on
                        Derivative
                      
                      For the quarter ended
                        March 31, 2010
                      
                      
                      For the year ended
                        March 31, 2009Convertible
      features and warrants
                      
                      Interest Expense
                      
                      $
                      60,177
                      
                      
                      $
                      65,144Total:
                      
                      
                      
                      $
                      60,177
                      
                      
                      $
                      65,144
 
 The
following table indicates the changes in fair value of the
instruments:
 
 Convertible
                      Features and
                      WarrantsBalances
      as of January 1, 2009
                    
                    $
                    5,368,333Additions
                    
                    
                    1,961,302Reductions
                    
                    
                    (2,829,446
                    )Balances
      as of December 31, 2009
                    
                    
                    4,500,189Additions
                    
                    
                    1,377,175Reductions
                    
                    
                    —Balances
      as of March 31, 2010
                    
                    $
                    5,877,364
 
 Note
13 — Stockholders’ Equity
 
 Common
stock was issued during the three months ended March 31, 2010 and March 31, 2009
for the following purposes:
  19
  Q1 2010
                                        
                                        
                                        Q12009Share Issuances
                                        
                                        
                                        Share Value
                                        
                                        
                                        Share Issuances
                                        
                                        
                                        Share ValueDebenture
      principal
                                        
                                        
                                        53,802,122
                                        
                                        
                                        $
                                        349.975
                                        
                                        
                                        
                                        —
                                        
                                        
                                        $
                                        —Debenture
      Interest
                                        
                                        
                                        61,080,961
                                        
                                        
                                        
                                        388,739
                                        
                                        
                                        
                                        6,798,941
                                        
                                        
                                        
                                        76,250Private
      placements
                                        
                                        
                                        —
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        98,600,00
                                        
                                        
                                        
                                        986,000Consulting
                                        
                                        
                                        5,000,000
                                        
                                        
                                        
                                        34,000
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        —Employees
      and directors
                                        
                                        
                                        500,000
                                        
                                        
                                        
                                        3,400
                                        
                                        
                                        
                                        1,500,000
                                        
                                        
                                        
                                        21,000Total
                                        
                                        
                                        120,383,083
                                        
                                        
                                        $
                                        776,114
                                        
                                        
                                        
                                        106,898,941
                                        
                                        
                                        $
                                        1,083,250
 
 The
following schedules provide additional detail on the summary listed
above.
 
 Debenture Principal and
Debenture Interest for the fiscal quarter ended March 31,
2010
 
 The
following represents principal and interest payments on debt, made during the
three months ended March 31, 2010, with the issuance of our common stock. 
The shares were valued in accordance with each respective convertible note's
term as disclosed in Note 8.
  PrincipalPayment
                                                                    
                                                                    
                                                                    InterestPaymentNote Description
                                                                    
                                                                    Number of
                                                                      Shares
                                                                    
                                                                    
                                                                    Value of
                                                                      Shares
                                                                    
                                                                    
                                                                    Number of
                                                                      shares
                                                                    
                                                                    
                                                                    Value of
                                                                      SharesConvertible
      Debentures Payable-Investors
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    $
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    16,750,000
                                                                    
                                                                    
                                                                    $
                                                                    94,698Convertible
      Debentures Payable- Mandatory Redemption payment
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    25,000,000
                                                                    
                                                                    
                                                                    
                                                                    141,000Long-Term
      Convertible Notes – July 2008 (Longview Amended and Restated
      Note)
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    19,330,961
                                                                    
                                                                    
                                                                    
                                                                    153,041Convertible
      Notes:  May 2009 – Aug. 2009
                                                                    
                                                                    
                                                                    53,802,122
                                                                    
                                                                    
                                                                    
                                                                    349,975
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —53,802,122
                                                                    
                                                                    
                                                                    $
                                                                    349,975
                                                                    
                                                                    
                                                                    
                                                                    61,080,961
                                                                    
                                                                    
                                                                    $
                                                                    388,739
 
 Debenture Principal and
Debenture Interest for the fiscal quarter ended March 31,
2009
 
 The
following represents principal and interest payments on debt, made during the
three month period ended March 31, 2009 with the issuance of our common
stock.
  PrincipalPayment
                                                                  
                                                                  
                                                                  InterestPaymentNote Description
                                                                  
                                                                  Number of
                                                                    Shares
                                                                  
                                                                  
                                                                  Value of
                                                                    Shares
                                                                  
                                                                  
                                                                  Number of
                                                                    shares
                                                                  
                                                                  
                                                                  Value of
                                                                    SharesLong-Term
      Convertible Notes – July 2008 (Longview Amended and Restated
      Note)
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  6,798,941
                                                                  
                                                                  
                                                                  
                                                                  76,250
 
 Private
Placements
 
 The
following private placement transactions raised a gross total of $986,000 in
exchange for 98,600,000 shares of our unregistered common stock, placed with
accredited investors during the three months ended March 31, 2009.  In
general, the proceeds were used to fund exploratory drilling and for general
working capital.
 
