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 September 30, 2009




OR





o
            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)





FLORIDA
              
              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 October 31, 2009 was 3,617,841,740.












TABLE OF
CONTENTS





PART
      I.
                3Item
      1. Financial Statements.
                3CONDENSED
      CONSOLIDATED BALANCE SHEETS
                3CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS
                5CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS
                7CONDENSED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
                9NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                10Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
                25Item
      4. Controls and Procedures.
                33PART
      II.
                33Item
      1. Legal Proceedings.
                33Item
      1A. Risk Factors.
                33Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.
                39Item
      3. Defaults Upon Senior Securities.
                39Item
      4. Submission of Matter to Vote of Security Holders.
                39Item
      5. Other Information.
                39Item
      6. Exhibits.
                39SIGNATURES
                40EXHIBIT
      INDEXCertification
      of CEO Pursuant to Rule 15d-14(a)Certification
      of CFO Pursuant to Rule 15d-14(a)Certification
      of CEO Pursuant to Section 1350Certification
      of CFO 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. The statements contained in this report on
Form 10-Q that are not purely historical are forward-looking statements within
the meaning of applicable securities laws. Forward-looking statements include
statements regarding our “expectations,” “anticipation,” “intentions,”
“beliefs,” or “strategies” regarding the future. Forward looking statements also
include statements regarding fluctuations in the price of gold or certain other
commodities, (such as silver, copper, diesel fuel, and electricity); changes in
national and local government legislation, taxation, controls, regulations and
political or economic changes in the United States or other countries in which
we may carry on business in the future; business opportunities that may be
presented to or pursued by us; our ability to integrate acquisitions
successfully; operating or technical difficulties in connection with exploration
or mining activities; the speculative nature of gold exploration, including
risks of diminishing quantities or grades of reserves; and contests over our
title to properties. All forward-looking statements included in this report are
based on information available to us as of the filing date of this report, and
we assume no obligation to update any such forward-looking statements. Our
actual results could differ materially from the forward-looking statements.
Among the factors that could cause actual results to differ materially are the
factors discussed in Item 1A of Part II, “Risk Factors.”


2





PART I.


Item 1.Financial
Statements.





GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS




September 30,
                    2009
                  
                  
                  December 31,
                    2008(Unaudited)
                  
                  
                  (Audited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                  
                  $
                  97,089
                  
                  
                  $
                  322,938Total
      Current Assets
                  
                  
                  97,089
                  
                  
                  
                  322,938MINERAL
      RIGHTS, PLANT AND EQUIPMENTMineral
      rights
                  
                  
                  1,530,547
                  
                  
                  
                  1,530,547Plant
      and equipment, net
                  
                  
                  675,068
                  
                  
                  
                  489,236Total
      Mineral Rights, Plant and Equipment
                  
                  
                  2,205,615
                  
                  
                  
                  2,019,783RECLAMATION
      BOND DEPOSIT
                  
                  
                  766,768
                  
                  
                  
                  766,768OTHER
      LONG-LIVED ASSETS - RECLAMATION
                  
                  
                  357,167
                  
                  
                  
                  408,190TOTAL
      ASSETS
                  
                  $
                  3,426,639
                  
                  
                  $
                  3,517,679





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


3





GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS (Continued)




September 30,
                      2009
                    
                    
                    December 31,
                      2008(Unaudited)
                    
                    
                    (Audited)LIABILITIES AND STOCKHOLDERS’
      DEFICIENCYCURRENT
      LIABILITIESAccounts
      payable
                    
                    $
                    1,633,357
                    
                    
                    $
                    1,222,933Accrued
      expenses
                    
                    
                    276,237
                    
                    
                    
                    121,750Accrued
      interest payable
                    
                    
                    4,455,191
                    
                    
                    
                    3,458,734Convertible
      debentures
                    
                    
                    10,187,966
                    
                    
                    
                    10,187,966Other
      debt
                    
                    
                    2,653,525
                    
                    
                    
                    2,660,565Total
      Current Liabilities
                    
                    
                    19,206,276
                    
                    
                    
                    17,651,948LONG-TERM
      DEBT AND OTHER LONG-TERM LIABILITIESLong-term
      convertible debt obligation, net of current portion
                    
                    
                    3,895,411
                    
                    
                    
                    2,782,563Long-term
      debt obligation, net of current portion
                    
                    
                    590,000
                    
                    
                    
                    500,000Derivative
      liability
                    
                    
                    9,213,327
                    
                    
                    
                    5,368,333Long-term
      reclamation liability
                    
                    
                    1,166,560
                    
                    
                    
                    1,105,342Total
      Long-Term Debt and Other Long-Term Liabilities
                    
                    
                    14,865,298
                    
                    
                    
                    9,756,238Total
      Liabilities
                    
                    
                    34,071,574
                    
                    
                    
                    27,408,186COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      DEFICITCommon
      stock, $.000666 par value 3,950,000,000 shares authorized, shares issued
      and outstanding were 3,617,841,740 (September 30, 2009) and 3,380,948,371
      (Dec. 31, 2008)
                    
                    
                    2,409,483
                    
                    
                    
                    2,251,712Additional
      paid-in capital
                    
                    
                    24,954,962
                    
                    
                    
                    22,721,504Accumulated
      deficit
                    
                    
                    (58,009,380
                    )
                    
                    
                    (48,863,723
                    )Total
      Stockholders’ Deficiency
                    
                    
                    (30,644,935
                    )
                    
                    
                    (23,890,507
                    )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICICT
                    
                    $
                    3,426,639
                    
                    
                    $
                    3,517,679





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


4




GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)




Three Months Ended Sept. 30,2009
                  
                  
                  2008REVENUE
      FROM GOLD SALES, Net
                  
                  $
                  ―
                  
                  
                  $
                  ―COST
      AND EXPENSESDepletion,
      depreciation and amortization
                  
                  
                  37,604
                  
                  
                  
                  60,000Reclamation,
      exploration and test mining expenses
                  
                  
                  485,430
                  
                  
                  
                  974,430General
      and administrative
                  
                  
                  330,453
                  
                  
                  
                  429,767Consultants
      and professional fees
                  
                  
                  32,204
                  
                  
                  
                  83,026Total
      Cost and Expenses
                  
                  
                  885,691
                  
                  
                  
                  1,547,223LOSS
      FROM OPERATIONS
                  
                  
                  (885,691
                  )
                  
                  
                  (1,547,223
                  )OTHER
      INCOME (EXPENSE):Financing
      cost – warrant issuances
                  
                  
                  (111,160
                  )
                  
                  
                  ―Derivative
      change in fair value
                  
                  
                  (42,643
                  )
                  
                  
                  ―
                  )Interest
      expense
                  
                  
                  (1,693,994
                  )
                  
                  
                  (723,698
                  )Total
      Other Expense
                  
                  
                  (1,847,797
                  )
                  
                  
                  (723,698
                  )NET
      LOSS
                  
                  $
                  (2,733,487
                  )
                  
                  $
                  (2,270,921
                  )Net
      loss per common share – basic
                  
                  $
                  (0.0008
                  )
                  
                  $
                  (0.0007
                  )Basic
      weighted average common shares outstanding
                  
                  
                  3,615,907,012
                  
                  
                  
                  3,245,163,591





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


5





Nine Months Ended Sept. 30,2009
                  
                  
                  2008REVENUE
      FROM GOLD SALES, Net
                  
                  $
                  ―
                  
                  
                  $
                  ―COST
      AND EXPENSESDepletion,
      depreciation and amortization
                  
                  
                  114,073
                  
                  
                  
                  180,000Reclamation,
      exploration and test mining expenses
                  
                  
                  2,577,821
                  
                  
                  
                  2,415,831General
      and administrative
                  
                  
                  1,022,670
                  
                  
                  
                  1,532,774Consultants
      and professional fees
                  
                  
                  177,610
                  
                  
                  
                  141,985Total
      Cost and Expenses
                  
                  
                  3,892,174
                  
                  
                  
                  4,270,590LOSS
      FROM OPERATIONS
                  
                  
                  (3,892,174
                  )
                  
                  
                  (4,270,590
                  )OTHER
      INCOME (EXPENSE):Financing
      cost – warrant issuances
                  
                  
                  (1,856,195
                  )
                  
                  
                  ―Derivative
      change in fair value
                  
                  
                  (42,643
                  )
                  
                  
                  (130,604
                  )Other,
      net
                  
                  
                  (58,500
                  )
                  
                  
                  551,907Interest
      expense
                  
                  
                  (3,296,145
                  )
                  
                  
                  (2,053,008
                  )Total
      Other Expense
                  
                  
                  (5,253,483
                  )
                  
                  
                  (1,631,705
                  )NET
      LOSS
                  
                  $
                  (9,145,657
                  )
                  
                  $
                  (5,902,295
                  )Net
      loss per common share – basic
                  
                  $
                  (0.0026
                  )
                  
                  $
                  (0.0019
                  )Basic
      weighted average common shares outstanding
                  
                  
                  3,538,215,668
                  
                  
                  
                  3,079,822,345





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


6





GOLDSPRING,
INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)





Nine Month Period Ended
                    September 30,2009
                  
                  
                  2008OPERATING
      ACTIVITIES:Net
      loss
                  
                  $
                  (9,145,657
                  )
                  
                  $
                  (5,902,295
                  )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                  
                  
                  114,073
                  
                  
                  