 ·
              During the three months ended
      2009, $986,000 for 98,600,000 shares at $0.01 per share and 95,000.000
      warrants.  The warrants have an exercise price of $.015 and a term of
      six years. .
  20
 
 Consultants
 
 In the
the three months ended 2010, the following shares were issued to consultants for
services performed:
 
 ·
              In January 2010, a consultant was
      issued 5 million shares valued at $34,000 or $0.0068 per share, for
      services.
 
 Employees and
directors
 
 During
the three months ended March 31, 2010, the following share grants were issued to
employees:
 
 ·
              In January 2010, pursuant to his
      employment agreement, Mr. Larry Martin, our Chief Geologist, was issued a
      total of five hundred thousand (500,000) of our unregistered common
      shares.  The value of the common shares at the time of issuance
      was $3,400, averaging $0.0068 per share.  Shares are valued at the
      closing market price on date of
issue.
 
 During
the three months ended March 31, 2009, the following share grants were issued to
employees:
 
 ·
              In January 2009, pursuant to his
      employment agreement, Mr. Larry Martin, our Chief Geologist, was issued a
      total of one million five hundred thousand (1,500,000) of our unregistered
      common shares.  The value of the common shares at the time of
      issuance was $21,000, averaging $0.014 per share.  Shares are valued
      at the closing market price on date of
  issue.
 
 Note
14 - Earnings Per Share
 
 Basic
earnings per share is computed by dividing net loss, after deducting preferred
stock dividends accumulated during the period, by the weighted average number of
shares of common stock outstanding. Diluted earnings per share is computed by
dividing net income, after deducting preferred stock dividends accumulated
during the period, by the weighted average number of shares of common stock and
dilutive common stock equivalent shares outstanding.   For the
quarters ended March 31, 2010 and March 31, 2009, there were approximately 3,650
million and 1,855 million, respectively, of common stock equivalent shares
excluded from the dilutive earnings per share calculation because they were
anti-dilutive. The following is a reconciliation of the number of shares used in
the basic and diluted computation of net income per share (in
millions):
  For the ThreeMonths Ended
                              March 31
                              (in millions)2010
                            
                            
                            2009Weighted
      average number of common shares outstanding – basic
                            
                            
                            3,704
                            
                            
                            
                            3,422Dilution
      from convertible debt, stock options and warrants
                            
                            
                            3,650
                            
                            
                            
                            1,855Weighted
      average number of common shares outstanding – diluted
                            
                            
                            7,354
                            
                            
                            
                            5,307
 
 Note
15 - Unregistered Sales of Securities
 
 During
the three months ended March 31, 2010, the following share were issued to
employees and consultants:
 
 ·
              In January 2010, pursuant to his
      employment agreement, Mr. Larry Martin, our Chief Geologist, was issued a
      total of five hundred thousand (500,000) of our unregistered common
      shares.  The value of the common shares at the time of issuance
      was $3,400, averaging $0.0068 per share.  Shares are valued at the
      closing market price on date of
issue.
 
 ·
              In January 2010, a consultant was
      issued 5 million shares valued at $34,000 or $0.0068 per share, for
      services.
  21
  Note
16 – Subsequent Events
 
 On April
21, 2010, the Board of Directors of the Company elected Corrado De Gasperis as
Chief Executive Officer and President of the Company, effective
immediately.  He is also serving as Principal Financial Officer of the
Company.  Mr. De Gasperis succeeds Robert Reseigh, who has served as
the Interim Chief Executive Officer since October 6, 2009, and Robert T. Faber
who has served as President since September 2004 and Principal Financial Officer
since June 2003.  Both Mr. Reseigh and Mr. Faber  will
continue in their roles as directors of the Company, and Mr. Faber will assume
the role of Chief Accounting Officer of the Company, working directly and
facilitating the transition with Mr. De Gasperis. In connection with his
election as Chief Executive Officer and President, the Company entered into an
Employment Agreement with Mr. DeGasperis, dated April 21, 2010.
 
 In
addition, on April 21, 2010, James V. Golden, Chief Operating Officer of the
Company, resigned as such, effective immediately.  In connection with
his resignation, the Company entered into a Resignation and Severance Agreement
dated April 21, 2010.
 
 On May 7,
2010, the Company announced that it had received stockholder approval to effect
a one-for-two hundred reverse stock split of its common stock, whereby each
block of two hundred shares of common stock registered in the name of each
stockholder will be converted into one share of the Company’s common
stock.  The reverse stock split was approved by the Company’s
stockholders pursuant to a written consent in lieu of a special meeting of the
stockholders solicited under a Definitive Proxy Statement on Schedule 14A (the
“Written Consent”), filed with the Securities and Exchange Commission on March
24, 2010.
  Of the
2,209,354,411 Written Consents received, 2,027,702,467 were voted in favor of
the reverse stock split, with 172,897,106 of the Written Consents cast against
the reverse stock split and 8,754,838 abstentions.
  The
Written Consents provided that the Board of Directors of the Company may
effectuate the reverse stock split any time on or prior to December 31,
2011.  The Company’s Board of Directors approved the immediate
implementation of the reverse stock split and all necessary documents and
notifications to the appropriate regulatory agencies, including the required
notification to the Financial Industry Regulatory Authority (“FINRA”), to
effectuate the reverse stock split, have been filed.  The Board of
Directors established the effective date for the reverse stock split to be the
day next following the receipt from FINRA that the notification has been
approved, which is expected to be no later than May 18, 2010.
  Item 2. Management’s Discussion and Analysis
or Plan of Operations
 
 The
following discussion provides information that we believe is relevant to an
assessment and understanding of the consolidated results of operations and
financial condition of our company. It should be read in conjunction with the
Consolidated Financial Statements and accompanying Notes also included in this
10-Q and our Annual Report on Form 10-K as of and for the fiscal year ending
December 31, 2009.
 
 The
following discussion addresses matters we consider important for an
understanding of our financial condition and results of operations as of and for
the three months ended March 31, 2010, as well as our future
results.
 
 Overview
 
 GoldSpring,
Inc. is a North American precious metals mining company, focused on a Comstock
Mine Project in Nevada, with extensive, contiguous property in the Comstock Lode
District.  The Comstock Mine Project is located in Storey County,
Nevada, approximately 3 miles south of Virginia City and 30 miles southeast of
Reno, Nevada. Access to the property is by State Route 342, a paved highway. The
Comstock District is located within the western portion of the Basin and Range
Province of Nevada, between Reno and Carson City. The majority of our activities
occur in three major structural zones: (1) the northeast striking, (2) the east
dipping Comstock and Occidental fault zones and (3) the northwest striking, east
dipping Silver City fault zone.
  22
 
 The
Company began acquiring properties in the Comstock in 2003.  Since
then, the Company has secured permits, built an infrastructure and brought the
exploration project into test mining production.  We began further
consolidating the Comstock Lode in 2005, by acquiring additional properties in
the district, expanding our footprint and creating opportunities for exploration
and mining. Because of the Comstock District’s historic significance during the
American Civil War and its world- class bonanza precious metal grades, the
geology is well known and has been studied in detail by the Company and many
independent researchers. We have accumulated a vast library of historical data
and detailed surface mapping and, in conjunction with drilling programs designed
for expanding the known historical data base, we have invested in our
understanding of the Comstock’s broader geological footprint.
 
 The
Comstock Mine Project now consists of 4,238 acres of active lode mining claims
in the Comstock Lode Mining District. The acreage is comprised of 590 acres of
patented claims (private lands) and 3,648 acres of unpatented claims, Bureau of
Land Management (BLM) administered. The Project includes the Comstock Mine heap
leach processing facility, which will be redesigned and constructed to
accommodate our new production plans. Nearly 700 Reverse Circulation (RC) holes,
drilled by GoldSpring and our predecessors, have further defined our mine plan
at the Lucerne and Billie the Kid open pits together with those along strike and
down- dip. For our exploration and development campaigns, all drilling, surface
and down-hole surveying, hole abandonment, geologic logging, sampling, and
assays were performed to industry-recognized standards.
 
 We
produced 11,550 ounces of gold and 68,514 ounces of silver from 2004-2006, at
our Comstock Lode test mining operation and existing heap leach processing
facilities.  Our test mining activities were suspended in 2007, and we
began an exploration and drilling program to gather the detailed information to
allow us to restart mining with a high degree of confidence.
 
 In
November, 2009, we retained Moelis & Company to serve as our exclusive
financial advisor.  Moelis & Company is a global investment bank
that provides financial advisory services and capital raising solutions to a
broad client base, through its offices in New York, Boston, Chicago, Los
Angeles, London, and Sydney.  We believe that the relationship
improves the likelihood of better financing our Comstock Lode project on more
favorable terms.
 
 In
December, 2009, we engaged Behre Dolbear, a mining consulting firm based in
Denver, Colorado, to review our mine model, and to produce a technical report
compliant with the Canadian NI 43-101 standard. The 43-101 standard is not
recognized by SEC Guide 7, but this report is expected to help us attract
international mining investors, who are accustomed to evaluating projects
through this standard.  The report is expected to be complete in the
second quarter of 2010.
 
 In
December, 2009, we entered into a definitive agreement to obtain $4.5 million in
new debt financing for our Comstock Lode project.  The financing is
being provided through a consortium led by an existing shareholder, who is an
accredited investor.  The funding will be provided through convertible
debentures, in six monthly increments of $750,000, which commenced December
10th,
2009.  Each debenture has a term of three years, carries an interest
rate of 8%, and is convertible to restricted common stock, at $.01 per share
through maturity.  The debentures also include warrants for 50% of the
face amount, exercisable at $.0175, a 100% premium to the current stock price,
for three years.
 