                  485,833Stock
      warrants and stock based compensation
                  
                  
                  2,025,152
                  
                  
                  
                  735,290Interest
      and liquidated damages paid through the issuance of stock
                  
                  
                  1,342,979
                  
                  
                  
                  2,430,211Accretion
      and debt discount interest
                  
                  
                  1,013,513
                  
                  
                  
                  ―Payments
      through the issuance of company stock
                  
                  
                  36,000
                  
                  
                  
                  345,236Financing
      Fees
                  
                  
                  52,500
                  
                  
                  
                  ―Derivative
      change fair value, net
                  
                  
                  42,643
                  
                  
                  
                  130,604Net
      loss adjusted for non-cash operating activities
                  
                  
                  (4,518,797
                  )
                  
                  
                  (1,775,121
                  )Changes
      in operating assets and liabilities:Prepaid
      and other current assets
                  
                  
                  ―
                  
                  
                  
                  95,834Accounts
      payable
                  
                  
                  410,423
                  
                  
                  
                  128,516Accrued
      expenses
                  
                  
                  1,150,945
                  
                  
                  
                  (1,843,785
                  )Other
      operating assets and liabilities
                  
                  
                  ―
                  
                  
                  
                  ―Other
                  
                  
                  ―
                  
                  
                  
                  317,598NET
      CASH USED IN OPERATING ACTIVITIES
                  
                  
                  (2,957,429
                  )
                  
                  
                  (3,076,958
                  )INVESTING
      ACTIVITIES:Reclamation
      bond deposit
                  
                  
                  ―
                  
                  
                  
                  (389,599
                  )Mineral
      claims
                  
                  
                  ―
                  
                  
                  
                  (161,150
                  )Acquisition
      / sale of plant and equipment
                  
                  
                  (128,880
                  )
                  
                  
                  (18,041
                  )NET
      CASH USED IN INVESTING ACTIVITIES
                  
                  
                  (128,880
                  )
                  
                  
                  (568,789
                  )FINANCING
      ACTIVITIES:Principal
      payments on Note Payable
                  
                  
                  (37,040
                  )
                  
                  
                  (51,759
                  )Net
      proceeds from the issuance of company stock
                  
                  
                  902,500
                  
                  
                  
                  2,472,944Proceeds
      from the issuance of note payable
                  
                  
                  1,995,000
                  
                  
                  
                  1,150,000NET
      CASH PROVIDED BY FINANCING ACIVITIES
                  
                  
                  2,860,460
                  
                  
                  
                  3,571,185INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALANTS
                  
                  
                  (225,849
                  )
                  
                  
                  (74,562
                  )CASH
      AND CASH EQUIVALENTS, BEGINNING OF YEAR
                  
                  
                  322,938
                  
                  
                  
                  174,996CASH
      AND CASH EQUIVALENTS, END OF YEAR
                  
                  $
                  97,089
                  
                  
                  $
                  100,434SUPPLEMENTAL
      CASH FLOW INFORMATION:INCOME
      TAXES
                  
                  $
                  ―
                  
                  
                  $
                  ―INTEREST
      PAID
                  
                  $
                  ―
                  
                  
                  $
                  ―




7





GOLDSPRING,
INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)





Supplemental
      disclosure of non-cash investing and financing activities:Issuance
      of company stock for interest
                  
                  $
                  1,342,279
                  
                  
                  $
                  1,420,366Issuance
      of company stock for liquidated damages
                  
                  $
                  ―
                  
                  
                  $
                  1,009,845Conversion
      of debt principal into company’s common shares
                  
                  $
                  ―
                  
                  
                  $
                  1,520,373Issuance
      of company stock to employees
                  
                  $
                  62,250
                  
                  
                  $
                  84,690Issuance
      of company stock for directors’ fees
                  
                  $
                  ―
                  
                  
                  $
                  234,400Seller
      note for acquisition of  land
                  
                  $
                  120,000
                  
                  
                  $
                  ―Issuance
      of company stock for consulting services
                  
                  $
                  ―
                  
                  
                  $
                  101,096Issuance
      of company stock for software
                  
                  
                  ―
                  
                  
                  
                  9,740Issuance
      of company shares for acquisition of mineral claims
                  
                  $
                  ―
                  
                  
                  $
                  79,558Issuance
      of company stock for financing fees
                  
                  
                  36,000
                  
                  
                  
                  ―





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


8






GOLDSPRING,
INC.
 CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICICT
 For
the Nine Months Ended September 30, 2009
 
 (Common
Stock Par value, $.000666 per share; 3,950,000,000 shares
authorized
 Preferred
Stock Par Value, per share; 50,000,000 shares authorized)
  Common
                      Shares Issued
                    
                    
                    Par value
                      $.000666
                      per share
                    
                    
                    Additional
                      Paid-in
                      Capital
                    
                    
                    Accumulated
                      Deficit
                    
                    
                    TotalDecember
      31, 2007 (Restated)
                    
                    
                    2,743,508,248
                    
                    
                    $
                    1,827,177
                    
                    
                    $
                    12,969,210
                    
                    
                    $
                    (32,376,040
                    )
                    
                    $
                    (17,579,653
                    )Common
      stock issued for:Debenture
      principal
                    
                    
                    196,155,028
                    
                    
                    
                    130,639
                    
                    
                    
                    1,949,634
                    
                    
                    
                    -
                    
                    
                    
                    2,080,273Debenture
      interest
                    
                    
                    151,961,857
                    
                    
                    
                    101,207
                    
                    
                    
                    1,456,497
                    
                    
                    
                    -
                    
                    
                    
                    1,557,704Mineral
      rights
                    
                    
                    3,866,667
                    
                    
                    
                    2,575
                    
                    
                    
                    76,983
                    
                    
                    
                    -
                    
                    
                    
                    79,558Consulting
      services
                    
                    
                    7,166,704
                    
                    
                    
                    4,773
                    
                    
                    
                    106,323
                    
                    
                    
                    -
                    
                    
                    
                    111,096Mining
      software
                    
                    
                    2,434,892
                    
                    
                    
                    1,622
                    
                    
                    
                    8,118
                    
                    
                    
                    -
                    
                    
                    
                    9,740Directors
                    
                    
                    20,000,000
                    
                    
                    
                    13,320
                    
                    
                    
                    221,080
                    
                    
                    
                    -
                    
                    
                    
                    234,400Employees
                    
                    
                    10,665,714
                    
                    
                    
                    7,103
                    
                    
                    
                    132,787
                    
                    
                    
                    -
                    
                    
                    
                    139,890Private
      placement
                    
                    
                    137,000,000
                    
                    
                    
                    91,242
                    
                    
                    
                    1,428,758
                    
                    
                    
                    -
                    
                    
                    
                    1,520,000529,250,862
                    
                    
                    
                    352,481
                    
                    
                    
                    5,380,180
                    
                    
                    
                    -
                    
                    
                    
                    5,732,661Warrant
      cost and stock based option compensation
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    3,434,323
                    
                    
                    
                    -
                    
                    
                    
                    3,434,323Liquidated
      damages
                    
                    
                    108,189,261
                    
                    
                    
                    72,054
                    
                    
                    
                    937,791
                    
                    
                    
                    -
                    
                    
                    
                    1,009,845Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (16,487,683
                    )
                    
                    
                    (16,487,683
                    )December
      31, 2008
                    
                    
                    3,380,948,371
                    
                    
                    $
                    2,251,712
                    
                    
                    $
                    22,721,504
                    
                    
                    $
                    (48,863,723
                    )
                    
                    $
                    (23,890,507
                    )Common
      stock issued for:Debenture
      interest
                    
                    
                    133,293,369
                    
                    
                    
                    88,774
                    
                    
                    
                    1,254,205
                    
                    
                    
                    -
                    
                    
                    
                    1,342,979Employees
                    
                    
                    5,000,000
                    
                    
                    
                    3,330
                    
                    
                    
                    58,920
                    
                    
                    
                    -
                    
                    
                    
                    62,250Private
      placement
                    
                    
                    98,600,000
                    
                    
                    
                    65,667
                    
                    
                    
                    920,333
                    
                    
                    
                    -
                    
                    
                    
                    986,000236,893,369
                    
                    
                    
                    157,771
                    
                    
                    
                    2,158,492
                    
                    
                    
                    -
                    
                    
                    
                    2,391,229Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (9,145,657
                    )
                    
                    
                    (9,145,657
                    )September
      30, 2009
                    
                    
                    3,617,841,740
                    
                    
                    $
                    2,409,483
                    
                    
                    $
                    24,954,962
                    
                    
                    $
                    (58,009,380
                    )
                    
                    $
                    (30,644,935
                    )
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  9




GOLDSPRING,
INC.


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009 and 2008




Note
1 - Basis of Presentation




We are a
North American precious metals mining company with an operating gold and silver
test mine in northern Nevada. Our Company refocused as a mining company, when we
acquired the Plum property in November 2003. In our relatively short history, we
secured permits, built an infrastructure and brought the Plum exploration
project into test mining production. Beginning in 2005, we started acquiring
additional properties around the Plum project in Northern Nevada, expanding our
footprint and creating opportunities for exploration. We are an emerging
operating test mine company, looking to build on our success through the
acquisition of other mineral properties in Comstock Lode District of Nevada with
reserves and exploration potential. Our objectives are to recommence production;
increase reserves through exploration and acquisitions; and expand our footprint
in the Comstock Lode District.