 Our cash
resources remain limited. Our continued existence and plans for mining
production depend on our ability to obtain the capital necessary to operate,
through the issuance of additional debt, royalty financing or equity or
equity-linked instruments. If we are unable to raise additional working and or
permanent capital through outside financing, it is unlikely that our existing
financing will be sufficient for the liquidity necessary for anticipated working
capital requirements associated with existing exploration activities and plans
for restarting production, including capital expenditure requirements and
interest payments associated with our indebtedness and existing lease
obligations.
  23
 
 Furthermore,
it is unlikely that the cash generated, if any, from our internal operations
will suffice as a primary source of the liquidity necessary for anticipated
working capital requirements, capital expenditure requirements and interest
payments associated with our lease obligations and indebtedness. There is no
assurance that the Company’s initiatives to improve its liquidity and financial
position will be successful. Accordingly,
there is substantial risk that the Company will be unable to continue as a going
concern. In the event of insolvency, liquidation, reorganization, dissolution or
other winding up of the Company, the Company’s creditors would be entitled to
payment in full out of the Company’s assets before stockholders would be
entitled to any payment, and it is unlikely that the value of such assets would
exceed the claims on such assets.
 
 There are
also risks involved in the fact that one individual and his affiliates, as of
March 31, 2010, beneficially own in excess of 40% of our voting stock. Pursuant
to financing agreements, this convertible debt holder and his affiliates with a
61 day notice, can waive the 4.9% ownership restriction, allowing them to
convert 100% of their convertible debt and related interest, which totals
$13,921,754 at March 31, 2010, into shares of our common stock. In addition, if
the proposed recapitalization and balance sheet restructuring plan is
implemented, this individual and his affiliates would own a significant
percentage of the Company’s common stock.  This group, if the
ownership restriction is waived and all convertible debt and related interest is
converted into our common stockmay take actions that
could conflict with the interests of the other stockholders including the
election of Company directors and approval of actions generally requiring the
approval of the stockholders of our voting stock, including adopting amendments
to our articles of incorporation and bylaws and approving mergers, certain
acquisitions or sales of all or substantially all of our assets, which could
delay or prevent a third party from acquiring or merging with the Company or
limit the ability of the other remaining stockholders to approve transactions
that they may deem to be in their best interests.
 
 Strategic
Plan and Management Reorganization
 
 The Board
has approved a strategic plan designed to restructure and recapitalize the
Company, accelerate mine development and production and continue
exploration.  The principal features of the plan encompass a
recapitalization and balance sheet restructuring (which includes a reverse stock
split, a debt-for-equity exchange, a land-for-debt exchange and a new capital
raise to fund gold mine operations, exploration and development) and an
operational and management restructuring.  The goal of the plan is to
deliver stockholder value by validating [qualified resources (at least measured
and indicated) and reserves (probable and proven) of 3,250,000 gold equivalent
ounces by 2013], and commencing commercial mining and processing operations by
early 2011, respectively, with annual production rates of 20,000 gold equivalent
ounces.  Mr. De Gasperis, our Chief Executive Officer, will lead
implementation of the plan.
  The
Company has received stockholder approval to effect a one-for-two hundred
reverse stock split of its common stock, whereby each block of two hundred
shares of common stock registered in the name of each stockholder will be
converted into one share of the Company's common stock.  The reverse stock
split was approved by the Company's stockholders pursuant to a written consent
in lieu of a special meeting of the stockholders solicited under a Definitive
Proxy Statement on Schedule 14A, filed with the Securities and Exchange
Commission ("SEC") on March 24, 2010.  Over 91% of the written consents
received were voted in favor of the reverse stock split, with less than 8% of
the written consents cast against. The Company's Board of Directors
approved the immediate implementation of the reverse stock split and all
necessary documents and notifications to the appropriate regulatory agencies,
including the required notification to FINRA, to effectuate the reverse stock
split, have been filed.  The Board has also established the effective date
for the reverse stock split to be the day next following the receipt from FINRA
that the notification has been approved, which is expected to be no later than
May 18, 2010.
  24
 
 The
approval of the reverse stock split is the first step in the Company's strategic
plan designed to restructure and recapitalize the Company. The recapitalization
and balance sheet restructuring phase of the strategic plan, in addition to
accomplishing the reverse stock split, is currently expected to
include:
  •
              A
      debt-for-equity exchange with the holders of its convertible indebtedness,
      thereby eliminating the substantial majority of the Company's
      indebtedness;
  •
              The
      consummation of the transaction for the rights to two integral parcels of
      land for exploration and to facilitate operations on the Company's
      existing parcels; and
  •
              The
      raising of new equity capital, possibly in the form of one or more equity
      transactions.
  The
Company anticipates completing these recapitalization and balance sheet
restructuring transactions around mid-year 2010.  In connection
therewith, the Board has agreed to pursue listing of the common shares on an
appropriate securities exchange in due course.  The strategic plan has
scheduled the exploration and development drilling intended to validate mine
design and increased [qualified resources and reserves in the latter half of
2010 through 2013, with two intermediate objectives of 1,000,000 gold equivalent
ounces and 2,000,000 of gold equivalent ounces] with the long term planned
objective of 3,250,000 gold equivalent ounces.  The plan has also
scheduled the start of production operations in early 2011, initially from using
existing heap leach operating assets, and then scaling to an annual run rate of
at least 20,000 [gold equivalent ounces]. The commencement of production in
early 2011 is dependent on the Company raising sufficient capital as part of its
strategic plan.
  Early
2010 Developments
 