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 nine month period ended September 30, 2009
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2009. 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, 2008.




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 nine month ended September 30, 2009.   During the nine
months ended September 30, 2009, the Company incurred a net loss of
$9,145,657.  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 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.




Note
4 — Summary of Significant Accounting Policies




Terms
and Definitions




Company
                
                Goldspring,
      Inc. and SubsidiariesAPB
                
                Accounting
      Principles BoardARB
                
                Accounting
      Review BoardEITF
                
                Emerging
      Issues Task ForceFASB
                
                Financial
      Accounting Standards BoardFSP
                
                FASB
      Staff PositionPlum
      LLC
                
                Plum
      Mining Company, LLCSAB
                
                SEC
      Staff Accounting BulletinSEC
                
                Securities
      Exchange CommissionSFAS
      or FAS
                
                Statement
      of Financial Accounting StandardsSOP
                
                Statement
      of Position




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


10




Principles
of Consolidation




The
consolidated financial statements include the accounts of our 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.  Certain reclassifications have been made in the 2008
results to conform to the presentation used in 2009.




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 September 30, 2009 and December
31, 2008.





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.





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.


11





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 or our estimate of the fair value of the services received,
whichever is more reliably measurable.




Plant and
Equipment




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




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.”)




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). The 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.


12





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 nine months
ended September 30, 2009 and 2008, we had net losses for which the affect of
common stock equivalents would be anti-dilutive. Accordingly only basic and
dilutive 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
financial reporting and tax bases of assets and liabilities using the enacted
tax rates and laws that are expected to be recovered. We provide a valuation
allowance for deferred tax assets for which we do not consider realization of
such assets to be more likely than not.





ACCOUNTING
STANDARDS UPDATES





In
June 2009, the Financial Accounting Standards Board (FASB) issued its final
Statement of Financial Accounting Standards (SFAS) No. 168,“The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles a Replacement of FASB StatementNo. 162”.
SFAS No. 168 made the FASB Accounting Standards Codification (the
Codification) the single source of U.S. GAAP used by nongovernmental
entities in the preparation of financial statements, except for rules and
interpretive releases of the Securities and Exchange Commission (SEC) under
authority of federal securities laws, which are sources of authoritative
accounting guidance for SEC registrants. The Codification is meant to simplify
user access to all authoritative accounting guidance by reorganizing
U.S. GAAP pronouncements into roughly 90 accounting topics within a
consistent structure; its purpose is not to create new accounting and reporting
guidance. The Codification supersedes all existing non-SEC accounting and
reporting standards and was effective for the Company beginning July 1,
2009. Following SFAS No. 168, the Board will not issue new standards
in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force
Abstracts; instead, it will issue Accounting Standards Updates (ASU). The FASB
will not consider ASUs as authoritative in their own right; these updates will
serve only to update the Codification, provide background information about the
guidance, and provide the bases for conclusions on the change(s) in the
Codification.


13





In August
2009, the FASB issued ASU 2009-05 which includes amendments to Subtopic 820-10,
“Fair Value Measurements and Disclosures—Overall”. The update provides
clarification that in circumstances, in which a quoted price in an active market
for the identical liability is not available, a reporting entity is required to
measure fair value using one or more of the techniques provided for in this
update. The amendments in this ASU clarify that a reporting entity is not
required to include a separate input or adjustment to other inputs relating to
the existence of a restriction that prevents the transfer of the liability and
also clarifies  that both a quoted price in an active market for the
identical liability at the measurement date and the quoted price for the
identical liability when traded as an asset in an active market when no
adjustments to the quoted price of the asset are required are Level 1 fair value
measurements. The guidance provided in this ASU is effective for the first
reporting period, including interim periods, beginning after
issuance.  The adoption of this standard did have a material impact on
the Company’s (consolidated) financial position and results of
operations.




In
September 2009, the FASB issued ASU 2009-06, Income Taxes (Topic 740),
”Implementation Guidance on Accounting for Uncertainty in Income Taxes and
Disclosure Amendments for Nonpublic Entities”, which provides implementation
guidance on accounting for uncertainty in income taxes, as well as eliminates
certain disclosure requirements for nonpublic entities.  For entities
that are currently applying the standards for accounting for uncertainty in
income taxes, this update shall be effective for interim and annual periods
ending after September 15, 2009. For those entities that have deferred the
application of accounting for uncertainty in income taxes in accordance with
paragraph 740-10-65-1(e), this update shall be effective upon adoption of those
standards. The adoption of this standard is not expected to have an impact on
the Company’s consolidated financial position and results of operations since
this accounting standard update provides only implementation and disclosure
amendments.





In
September 2009, the FASB has published ASU No. 2009-12, “Fair Value Measurements
and Disclosures (Topic 820) - Investments in Certain Entities That Calculate Net
Asset Value per Share (or Its Equivalent)”. This ASU amends Subtopic 820-10,
“Fair Value Measurements and Disclosures – Overall”, to permit a reporting
entity to measure the fair value of certain investments on the basis of the net
asset value per share of the investment (or its equivalent). This ASU also
requires new disclosures, by major category of investments including the
attributes of investments within the scope of this amendment to the
Codification. The guidance in this Update is effective for interim and annual
periods ending after December 15, 2009. Early application is permitted.The Company is in the
process of evaluating the impact of this standard on its consolidated financial
position and results of operations. The adoption of this standard is not
expected to have any impact on the Company’s consolidated financial position and
results of operations.





In
October 2009, the FASB has published ASU 2009-13, “Revenue Recognition (Topic
605)-Multiple Deliverable Revenue Arrangements”, which addresses the accounting
for multiple-deliverable arrangements to enable vendors to account for products
or services (deliverables) separately rather than as a combined unit.
Specifically, this guidance amends the criteria in Subtopic 605-25, “Revenue
Recognition-Multiple-Element Arrangements”, for separating consideration in
multiple-deliverable arrangements. This guidance establishes a selling price
hierarchy for determining the selling price of a deliverable, which is based on:
(a) vendor-specific objective evidence; (b) third-party evidence; or (c)
estimates. This guidance also eliminates the residual method of allocation and
requires that arrangement consideration be allocated at the inception of the
arrangement to all deliverables using the relative selling price method and also
requires expanded disclosures. The guidance in this update is effective
prospectively for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010. Early adoption is permitted.
The adoption of this standard did not have an impact on the Company’s
consolidated financial position and results of operations.


14


In
October 2009, the FASB has published ASU 2009-14, “Software (Topic 985)-Certain
Revenue Arrangements that Include Software Elements” and changes the accounting
model for revenue arrangements that include both tangible products and software
elements. Under this guidance, tangible products containing software components
and nonsoftware components that function together to deliver the tangible
product's essential functionality are excluded from the software revenue
guidance in Subtopic 985-605, “Software-Revenue Recognition”. In addition,
hardware components of a tangible product containing software components are
always excluded from the software revenue guidance.  The guidance in
this ASU is effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010. Early
adoption is permitted.  The adoption of this standard did not have an
impact on the Company’s consolidated financial position and results of
operations.




Other
ASUs, not effective until after September 30, 2009, are not expected to
have a significant effect on the Company’s consolidated financial position or
results of operations.





Note
5 — Mineral Rights




Mineral
rights at September 30, 2009 and December 31, 2008 consisted of the
following:




2009
                  
                  
                  2008Comstock
      Placer Claims
                  
                  $
                  100,000
                  
                  
                  $
                  100,000Big
      Mike Copper Claims
                  
                  
                  69,138
                  
                  
                  
                  69,138Comstock
      Lode Claims
                  
                  
                  1,271,409
                  
                  
                  
                  1,271,409Water
      rights
                  
                  
                  90,000
                  
                  
                  
                  90,000$
                  1,530,547
                  
                  
                  $
                  1,530,547





Note
6 — Property and Equipment, net




Plant and
equipment at September 30, 2009 and December 31, 2008, consisted of the
following:





2009
                  
                  
                  2008Land
      and Building
                  
                  $
                  677,443
                  
                  
                  $
                  547,166Vehicle
      and Equipment
                  
                  
                  302,094
                  
                  
                  
                  302,094Processing
      and Lab
                  
                  
                  704,527
                  
                  
                  
                  585,923Furniture
      and Fixtures
                  
                  
                  49,391
                  
                  
                  
                  49,3911,733,455
                  
                  
                  
                  1,484,574Less
      accumulated depreciation
                  
                  
                  (1,058,837
                  )
                  
                  
                  (995,338
                  )$
                  675,068
                  
                  
                  $
                  489,236





Depreciation
expense for the nine months ended September 30, 2009 and 2008 was $63,049 and
$180,000, 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.





Note
7 – 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.


15





Note
8 — Long-term Reclamation Liability





We have
an accrued a long-term liability of $1,166,560 and $1,105,342 as of September
30, 2009 and December 31, 2008 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 2008. 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 for the nine month period ended September 30, 2009 was $61,218
and the amortization of Long-lived assets was $51,024 for the same
period.