 Our
strategic plan calls for additional infill drilling and metallurgical testing
prior to the resumption of mining.  Two drilling programs began late
in the first quarter, 2010.  These drilling programs are managed by
Larry Martin, CPG, our Chief Geologist.
 
 The first
program is a reverse circulation drilling program that provides additional
information for a detailed mine design.  It includes approximately 60
infill holes in the Lucerne area and the historic Hartford and Justice
areas.  The drilling commenced using two drilling rigs and crews
supplied by George DeLong Construction, Inc., of Winnemucca,
Nevada.
 
 The
second drilling program includes drilling six core holes, using a diamond
drilling rig and crews supplied by KB Drilling, of Moundhouse,
Nevada.  The core will be used for metallurgical testing, needed for
final design of the processing flow design and for geotechnical testing, needed
to finalize the slope stability calculations for the open pit
walls.
 
 The
information from these drill programs will be used to develop a detailed mine
design for reopening the mine, fine-tune our mineral processing procedures to
maximize gold and silver recovery and update our global resource
estimates.  We continue to take all needed steps needed to resume
production.
 
 The
Company is currently preparing an application for a major modification to our
Air Quality Permit and an application for a new Mercury Emissions Permit
scheduled for completion in the second quarter of 2010, under the direction of
Dennis Anderson, PE, our Senior Engineer.  These permits, to be issued
by the Nevada Division of Environmental Protection (NDEP), are required before
mining and processing can begin.
 
 In
mid-2009, the Company was contacted by the United State Environmental Protection
Agency (EPA) regarding the selection of the Company’s Plum Mine to be audited
under the EPA’s Toxic Release Inventory (TRI) program.  The Company
engaged Enviroscientists, Inc., to assist it in managing the EPA audit as well
as the Company’s TRI reporting requirements.  The audit may determine
that the Company was not in compliance with the TRI requirements and, as a
result, the EPA may take action against the Company, including the imposition of
fines and penalties or other enforcement action, based on the results of the
audit.
  25
 
 Additional
activities planned for 2010:
 
 A
drilling program to evaluate what we have designated as the “northern extension”
mineralization has been designed.  This additional drilling will begin
once the first program of infill holes has been completed and
evaluated.  Our strategic plan also calls for a program of exploration
drilling on the 36 exploration targets already identified by our geologic team,
throughout our extensive land holdings in the Comstock Lode
district.  Our geologic team will rank the targets so that we are
leveraged for maximum success.
 
 We will
continue to increase our footprint in the Comstock Lode District by staking or
leasing mining claims with potential for exploration success.  We
consider the historic Comstock Lode central to our growth strategy. We work
collaboratively with Federal, State, and local regulatory agencies to ensure
that we obtain all remaining permits needed to resume mining.
 
 The
Company will continue our program to catalog and digitize our library of
historic mining maps and reports, so that our team can leverage the knowledge
accumulated by over 150 years of mining experience in the Comstock
Lode.
 
 Comparative
Financial Information
 
 Below we
set forth a summary of comparative financial information the three and three
months ended March 31, 2010 and 2009.
 
 Comparative
Financial Information
 
 Three
Months Ended March 31, 2010 and March 31, 2009:
 
 Quarter
                          ended
                          March 31, 2010
                        
                        
                        Quarter
                          ended
                          March 31, 2009
                        
                        
                        DifferenceRevenue
                        
                        $
                        —
                        
                        
                        $
                        —
                        
                        
                        $
                        —Depletion
      and amortization
                        
                        
                        108,236
                        
                        
                        
                        38,866
                        
                        
                        
                        69,370Reclamation,
      Exploration and Test Mining Expense
                        
                        
                        491,324
                        
                        
                        
                        1,450,316
                        
                        
                        
                        (958,992
                        )General
      and Administration
                        
                        
                        355,424
                        
                        
                        
                        382,554
                        
                        
                        
                        (27,130
                        )Consulting
      and Professional Service
                        
                        
                        149,306
                        
                        
                        
                        70,406
                        
                        
                        
                        (78,900
                        )Financing
      cost
                        
                        
                        86,914
                        
                        
                        
                        —
                        
                        
                        
                        86,914Derivative
      change in fair value
                        
                        
                        878,456
                        
                        
                        
                        1,326,862
                        
                        
                        
                        (448,406
                        )Other
      – Gain on sale of Royalty
                        
                        
                        (300,000
                        )
                        
                        
                        —
                        
                        
                        
                        (300,000
                        )Interest
      Expense
                        
                        
                        859,647
                        
                        
                        
                        781,100
                        
                        
                        
                        (78,547
                        )Net
      Loss
                        
                        $
                        (2,629,307
                        )
                        
                        
                        (4,050,104
                        )
                        
                        
                        1,420,797
 
 We did
not produce or sell any gold or silver at our Comstock project in Nevada during
the three months ended March 31, 2010 and March 31, 2009.
  26
 
 Reclamation,
Exploration and Test Mining Expenses were $ 958,922 less for the three months
ended March 31, 2010 compared to the three months ended March 31, 2009. This
variance reflects the suspension of drilling activities in mid first quarter
2009 allowing our team to focus on quantifying the drill assay information from
the December 2007 through January 2009 drill campaign.  The 2010 drill
campaign did not start until the later part of March.
 
 Consulting
and professional expenses for the three month period ended March 31, 2010 were
$149,306 compared to $70,406 for the three month ended March 31, 2009, amounting
to $78,900 quarter over quarter increase.  The increase in consulting
and professional expenses reflects the engagement of Symmetry Advisors for
strategic planning and scheduling and higher legal and accounting fees during
the first calendar quarter 2010.
 
 The
Financing cost released in the first quarter 2010 represent fees associated with
the $1,750,000 of funding received in the first quarter 2010.
 
 Derivative
change in Fair Value decreased in the first quarter 2010 when compared to the
same period in 2009 by $448,406. This favorable variance reflects the year over
year fair value calculation change for beneficial features (embedded
derivatives) and detachable instrument (warrants) contained in various notes at
each of the reporting periods.
 
 In
January 2010, we sold a 0.6% royalty interest in our Obester Property to
Precious Royalties for $550,000. After adjusting our mineral claim value for the
sale, a gain of $300,000 was realized.
 
 Interest
expense for the three month period ended March 31, 2010 increased by $78,547
when compared to the same calendar quarter in 2009. This variance reflects the
issuance of additional interest bearing notes.
 
 Liquidity
and Capital Resources
 
 We
recognize that our cash resources are limited. Our continued existence and plans
for mining production depend on our ability to obtain the capital necessary to
operate, through the issuance of additional debt, royalty financing or equity.
During the first three months of 2010, we raised an aggregate of $1,750,000 in
financing.  While this additional funding may meet our immediate
working capital needs, we did not generate revenues or cash flows or obtain
additional or alternative funding that would enable us to continue as a going
concern. We have yet to realize an operating profit at our Company. As disclosed
in the report of our independent registered public accounting firm in our
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2009, our recurring losses and negative cash flow from
operations raise substantial doubt about our ability to continue as a going
concern.
 
 As
of March 31, 2010, the Company was in default of the terms on several
outstanding notes payable with the Winfield Group (“Winfield Group”) totaling
$13,369,986 of principal and $4,573,544 of interest.  The Winfield
Group consists of Mr. Winfield, Sante Fe Financial Corporation, Portsmouth
Square and InterGroup Corporation, Combined, the Winfield Group represent the
Company’s largest creditor and a significant stockholder.  Mr.
Winfield is affiliated with these Companies through a direct controlling
interest and/or as their Chairman of the Board.  Because we are in
default, the entire note balances of the defaulted notes have been recorded as
current liabilities.
 
 The
Winfield Group held various notes and debentures issued by the Company that are
reported in several different liabilities accounts that are in default as of
March 31, 2010.  The notes are as follows:
  27
 
 Debt in Technical
      Default with Winfield GroupAt March 31, 2010Note Descriptions (Winfield
      Group)
                                  
                                  Principal
                                  
                                  
                                  Unpaid
                                    Interest
                                  
                                  
                                  Total15%
      Convertible Notes Payable – Investors
                                  
                                  $
                                  687,928
                                  
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  687,92918%
      Convertible Debentures Payable - Mandatory Redemption
    Payment
                                  
                                  
                                  4,412,058
                                  
                                  
                                  
                                  1,067,824
                                  
                                  
                                  
                                  5,479,88218%
      Convertible Notes Payable - 2006 – 2007
                                  
                                  
                                  1,620,000
                                  
                                  
                                  
                                  1,005,538
                                  
                                  
                                  
                                  2,625,53811%
      Convertible Notes Payable - June - November 2008
                                  
                                  
                                  2,500,000
                                  
                                  
                                  
                                  471,128
                                  
                                  
                                  
                                  2,971,12811%
      Convertible Notes Payable - December 2008
                                  
                                  
                                  500,000
                                  
                                  
                                  
                                  77,196
                                  
                                  
                                  
                                  577,1969%
      Convertible Notes Payable - May - August 2009
                                  
                                  
                                  1,000,000
                                  
                                  
                                  