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




2009Long-term
      asset retirement obligation 1/1/2009
                    
                    $
                    1,105,342Additional
      obligations incurred
                    
                    
                    ―Increase
      in present value of the reclamation obligation (accretion
      expense)
                    
                    
                    61,218Long-term
      asset retirement obligation 09/30/2009
                    
                    $
                    1,166,560





Note 9 - Convertible
Debentures




Convertible
debentures at September 30, 2009 and December 31, 2008 were as
follows:




2009
                  
                  
                  2008Convertible
      Debentures Payable (interest rate of 15%)
                  
                  $
                  1,105,908
                  
                  
                  $
                  1,105,908Convertible
      Debentures Payable- Mandatory Redemption payment (interest rate of
      18%)
                  
                  
                  4,412,058
                  
                  
                  
                  4,412,058Convertible
      Notes Payable – 2006 & 2007 (interest rate of 18%)
                  
                  
                  2,170,000
                  
                  
                  
                  2,170,000Convertible
      Notes Payable – 2008  (interest rate of 11%)
                  
                  
                  2,500,000
                  
                  
                  
                  2,500,000Total
                  
                  $
                  10,187,966
                  
                  
                  $
                  10,187,966




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 subscription agreement. We exchanged 21,739,129 shares of common stock and
21,739,129 warrants issued in the March Offering for:





a)
            8% convertible notes in the
      aggregate principal amount of approximately
      $11.1 million.   The principal amount of the
      convertible notes consist of the original $10.0 million investment
      plus approximately $1.1 million of accrued penalties associated with
      the delay in registration of the common stock held by the investors,
      and


b)
            warrants to purchase
      approximately 27.8 million shares of common stock at an exercise
      price of $0.20 per share, subject to anti-dilution adjustments, which
      expire in 4 years.




16




The 8%
convertible notes mature in November 2006 and call for monthly payments of
102% of 1/20th of the
initial principal amount, together with accrued interest. We have the option to
repay the notes with our common stock at a conversion rate of 85% of the average
of the five lowest closing bid prices during the preceding 20 trading days.
Further, the notes may be prepaid at 115% of their outstanding principal. Each
note may be converted by the holder into common stock at an initial conversion
price of $0.20 per share, which is subject to anti-dilution adjustments. During
the first 20 days following the closing date, the conversion price may be
reduced to 70% of the average of the five lowest closing prices during the 20
trading days preceding the closing date.




Convertible Debentures
Payable - Mandatory Redemption




In March
2005, because we did not deliver the share certificates within the period
required in the subscription agreement, John V. Winfield, a major shareholder
and note holder elected to demand payment of approximately $6.9 million pursuant
to the mandatory redemption payment provisions of the subscription agreement and
consequently forfeited his right to receive shares in lieu of
payment.




On March
31, 2005, we entered into a Settlement Agreement (“Settlement”) with the Mr.
Winfield and agreed to convert the mandatory redemption payment into nine
Convertible Debentures (“the Debentures”). Accordingly, we accrued a liability
for approximately $6.9 million and reduced our paid-in-capital account for
approximately $3.5 million. The Debentures are subject to various covenants and
conditions, including, but not limited to anti-dilution rights and protective
rights.  The Debentures accrue interest at 12% per annum and are
payable in 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.   We are currently in default on this
note.  The default interest rate is 18% per annum.





The
debentures are subject to the following terms:




Conversion
Rights


The
Debentures are convertible, in all or in part, into shares of our common stock
(“Conversion Shares”) at any time. The conversion price shall 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; and (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; provided, however, until the effective date of the registration
statement (see below), the conversion price shall be fifty-percent (50%) 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
(i) $0.1131 and (ii) the conversion price of the convertible notes (See Note 6),
as adjusted from time to time, whichever is lower.




Security
Agreement


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
(See Note 7) in substantially all of our assets.





Convertible
Notes Payable – 2006 & 2007





The
convertible notes payable as of June 30, 2009 are as follows:





Issued date
                    
                    
                    Face amountWinfield
      Group Debenture Payable
                    
                    5/15/2006
                    
                    
                    $
                    300,000Winfield
      Group Debenture Payable
                    
                    6/21/2006
                    
                    
                    
                    300,000Winfield
      Group Debenture Payable
                    
                    8/23/2006
                    
                    
                    
                    300,000Longview
      Debenture Payable
                    
                    8/24/2006
                    
                    
                    
                    300,000Winfield
      Group Debenture Payable
                    
                    12/12/2006
                    
                    
                    
                    100,000Winfield
      Group Debenture Payable
                    
                    
                    Q1
      2007
                    
                    
                    
                    331,120Winfield
      Group Debenture Payable
                    
                    
                    Q2
      2007
                    
                    
                    
                    288,880Longview
      Debenture Payable
                    
                    3/27/2007
                    
                    
                    
                    250,000$
                    2,170,000




17





On August
23 and 24, 2006, the Company formally entered into an agreement with several
investors to loan the Company $1,900,000, which was amended in March 2007,
increasing the loan amount to $2,200,000. The notes bear interest at 12% per
annum, payable on the first of each month commencing October 1, 2006, along with
1/24 of the face amount of such notes.  The notes are also convertible
into Common Stock at a 50% discount to market until the underlying shares are
registered and at a 15% discount to market thereafter. As additional
consideration, the investors were issued a total of 20,000,000 warrants to
purchase common stock at exercise prices based upon the same formulas for
conversion of the amounts due under the notes. The notes are 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 connection
with this loan, the lender has agreed to acquire the existing mortgage on the
Plum Mine property from the Brockbank Trust. To date, $2,170,000 of the
$2,200,000 has been funded by the investors.  As of December 31, 2008,
we had failed to make any monthly payments on the notes and they are in default.
The default interest rate is 18% per annum.





The
“favored nations” rights in several existing notes were triggered by the
issuance of new notes. Since new warrants were not issued, no “favored nations”
rights were triggered in the existing warrants and therefore the accounting for
warrants will be unaffected.  The warrants conversion feature will be
evaluated and adjusted to fair value annually.





Convertible
Notes Payable –2008





In June
2008, the Company entered into a Loan Agreement with John Winfield and
affiliates (“Winfield”) pursuant to which Winfield has agreed to loan the
Company $2,500,000 no later than December 31, 2008 through issuance of a series
of secured notes (“Notes”). The Notes bear interest at the rate of 11% per
annum, and interest is payable quarterly in either cash or Company common stock,
at 85% of market price, at the Company’s option. The term of the Notes is two
years from the date of issuance, and the Notes are convertible into Company
common stock, at a conversion price of $.015 per share. The Notes are secured by
a lien on all of the Company’s assets. In each month, during the five months
ended December 2008, Winfield lent the Company $500,000 pursuant to the Loan
Agreement.





The
Convertible Notes Payable -2008 contain a non-detachable convertible option that
was “in the money” at the commitment dates.  Accordingly, we applied
the accounting guidance of ASC 470 to determine the methodology for calculating
the value of this embedded conversion option.   Pursuant to ASC
470, we used the intrinsic value calculation (the difference between the
conversion price and the quoted market price of our shares at the commitment
date multiplied by the number of shares into which the security is convertible)
to determine the value of the convertible feature.  The Convertible
Notes provide the following Conversion Right: “Each Lender shall have the right
at any time, and from time to time, on or prior to the Maturity Date to convert
all or any part of the outstanding unpaid amount of the Note into fully paid and
non-assessable shares of Common Stock.”   In general, the value
of the conversion option is recorded as a debt discount and amortized over the
term of the note, but since the Lender has the right to convert into common
shares at the issuance date, the entire amount was recorded to interest expense
in this reporting period.





Note Principal
                                            
                                            Unamortized
                                              Debt Discount
                                            
                                            
                                            Conversion
                                              Price per
                                              Share
                                            
                                            
                                            Number of
                                              Shares
                                              Underlying
                                              Convertible
                                              Note$
                                            2,500,000
                                            
                                            
                                            -
                                            
                                            
                                            $
                                            0.015
                                            
                                            
                                            
                                            166,666,667




18





Note
10 —Other Debt




Other
Debt at September 30, 2009 and December 31, 2008 are as follows:





2009
                      
                      
                      2008Promissory
      Notes Payable - 2005 through 2008
                      
                      $
                      2,400,000
                      
                      
                      $
                      2,400,000Debt
      – Plum Mine
                      
                      
                      250,000
                      
                      
                      
                      250,000Equipment
      Financing - current portion
                      
                      
                      3,525
                      
                      
                      
                      10,565$
                      2,653,525
                      
                      
                      $
                      2,660,565




Promissory Notes Payable
–2005 through 2008





Promissory
Notes Payable at September 30, 2009 and December 31, 2008 are as
follows:




2009
                  
                  
                  2008Promissory
      Notes Payable-July 2005 Financing (interest rate of 17%)
                  
                  $
                  1,200,000
                  
                  
                  $
                  1,200,000Promissory
      Notes Payable-December 2007 Financing (interest rate of
    18%)
                  
                  
                  600,000
                  
                  
                  
                  600,000Promissory
      Notes Payable-January 2008 Financing (interest rate of
18%)
                  
                  
                  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 John V. Winfield,
a major investor. 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 accrue interest at 15% per annum and are
payable in monthly installments of principal and interest over a 24 month period
with the remaining entire balance of unpaid principal and interest 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 (See
Note 8). As of December 31, 2006 we had failed to make any monthly payments on
the notes and they are in default.  The default interest rate is 17%
per annum.  As of September 30, 2009, we had failed to make any
monthly payments on the notes and we are in technical
default.





Promissory Notes Payable –
December 2007 Financing




In
December 2007, we completed a financing transaction with Mr. Winfield and his
affiliates 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 4.9% per annum, payable
on or prior to the one year anniversary of the respective loan
date.  As of December 31, 2008 we had failed to make any monthly
payments on the notes and they are in default.  The default interest
rate is 18% per annum.  As of September 30, 2009, we had failed to
make any monthly payments on the notes and we are in technical
default.





Promissory Notes Payable –
January 2008 Financing




On
January 31, 2008, we completed a financing transaction with Mr. Winfield and his
affiliates 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 4.9% per annum, payable
on or prior to the one year anniversary of the respective loan date. 
..  As of January 31, 2009 we had failed to make any monthly payments
on the notes and they are in default.  The default interest rate is
18% per annum.   As of September 30, 2009, we had failed to make
any monthly payments on the notes and we are in technical
default.


19





Debt - Plum
Mine




We have a
non-interest bearing note payable note related to our purchase of the Plum
Mining property. The note does include, however, a clause for 5% annual interest
on all past due balances. The note was payable in ten quarterly payments through
June 2006. As of September 30, 2009 we still had a $250,000 note balance due and
are in technical default.





·
            0%
      secured promissory note


·
            Default
      interest of 5% per annum


·
            Maturity
      Date:   June 2006





Note
11 — Long-term Convertible Debt Obligation





Convertible
debentures at September 30, 2009 and December 31, 2008 were as
follows:


2009
                    
                    
                    2008Long-term
      Convertible Notes Payable – July 2008 (Longview Amended and Restated Note)
      (interest rate of 11%)
                    
                    $
                    2,782,563
                    
                    
                    $
                    2,782,563Long-term
      Convertible Notes Payable – May 2009 (interest rate of 9%)
                    
                    
                    2,000,000
                    
                    
                    
                    ―Embedded
      Derivatives (Note accretion)
                    
                    
                    (887,152
                    )
                    
                    
                    ―Long-term
      Convertible Notes Payable, net of current portion
                    
                    $
                    3,895,411
                    
                    
                    $
                    2,782,563




Long-Term Convertible Notes
– July 2008 (Longview Amended and Restated Note)




On July
10, 2008, the Company amended its promissory note with Longview Fund, L.P.,
which had outstanding principal of $2,175,000 and related outstanding interest
of $607,563 through the issuance of an Amended and Restated Promissory Note in
the aggregate amount of $2,782,563. The amended terms are as
follows:




Expiration
      Date:
                  
                  July
      10, 2011Accrued
      Interest:
                  
                  Accrued
      interest at July 10, 2008 capitalized into the amended and revised
      note.Interest
      Rate:
                  
                  11%,
      payable in arrears in cash or stock (at a 15% discount to market price,
      calculated as a 5 day trailing
VWAP)




Conversion:
                  
                  The
      principal amount of the Note and interest thereon is convertible into
      Goldspring Common Stock at a price of $.0175 per share.Term:
                  
                  Three
      YearsAnti
      Dilution:
                  
                  Full
      ratchet





Convertible Loan Agreement –
May 1,  2009





On May 1,
2009, the Company secured $2,000,000 commitment for additional convertible debt
financing.  The agreement gives the Company the right, upon 30 days
prior written notice to the Lenders, to request financing of not less than
$250,000 and or more than $500,000 per loan request.  The Company may
request loans at any time between May 1, 2009 and August 28,
2009.   As of the date of the filing the Company has received
$2,000,000 of financing.





The terms
of the agreement are as follows:




Convertible
      Loan Amount:
                    
                    Up
      to $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.




20




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





The
Convertible Loan Agreement Payable –May 2009 contain a non-detachable
convertible option at the commitment dates.  Accordingly, we applied
the accounting guidance of ASC 470 to determine the methodology for calculating
the value of this embedded conversion option.   Pursuant to ASC
470, we used the intrinsic value calculation (the difference between the
conversion price and the quoted market price of our shares at the commitment
date multiplied by the number of shares into which the security is convertible)
to determine the value of the convertible feature.  The Convertible
Notes provide the following Conversion Right: “Each Lender shall have the right
at any time, and from time to time, on or prior to the Maturity Date to convert
all or any part of the outstanding unpaid amount of the Note into fully paid and
non-assessable shares of Common Stock.”   In general, the value
of the conversion option is recorded as a debt discount and amortized over the
term of the note, but since the Lender has the right to convert into common
shares six months after the issuance date, the amount is being amortized over
six months.  Interest expense relating to the amortization of debt
discount for the nine month period ended September 30, 2009 and for the three
month period ended September 30, 2009 was $952,296 and $877,152
respectively.





Note Principal
                                                  
                                                  Unamortized
                                                    Debt Discount
                                                  
                                                  
                                                  Conversion
                                                    Price per
                                                    Share
                                                  
                                                  
                                                  Number of
                                                    Shares
                                                    Underlying
                                                    Convertible
                                                    Note$
                                                  2,000,000
                                                  
                                                  $
                                                  877,152
                                                  
                                                  
                                                  $
                                                  0.0125
                                                  
                                                  
                                                  
                                                  160,000,000





Note
12 — Long-term Debt Obligation





Long-term
debt at September 30, 2009 and December 31, 2008 was as follows:




2009
                        
                        
                        2008Long-term
      Debt - Winfield Debenture (interest of 11%)
                        
                        
                        500,000
                        
                        
                        
                        500,000Long-term
      Debt – Seller’s Note Land Purchase (interest of 16%)
                        
                        
                        90,000
                        
                        
                        
                        ―Long-term
      Debt - Equipment Financing (weighted average interest rate of
      7.2%)
                        
                        
                        3,525
                        
                        
                        
                        16,565Less
      current portion
                        
                        
                        (3,525
                        )
                        
                        
                        (10,565
                        )Long-term
      debt, net of current portion
                        
                        $
                        590,000
                        
                        
                        $
                        500,000





Long-Term Debt – Winfield
Debenture




On
December 8, 2008, we completed a financing transaction with Mr. Winfield and his
affiliates which provided us with $500,000 in funding. In consideration for the
financing, we issued promissory notes with a face value of $500,000 bearing loan
interest of 11% per annum.  The term of loan is for two years
commencing from the date of the loan agreement.


21





Long-term Debt - Seller’s
Note Land Purchase




On
February 17, 2009 we purchased 4.79 acres in the Comstock District for
$130,000.  We partially financed this transaction through a first deed
of trust that is interest only for two years and bears interest at 16% per
annum.





Long-Term Debt - Equipment
Financing




During
2004, we purchased certain equipment and financed our purchases through GMAC and
Ford Motor Company credit agencies. Aggregated principal and interest due
pursuant to the financings is due monthly in equal installments of $1,054, at an
average interest rate of 7.2%. The equipment purchased is pledged as collateral
for the debt.




Principal
payments on long-term debt financing for the next four years are as
follows:




2009
                  
                  $
                  3,5252010
                  
                  $
                  ―2011
                  
                  $
                  ―2012
      and thereafter
                  
                  $
                  ―Total
                  
                  $
                  3,525




Note
13 — Stockholders’ Equity




Common
stock was issued during the six month period ended September 30, 2009 and
December 21, 2008 for the following purposes:




2009 Share
                        Issuances
                      
                      
                      Share Value
                      
                      
                      2008 Share
                        Issuances
                      
                      
                      Share ValueDebenture
      principal
                      
                      
                      ―
                      
                      
                      $
                      ―
                      
                      
                      
                      99,847,173
                      
                      
                      $
                      970,273Debenture
      Interest
                      
                      
                      125,202,687
                      
                      
                      
                      1,266,041
                      
                      
                      
                      77,145,795
                      
                      
                      
                      700,066Liquidated
      damages
                      
                      
                      ―
                      
                      
                      
                      ―
                      
                      
                      
                      108,189,261
                      
                      
                      
                      1,009,845Private
      placements
                      
                      
                      98,600,000
                      
                      
                      
                      986,000
                      
                      
                      
                      90,000,000
                      
                      
                      
                      1,000,000Mineral
      claims
                      
                      
                      ―
                      
                      
                      
                      ―
                      
                      
                      
                      2,200,000
                      
                      
                      
                      32,490Mining
      software
                      
                      
                      ―
                      
                      
                      
                      ―
                      
                      
                      
                      2,434,892
                      
                      
                      
                      9,740Consulting
                      
                      
                      ―
                      
                      
                      
                      ―
                      
                      
                      
                      7,530,000
                      
                      
                      
                      114,240Employees
      and directors
                      
                      
                      4,500,000
                      
                      
                      
                      58,500
                      
                      
                      
                      20,000,000
                      
                      
                      
                      234,400Total
                      
                      
                      228,302,687
                      
                      
                      $
                      2,310,541
                      
                      
                      
                      407,347,121
                      
                      
                      $
                      4,071,054




Debenture Principal,
Debenture Interest and Liquidated Damages





The
following represents interest payments on debt, made during the three month
period ended September 30, 2009 with the issuance of our common
stock.




Note Description
                                
                                Interest
                                  Payment
                                  Number of
                                  shares
                                
                                
                                Value of
                                  Shares
                                
                                See NoteConvertible
      Debentures
                                  Payable-Investors
                                
                                
                                ―
                                
                                
                                $
                                ―
                                
                                Note
      9Convertible
      Debentures Payable - Mandatory Redemption payment
                                
                                
                                ―
                                
                                
                                $
                                ―
                                
                                Note
      9Long-Term
      Convertible Notes – July 2008 (Longview Amended and Restated
      Note)
                                
                                
                                8,090,682
                                
                                
                                $
                                76,938
                                
                                Note11




22





The
following represents interest payments on debt, made during the nine month
period ended September 30, 2009 with the issuance of our common
stock.