                                  70,681
                                  
                                  
                                  
                                  1,070.6818%
      Convertible Notes Payable - December 2009
                                  
                                  
                                  500,000
                                  
                                  
                                  
                                  9,401
                                  
                                  
                                  
                                  509,40117%
      Promissory Note Payable - July 2005
                                  
                                  
                                  1,200,000
                                  
                                  
                                  
                                  1,455,618
                                  
                                  
                                  
                                  2,655,61818%
      Promissory Note Payable - December 2007 Financing
                                  
                                  
                                  600,000
                                  
                                  
                                  
                                  190,092
                                  
                                  
                                  
                                  790,09218%
      Promissory Note Payable - January 2008 Financing
                                  
                                  
                                  600,000
                                  
                                  
                                  
                                  176,092
                                  
                                  
                                  
                                  776,0925%
      Debt Seller Note (Plum Mine)
                                  
                                  
                                  250,000
                                  
                                  
                                  
                                  59375
                                  
                                  
                                  
                                  309,375Total
      at March 31, 2010
                                  
                                  $
                                  13,369,986
                                  
                                  
                                  $
                                  4,573,544
                                  
                                  
                                  $
                                  17,943,530
 
 Had the
Winfield Group converted all of its convertible principal and interest
of  $13,921,754 into shares of our common stock at March 31, 2010, we
would have been obligated to issue to the  Winfield Group
2,027,000,000 shares representing 37% of our outstanding shares of common stock,
resulting in substantial dilution.
 
 As stated
earlier, the board has approved a restructuring and recapitalization plan that
includes a reverse stock-split, debt for equity exchange and a new capital
raise. If we are unable, however, to raise additional working capital through
outside financing, it is unlikely that we will achieve resumption of mining in
early 2011.  Furthermore, it is unlikely that the cash generated from
our internal operations will suffice as a primary source of the liquidity
necessary for anticipated working capital requirements, capital expenditure
requirements and interest payments associated with our lease obligations and
indebtedness. There is no assurance that the Company’s initiatives to improve
its liquidity and financial position will be successful. Accordingly, there is
substantial risk that the Company will be unable to continue as a going concern.
In the event of insolvency, liquidation, reorganization, dissolution or other
winding up of the Company, the Company’s creditors would be entitled to payment
in full out of the Company’s assets before stockholders would be entitled to any
payment, and it is unlikely that the value of such assets would exceed the
claims on such assets.
 
 Item 3. Quantitative and Qualitative
Disclosures About Market Risks
 
 An
investment in our common stock involves risk. You should carefully consider the
following risk factors.
 
 Our
exposure to market risk for changes in interest rates relates primarily to the
market-driven increase or decrease in interest rates, and the impact of those
changes on the Company’s ability to realize a return on invested or available
funds. We ensure the safety and preservation of our invested principal funds by
limiting default risk, market risk and reinvestment risk. We mitigate default
risk by investing in short term high-credit investment grade securities and/or
commercial checking and savings accounts.
  28
 
 ITEM
4. CONTROLS AND PROCEDURES
 
 A. 
Disclosure
 
 Evaluation
of Disclosure Controls and Procedures
 
 As of the
end of the period covered by this Quarterly Report on Form 10-Q, management
performed, with the participation of our Principal Executive Officer and
Principal Financial Officer and our Principal Accounting Officer, an evaluation
of the effectiveness of our disclosure controls and procedures as defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and
procedures are designed to ensure that information required to be disclosed in
the report we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the SEC’s forms,
and that such information is accumulated and communicated to our management
including our Principal Executive Officer and Principal Financial Officer and
our Principal Accounting Officer, to allow timely decisions regarding required
disclosures. Based on the evaluation as described above, our internal control
over disclosure controls and procedures as of March 31, 2010 were
effective.
 
 B.
 Internal Control over Financial Reporting
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes
those policies and procedures that:
 
 (i)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets;
 
 (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements; and
 
 (iii)
provide reasonable assurance regarding prevention or timely detection of
unauthorized transactions.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
 
 In making
this assessment, our management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated
Frameworkand Internal
Control over Financial Reporting-Guidance for Smaller Public
Companies.
 
 There
have been no changes during the quarter ended March 31, 2010 in our Company's
internal control over financial reporting identified in connection with the
evaluation required by Exchange Act Rules 13a-15(d) and 15d-15(d) that have
material affected, or are reasonably likely to materially affect, our internal
controls over our financial reporting.
  29
 
 PART
II - OTHER INFORMATION
 
 Item 1. Legal Proceedings
 
 From time
to time, we are involved in lawsuits, claims, investigations and proceedings
that arise in the ordinary course of business. There are no matters pending or
threatened that we expect to have a material adverse impact on our business,
results of operations, financial condition or cash flows.
 