Note Description
                            
                            Interest
                              Payment
                              Number of
                              shares
                            
                            
                            Value of
                              Shares
                            
                            See NoteConvertible
      Debentures Payable-Investors
                            
                            
                            12,300,000
                            
                            
                            $
                            123,000
                            
                            Note
      9Convertible
      Debentures Payable - Mandatory Redemption payment
                            
                            
                            99,000,000
                            
                            
                            $
                            990,000
                            
                            Note
      9Long-Term
      Convertible Notes – July 2008 (Longview Amended and Restated
      Note)
                            
                            
                            21,993,369
                            
                            
                            $
                            229,979
                            
                            Note11





Private
Placements





The
following private placement transactions exempt from registration under Section
4(2) of the Securities Act raised a total of $950,000 in exchange for 95,000,000
shares of our unregistered Common stock, were place with accredited
investors.  In general, the proceeds were used to fund exploratory
drilling and for general working capital.





·
            In the first quarter 2009,
      $950,000 for 95,000,000 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.  We also issued 3.6 million shares as a placement
      fee.




Employees and
directors





During
the nine month period ended September 30, 2009, the following shares were issued
to employees and Company directors:





·
            Pursuant to his employment
      agreement, Larry Martin, the Company’s Chief Geologist, was issued a total
      of 2,500,000 of our unregistered common shares, valued at $32,250 or
      $0.0129 per share during
2009.




·
            Pursuant to his agreement with
      the Company, Dennis Anderson, the Company’s Senior Engineer, was issued a
      total of 2,500,000 of our unregistered common shares, valued at $30,000 or
      $0.012 per share during
2009.





Note
14- Earnings Per Share




Basic
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 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. The amount of preferred
stock dividends is zero in all periods presented. For the quarters ended
September 30, 2009 and September 30, 2008, there were approximately
2,160,000,000 and 1,754,000,000, 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):


23




For the three month period ended
                                  September 30,2009
                                
                                
                                2008Weighted
      average number of common shares outstanding – basic
                                
                                
                                3,616
                                
                                
                                
                                3,245Dilution
      from convertible debt, stock options and warrants
                                
                                
                                2,160
                                
                                
                                
                                1,754Weighted
      average number of common shares outstanding – diluted
                                
                                
                                5,776
                                
                                
                                
                                4,999




For the nine month period ended
                                    September 30,2009
                                  
                                  
                                  2008Weighted
      average number of common shares outstanding – basic
                                  
                                  
                                  3,538
                                  
                                  
                                  
                                  3,080Dilution
      from convertible debt, stock options and warrants
                                  
                                  
                                  2,160
                                  
                                  
                                  
                                  1,754Weighted
      average number of common shares outstanding – diluted
                                  
                                  
                                  5,698
                                  
                                  
                                  
                                  4,834





Note
15- Embedded Derivatives





“Derivative
liability” totaling $9,213,327 at September 30, 2009 represents the fair value
of the conversion feature (embedded derivatives) included in
debt.    SeeNote 9 - Convertible
Debentures: Embedded Derivatives and Note 11 — Long-term Convertible Debt
Obligation: Embedded Derivatives for additional information.





Note
16 - Unregistered Sales of Securities





During
the first quarter 2009, Goldspring raised $950,000 through a private placement
to six (6) accredited investors. In consideration we issued 95,000,000 shares of
our unregistered Common Stock at $0.01 per share purchase price plus 95,000,000
warrants to purchase Common Stock at $0.015.  The term of the warrants is
six (6) years.  The proceeds from this private placement were used to
fund exploratory drilling and for general working capital.  In
addition, 3.6 million shares were issued as part of a placement
fee.





·
            Pursuant to his employment
      agreement, Larry Martin, the Company’s Chief Geologist, was issued a total
      of 2,500,000 of our unregistered common shares, valued at $32,500 or
      $0.0129 per share during
2009.




·
            Pursuant to his agreement with
      the Company, Dennis Anderson, the Company’s Senior Engineer, was issued a
      total of 2,500,000 of our unregistered common shares, valued at $30,000 or
      $0.012 per share during
2009.





Note
17 – Subsequent Events




Effective
as of October 6, 2009, Robert Reseigh, a director of the Registrant was
appointed as its interim CEO.  Robert T. Faber remains as the
Registrant’s President and CFO.




The
Nevada Division of Environmental Protection (NDEP) on November 11, 2009 approved
a major modification to GoldSpring’s Water Pollution Control Permit. The
modification was requested to allow the addition of a milling operation that
will increase the recovery of gold and silver at the Company’s Comstock Mine
Project.




The
changes to the process facilities approved under the permit modification
include:




·
            Installation
      of a new three-stage crushing
system;




24




·
            Construction
      and operation of two new crushed-mineralized material storage
      areas;


·
            Implementation
      of a high-grade mineralized material milling circuit in a contained
      area;


·
            Increasing
      the capacity of the leach solution pumping
  systems;


·
            Construction
      of a new pregnant solution pond;
and


·
            Doubling the Merrill-Crowe
      processing plant capacity.




On
October 1, 2009 GoldSpring acquired a mining lease for nine patented mining
claims, and sixteen unpatented mining claims for its Comstock Mine Project. The
lease from Railroad and Gold, LLC also includes rights for nine town lots and a
rural parcel in American Flats. The claims add 344 acres to the mineral estate
for the project.  GoldSpring's Comstock Mine Project now includes a
mineral estate of 4,607 acres, including 680 acres of patented mining claims,
and 3,927 acres of unpatented, BLM-administered mining claims.





On
November 9, 2009, Jonathan Jaffrey resigned as a member of the Registrant’s
Board of Directors.  Mr. Jaffrey did not provide an explanation for
his resignation.





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.





The
following discussion addresses matters we consider important for an
understanding of our financial condition and results of operations for the three
months ended September 30, 2009, as well as our future results.




Overview




GoldSpring,
Inc. (Company) is a North American precious metals mining company, focused in
Nevada, with an extensive land position of 334 claims that controls 4,300 acres
comprised of 590 acres of patented claims (private lands) and 3,710 acres
unpatented claims subject to various underlying royalties, in the historic
Silver City and Comstock mining districts, Storey County and Lyon County,
Nevada, USA. The Company was formed in mid-2003, and during that year acquired
two properties in the Comstock Lode District. The Company deployed several
million dollars securing permits, building an infrastructure and bringing the
exploration project into test mining production within a year of its
acquisition.





The
Company, in 2005, began consolidating the Comstock Lode District by acquiring
additional properties. The Company successfully expanded our footprint and
creating additional opportunities for exploration and mining.  The
Company's objectives are to create reserves through exploration, resume mining,
optimize its production, and maximize shareholder value.




From
September 2004 through 2006 the Company operated its Plum Mine open pit gold and
silver operation located on the patented Billie the Kid claims in the Comstock
District.  During this period, the Plum Mine operation produced
and sold 11,550 ounces of gold and 45,376 ounces of silver.  The
average recoverable grade for gold was 0.034 ounces per ton and for silver was
0.13 ounces per ton.  In early 2007 the Company decided to suspend
mining operations and to go into voluntary temporary closure in order to focus
on our footprint in the Comstock,, study the geology of the District, delineate
mineralization and create a drilling strategy and plan.  The focus
shifted from mine operations to exploration and developmental drilling in order
to define mineralization.  In addition, a comprehensive metallurgical
testing program was initiated to ensure optimum precious metal recovery from
future production.





The
majority of 2007 was focused on collecting and analyzing geological information
from our Comstock project in Nevada, the Hartford / Lucerne Complex provided a
unique opportunity to identify significant precious metals mineralization that
would lead us to open pit mine production in a short period of
time.


25


The
Company’s goal is to reopen The Plum Mine during 2010 by commencing open pit
mining at the Hartford / Lucerne Complex.  To achieve this goal, the
Company contracted Techbase to create a computerized mine modeling and
mineralization estimate and commissioned an in house scoping
study.  The scoping study includes a complete comprehensive mine plan
and mining schedule.  Construction of the new milling facility and new
process ponds as well as the expansion of the processing facilities will require
a diligent, efficient and fully funded effort to achieve production by early
2010.  A mine truck and shovel fleet, and ancillary mine production
equipment will need to be acquired and placed in service by the mine production
team.  The mine production team will supply the ore to the mill and
heap leach pad for processing.  Our ability to resume mining is dependent
upon securing sufficient funds to procure the mining fleet and related
assets.





Results
of Operations and Operational Plan





The
Hartford / Lucerne complex area was the focus of the 2008 - January 2009
development drilling program.   The existing production facility
and planned starter pit are located on patented-private land. The Nevada
Division of Environmental Protection -Bureau of Mine Regulation and Reclamation
(BMRR) is the lead agency in the regulation of the operation of the Plum
Mine.  The ultimate economic pit currently being planned trends onto
public lands administered by the Bureau of Land Management (BLM), US Dept of the
Interior.





Exploration,
developmental and in-fill drilling since our decision to suspend mining
operation has resulted in definition of new mineable precious metal mineralized
material.  An internal scoping report quantified the mineralized
material  and estimated precious metal recovery rates as
follows:




Inventory
of Mineralized Material


Estimated Recovery %Category
                  
                  Tons
                  
                  
                  Au(ounces per ton)
                  
                  
                  Ag(ounces per ton)
                  
                  
                  Au (%)
                  
                  
                  Ag (%)Mill-grade
                  
                  
                  7,753,000
                  
                  
                  
                  0.053
                  
                  
                  
                  0.597
                  
                  
                  
                  95
                  %
                  
                  
                  80
                  %Heap-grade
                  
                  
                  15,161,000
                  
                  
                  
                  0.015
                  
                  
                  
                  0.015
                  
                  
                  
                  65
                  %
                  
                  
                  30
                  %Total
                  
                  
                  22,914,000
                  
                  
                  
                  0.028
                  
                  
                  
                  0.371





The Plum
Mine, our project in the Comstock Lode District,  has a State issued
Mine Reclamation Permit (Permit No. NEV 0196) and an Operating Permit (NEV
2000109).  The Mine Reclamation Permit was updated in 2008 pursuant to
a required three year review and modification program.  Pursuant to
the 2008 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. This reclamation bond allows mining and processing at
the currently permitted heap leach facility in the Comstock District of Storey
County.





Modification
to the State permits is underway to add changes to the processing system that
will optimize precious metals recovery.  In the first calendar quarter
2009, we submitted a major modification to our water pollution control permit to
the Nevada Department of Environmental Protection (NDEP).  We expect
to have this amended permit during the last calendar quarter of
2009.  In addition, we intend to submit a major modification to our
Air Quality permit during the fourth quarter 2009.  The permit
modification is required for planned equipment changes and additions to the
processing circuit. The Storey County Special Use Permit must be amended before
the commencement of mining.  The completion of permitting should
allow us to commence mine production again in 2010. (See Note 17 –
Subsequent Events regarding NDEP’s approval of major modification to the water
pollution control permit.)


26





A
significant part of our success can be attributed to the tier-one team of
experienced mining professionals that has been assembled since late 2007. This
team created a drill campaign based on the results of the geological model they
created from analyzing data for mineralization in the Comstock Mining
District.    We launched this developmental surface drill
program at the  Hartford / Lucerne Complex in December 2007 to
delineate the zones of mineralization. The drill hole depth of this reverse
circulation drill program typically ranged from 600 to 1000
feet.





Our
fifteen-month drill program, which ended in February 2009, consisted of 182
Reverse Circulation (RC) drill holes.     The majority
of the 182 drill holes were planned and methodically located to drill Hartford /
Lucerne Complex on adequate spacing to define continuity and grade.  A
small fraction of the allocated budget was used to drill holes on lease
properties that required annual work commitments.  Several of these
exploration drill holes intersected favorable mineralized zones and will be
followed by additional offset drilling.





During
this program the Company contracted two drilling companies:  Orbit
Garant Drilling and George Delong Construction and
Drilling.  The drill rigs were reverse circulation track rigs and one
truck mounted drill rig that performed the exploration and developmental
drilling at the Comstock project. Several experienced mining professionals and
consultants with proven success were added in 2008 to further strengthen and
augment all facets of mining, including metallurgy.  In order to fund
these exploration efforts, the Company raised $5,120,000 in 2008 and $950,000 in
the first fiscal quarter 2009 to finance this developmental and exploratory
drill campaign.





Third-party
consultant Mike Norred, President of Techbase International, modeled the results
of this  Hartford / Lucerne Complex drill program combined with the
historic drill results to estimate gold and silver mineralization. This
statistical model confirmed that the drill hole spacing selection was
correct.  The model independently confirmed many geologic attributes
which control this mineralized material deposit.





Our
procedures to ensure accurate reporting include:  1.) Surface collars
of the individual drill holes were surveyed and drill holes completed after
October 7, 2008 were surveyed down the hole.  2.) Samples of drilling
were collected every five feet and duplicate samples every 100
feet.  3.)  Drill samples were kept in secured containers
until pickup by American Assay Labs in Sparks,
Nevada.  4.)  American Assay Labs was the principle
certified commercial laboratory used by the Company for assay
analysis.  5.  Check  assay analysis was conducted
by ALS-Chemex Laboratories in Reno, Nevada  6.) Specific selected
samples were assayed by the Company’s in-house analytical lab.




In mid
December 2007, the Company commenced development of a mineral exploration and
mine development business model with the objective of resumption of mine
production in 2010.   The most relevant steps taken are as
follows:





 ̈   Expanding
our land holding and mineral rights in the Comstock Region and other acquisition
opportunities through the entry into of two letters of intent to purchase
rights, which upon consummation, may allow the Company to amass one of the
largest land positions in the Comstock District.





 ̈   Further
exploration in the Comstock Region to accomplish the above, including a decision
to review the geology of the Hartford / Lucerne complex in a more detailed
manner





 ̈   Completed
an in-house mineralized material report for the Hartford / Lucerne complex
through a focus on infill drilling





 ̈   Expanded
the permitted drilling area





 ̈  
Updated and expanded the mine reclamation permit and reclamation
bond





In
addition to our drilling activities, we expanded our mineral claim portfolio in
the Comstock District through acquisition and the staking of mineral claims
..  We now control over 4,300 acres of patented and unpatented mining
claims in the Comstock District of Nevada.  Approximately 2,000 acres
of these holdings had been added through the staking new mineral
claims.  We remain focused on expanding our land portfolio and mineral
holdings in the Comstock Lode District.  (See Note 17 – Subsequent
Events regarding acquisition of mineral lease.)


27


Our
exploration staff is currently planning additional surface geochemical sampling,
detailed geologic mapping and rock chip sampling on previously identified
favorable targets and expanding onto additional target areas.  We are
consolidating historic exploration and production records using Techbase
software.  Our plans are to expand our computer model of the Hartford
/ Lucerne complex with the objective of delineating additional geologic targets
in the Comstock Lode District.





2009
Developments




In the
first quarter of 2009, a modification application to the Water Pollution Control
Permit was submitted to the Nevada Division of Environmental
Protection.  The permit modifications highlight the Company’s newly
designed processing facilities that will optimize recovery of the recently
discovered mill-grade gold and silver mineralized material at the Hartford
Complex.





The major
planned improvements to the processing facilities include the:





·
            Construction and operation of two
      new crushed mineralized material storage
  areas;





·
            Implementation of a high-grade
      mineralized material milling circuit in a contained
      area;





·
            Expansion of the leach solution
      pumping systems;





·
            Formation of a new pregnant
      solution pond; and





·
            Expansion of the Merrill Crowe
      processing plant.





The
Nevada Division of Environmental Protection, Bureau of Mining Regulations and
Reclamation, has begun its review of the application.  Major
modification applications typically take nearly 180 days to
complete.  Under the modified permit, the Company initially plans to
mine and process at a rate of 720,000 tons of gold and silver mineralized
material per year.  The majority of the mineralized material that will
be processed in the milling circuit will have a high percentage of the contained
precious metals recovered because of efficiencies afforded by the milling
process.  (See Note 17 – Subsequent Events regarding NDEP’s approval
of major modification to the water pollution control permit.)





Several
other operating permits are also being updated to allow operations to begin in
2010.  Dennis Anderson, Professional Mine Engineer, leads the mine
permitting efforts and is supported by the engineering consultants at Telesto
Nevada, LLC of Reno, Nevada.




In
anticipation of mining resumption, the Company has procured a 300 ton per day
ball mill and related equipment.  The ball mill is being added to
process the high grade gold and silver mineralization, optimizing gold and
silver recovery.  Precious metal recovery using the ball mill and
grinding to 100 Mesh should be around 95% versus 65% for heap
leaching.




Assuming
sufficient funds are raised in a timely manner, the Company’s goal would be to
reopen the Mine during in 2010. In order to resume production, the Company must
complete a comprehensive mine plan; and complete a mining schedule, all of which
are dependent upon ability to secure sufficient funds to procure the mining
fleet and related assets. In addition, we will need to construct the milling
facility, process ponds and expand the existing processing facilities. A haul
truck and shovel fleet, and ancillary mine production equipment will need to be
acquired and placed in service by the mine production team.


28


There are
also risks involved in the fact that one individual and his affiliates, as of
September 30, 2009, beneficially own in excess of 23.5% 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 him to convert 100% of his convertible debt and related interest, which
totals $12,319,351 at September 30, 2009, into our common shares. This group, if
they waive the ownership restriction and convert all convertible debt and
related interest into our voting common stock,may take actions that could
conflict with your interests.This includes the election of Company directors, approval of actions
generally requiring the approval of the holders 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 someone from acquiring or merging with us
or limit the ability of our other stockholders to approve transactions that they
may deem to be in their best interests.




DWC Resources Letter of
Intent





On August
13, 2008, Goldspring, Inc. (the “Company”) entered into a binding letter of
intent to purchase certain property owned by DWC Resources, Inc. in Storey
County, Nevada.  The purchase price is $7,500,000, but is subject to
adjustment pursuant to the results of a fairness opinion and/or appraisal to be
obtained by the Company. The purchase price will be paid through issuance of a
$7,500,000 promissory note which shall bear interest at the rate of 9% per year
with quarterly interest payments due throughout the term of the note which is 5
years. The purchased assets include patented and unpatented lode mining claims
owned by DWC Resources, Inc. in the Comstock Lode district. The letter of intent
also provides for the payment of royalties ranging from 2% - 6% of “net smelter
returns” based upon the price of gold per ounce and a 1% royalty to be paid to
the party which sold the subject property to DWC Resources in 2007. There is
also a commitment to expend a minimum of $250,000 per year on exploration by the
Company for five years.  The definitive documentation has not yet been
executed.