 Item
1A.  Risk
Factors
 
 Set forth
below is an update to our risk factors as set forth in our Annual Report on Form
10-K for the year ended December 31, 2010.  For full comprehension of
the risks affecting our Company, you are encouraged to review the risk factors
set forth in our 2009 Annual Report on Form 10-K, which are hereby incorporated
herein in their entirety.
 
 Investing
in our common stock is very speculative and involves a high degree of risk. You
should carefully consider all of the information in this report before making an
investment decision. The following are among the risks we face related to our
business, assets and operations. They are not the only risks we face. Additional
risks and uncertainties not presently known to us or that we currently believe
to be immaterial may also arise. Any of these risks could materially and
adversely affect our business, results of operations and financial condition,
which in turn could materially and adversely affect the trading price of our
common stock. You should not purchase our shares unless you can afford to lose
your entire investment.
 
 Relative
to our cash flows we have substantial indebtedness.
 
 As of
March 31, 2010, we had current indebtedness of $15,885,732 million in addition
to $5,281,444 million of current accrued interest payable. For the fiscal
quarter ended March 31, 2010, we had a deficit of cash flows from operating
activities of $1,504,423 million. Our substantial indebtedness, and our ability
to incur additional indebtedness, may further negatively affect our cash flow
and our ability to operate our business and react to changes in the economy or
our industry.
 
 Outstanding
convertible securities and warrants may result in substantial
dilution.
 
 At March
31, 2010, we had outstanding 3,782,950,927 shares of common stock. In addition,
we had outstanding convertible notes and related interest plus various common
stock purchase warrants. At March 31, 2010, these notes, related interest and
warrants were convertible into or exercisable for a total of approximately 3.65
billion additional shares of our common stock, subject to further anti-dilution
provisions.
 
 If
we are not able to obtain financing, it is unlikely that we will be able to
continue as a going concern.
 
 If we are
unable to raise additional working capital through outside financing, it is
unlikely that the cash generated from our internal operations will suffice as a
primary source of the liquidity necessary for anticipated working capital
requirements, capital expenditure requirements and interest payments associated
with our lease obligations and indebtedness. There is no assurance that the
Company’s initiatives to improve its liquidity and financial position will be
successful. Accordingly, there is substantial risk that the Company will be
unable to continue as a going concern. In the event of insolvency, liquidation,
reorganization, dissolution or other winding up of the Company, the Company’s
creditors would be entitled to payment in full out of the Company’s assets
before stockholders would be entitled to any payment, and it is unlikely that
the value of such assets would exceed the claims on such assets.
  30
 Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
 
 Employees and
directors
  During
the three month period ended March 31, 2010, the following shares were issued to
employees and Company directors:
 
 ·
              In January 2010, pursuant to his
      employment agreement, Mr. Larry Martin, our Chief Geologist, was issued a
      total of five hundred thousand (500,000) of our unregistered common
      shares.  The value of the common shares at the time of issuance
      was $3,400, averaging $0.0068 per share.  Shares are valued at the
      closing market price on date of
issue.
 
 As of
March 31, 2010, Mr. Faber, Chief Accounting Officer, has unpaid wages and
expenses of $105,700.
 
 Item 3. Defaults Upon Senior
Securities
 
 As of
March 31, 2010, the Company is in default of the terms on several outstanding
notes payable with the Winfield Group with principal balance due of $13,369,986
and accrued interest of $4,573,549 (See Note 8 to the condensed consolidated
financial statements contained in this quarterly report on Form 10-Q). Because
we are in default, the entire note balances of the defaulted notes have been
recorded as current liabilities.
 
 Item 5. Other Information
 
 None.
 
 Item 6. Exhibits and Reports on Form
8-K
 
 (a)     The
following documents are filed as part of this Report:
 
 (1) Financial
statements filed as part of this Report:
  Consolidated
      Balance Sheet as of  March 31, 2010 (Unaudited)
                        
                        
                        F-1Consolidated
      Statement of Operations for the three-month periods ended March 31, 2010
      and 2009 (Unaudited)
                        
                        
                        F-3Consolidated
      Statement of Cash Flows for the three-month periods ended March 31, 2010
      and 2009 (Unaudited)
                        
                        
                        F-4Notes
      to Financial Statements
                        
                        
                        1
 
 (2) Exhibits
filed as part of this Report:
 
 Exhibit
                        Number
                      
                      Exhibit31
                      
                      Certifications
      of Principal Executive Officer and Principal Financial Officer pursuant to
      Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities
      Exchange Act of 1934, as amended.32
                      
                      Certifications
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of
2002
  31
  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.
 
 GOLDSPRING,
      INC.(Registrant)Date:
      May 13, 2010
              By:
              /s/ Corrado De GasperisName:
      Corrado De GasperisTitle:  
      Chief Executive Officer (Principal
                Executive
      Officer and Principal Financial
                Officer)Date:
      May 13, 2010
              By:
              /s/ Robert T. FaberName:
      Robert T. FaberTitle:  
      Chief Accounting Officer
  32