Sutro
Tunnel Sublease




The
Company simultaneously entered into a binding letter of intent to sublease the
Sutro Tunnel Lease dated January 1, 2008 between Sutro Tunnel Co. and John
Winfield or his nominee.  The purchase price for the sublease is
$2,000,000 (which is subject to adjustment upon receipt of a third party
fairness opinion/appraisal) payable pursuant to the issuance of a $2,000,000
promissory note which shall bear interest at the rate of 9%per year with
quarterly interest payments due throughout the term of the note which is 5
years. The letter of intent also provides for the payment of royalties ranging
from 6% - 8% of “net smelter returns” based upon the price of gold per ounce and
a 1% royalty to be paid to Winfield if Winfield provides an acceptable buyout of
the Sutro property. The Company is also required to fulfill lessee’s obligations
under the Sutro Tunnel Lease with regard to payment of royalties and exploration
expenditures.  The definitive documentation has not yet been
executed.




Comparative
Financial Information





Below we
set forth a summary of comparative financial information the three and nine
months ended September 30, 2009 and 2008.




Comparative
Financial Information





Three
Months Ended September 30, 2009





Quarter
                  ended
                  September 30,
                  2009
                
                
                Quarter
                  ended
                  September 30,
                  2008
                
                
                DifferenceRevenue
                
                $
                —
                
                
                $
                —
                
                
                $
                —Depletion
      and amortization
                
                
                37,604
                
                
                
                60,000
                
                
                
                (22,396
                )Reclamation,
      Exploration and Test Mining Expense
                
                
                485,429
                
                
                
                947,430
                
                
                
                (489,001
                )General
      and Administration
                
                
                330,453
                
                
                
                429,767
                
                
                
                (99,314
                )Consulting
      and Professional Service
                
                
                32,204
                
                
                
                83,026
                
                
                
                (50,822
                )Financing
      cost – warrant issuances
                
                
                111,160
                
                
                
                —
                
                
                
                111,160Derivative
      change in fair value
                
                
                42,643
                
                
                
                —
                
                
                
                42,643Interest
      Expense
                
                
                1,693,994
                
                
                
                723,698
                
                
                
                970,296Net
      Loss
                
                $
                (2,733,487
                )
                
                
                (2,270,921,
                )
                
                $
                462,566




29





We did
not produce or sell any gold or silver at our Comstock project in Nevada during
the three months ended September 30, 2009 and September 30, 2008.  In
February 2007, we shifted our focus to geology and developmental / in-fill
drilling and suspended mining activities.





Reclamation,
Exploration and Test Mining Expenses were $ 489,001 less for the three month
period ended September 30, 2009 compared to the three month period ended
September 30, 2008. This variance reflects the suspension of drilling activities
in the first quarter 2009 allowing our team to focus on quantifying the drill
assay information from the December 2007 through January 2009 drill
campaign.





The third
calendar quarter 2009 General and Administrative expenses decreased by $99,314
from the third calendar quarter 2008.  The calendar quarter 2008
General and Administrative expenses were impacted by the recording of stock
options granted to directors.





Consulting
and professional expenses for the three month period ended September 30, 2009
were $32,204 compared to $83,026 for the three month ended September 30, 2008,
amounting to $50,822 quarter over quarter decrease.  The decrease in
consulting and professional expenses reflects lower legal and accounting fees
during the third calendar quarter 2009.





The third
calendar quarter 2009 Financing cost – warrant issuance expense represents the
fair value calculation for the 20 million warrants issued in conjunction with
the May 2009 financing. The fair value of each warrant was estimated at the
date of the grant using the Black-Scholes option pricing
model.  Black-Scholes utilizes assumptions related to volatility, the
risk free interest rate, the dividend yield (which is assumed to be zero, as the
Company has not paid, nor anticipates paying any, cash dividends and employee
exercise behavior.  Expected volatilities utilized in the model are
based mainly on the historical volatility of the Company’s stock price and other
factors.





Interest expense for the
three month period ended September 30, 2009 increased by $970,296 when compared
to the same calendar quarter in 2008. This variance reflects the issuance of
additional interest bearing notes and amortization of debt discount of $887,152
associated with fair value calculation for the May 2009 convertible debt
financing.




Nine
Months Ended September 30, 2009





Nine months
                          ended
                          September 30,
                          2009
                        
                        
                        Nine months
                          ended
                          September 30,
                          2008
                        
                        
                        DifferenceRevenue
                        
                        $
                        —
                        
                        
                        $
                        —
                        
                        
                        $
                        —Depletion
      and amortization
                        
                        
                        114,073
                        
                        
                        
                        180,000
                        
                        
                        
                        (65,927
                        )Reclamation,
      Exploration and Test Mining Expense
                        
                        
                        2,577,821
                        
                        
                        
                        2,415,831
                        
                        
                        
                        161,990General
      and Administration
                        
                        
                        1,022,670
                        
                        
                        
                        1,532,774
                        
                        
                        
                        (510,104
                        )Consulting
      and Professional Service
                        
                        
                        177,610
                        
                        
                        
                        141,985
                        
                        
                        
                        32,625Financing
      cost – warrant issuances
                        
                        
                        1,856,195
                        
                        
                        
                        —
                        
                        
                        
                        1,856,195Derivative
      change in fair value
                        
                        
                        42,643
                        
                        
                        
                        130,604
                        
                        
                        
                        (87,691
                        )Other,
      net
                        
                        
                        58,500
                        
                        
                        
                        (551,907
                        )
                        
                        
                        635,407Interest
      Expense
                        
                        
                        3,296,145
                        
                        
                        
                        2,053,008
                        
                        
                        
                        1,243,137Net
      Loss
                        
                        $
                        9,145,657
                        )
                        
                        
                        (5,902,295
                        )
                        
                        $
                        3,243,305




30


We did
not produce or sell any gold or silver at our Comstock project in Nevada during
the nine month period ended September 30, 2009 and September 30,
2008.  In February 2007, we shifted our focus to geology and
developmental / in-fill drilling and suspended mining activities.





Reclamation,
Exploration and Test Mining Expenses were $ 161,990 greater for the nine month
period ended September 30, 2009 compared to the nine month period ended
September 30, 2008. The variance reflects the permit application costs in
2009..





The nine
month period ended September 30, 2009 General and Administrative expenses
decreased by $510,104 when compared to the first nine months of
2008.  General and Administrative expenses were higher for the nine
month period ended September 30, 2008 because of employee stock option expense
of $429,000.  This compares to $0 for the nine month period ended
September 30, 2009.





Consulting
and professional expenses for the nine month period ended September 30, 2009
were $177,610 compared to $141,985 for the nine month period ended September 30,
2008, amounting to $35,625 increase.  The increase in expenses
reflects higher legal and accounting fees in 2009.





The 2009
Financing cost – warrant issuance expense represents the fair value calculation
for the 95 million warrants issued in conjunction with six (6) private
placements during the quarter plus the 80 million warrants issued in conjunction
with the May 2009 financing.  The fair value of each warrant was
estimated at the date of the grant using the Black-Scholes option pricing
model.  Black-Scholes utilizes assumptions related to volatility, the
risk free interest rate, the dividend yield (which is assumed to be zero, as the
Company has not paid, nor anticipates paying any, cash dividends and employee
exercise behavior.  Expected volatilities utilized in the model are
based mainly on the historical volatility of the Company’s stock price and other
factors.





Other,
net of increase of $635,407 in the 2009 compared to 2008 reflects an accrual
adjustment to liquidated damages resulting from the extinguishment of
debt.





Interest
expense for the nine month period ended September 30, 2009 increased by
$1,243,137 from the nine month period September 30, 2008. This variance reflects
the issuance of additional interest bearing notes ($18.2 million of interest
bearing debt at September 30, 2009 compared to $15.2 million at September 30,
2008) and amortization of debt discount of $952,296 associated with fair value
calculation for the May 2009 financing.





Our
Company is a Test Mining Stage enterprise as defined by SEC Industry Guide 7,
and, in accordance with SEC Industry Guide 7, infrastructure expenditures such
as haul roads, leach pads and start-up costs and all drilling were
expensed.


31





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 nine months of 2009, we secured an aggregate of $2,950,000 in
financing. Specifically, we raised $950,000 through six private placements
during the first calendar quarter of 2009 and In May 2009 we secured $2 million
if formal debt commitments of which 100% has been funded.  While this
additional funding may meet our immediate working capital needs, if we are not
able to generate sufficient revenues and cash flows or obtain additional or
alternative funding, we will be unable 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
Form 10-K for the year ended December 31, 2008, our recurring losses and
negative cash flow from operations raise substantial doubt about our ability to
continue as a going concern.





As
of  September 30, 2009, the Company was in default of the terms on
several outstanding notes payable with the Winfield Group totaling $11,869,986
of principal and $3,757,362 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.




Mr.
Winfield and his affiliates (“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 September 30, 2009.  The notes are
as follows:





Principal
                  
                  
                  InterestConvertible
      Debentures Payable – Investors (Note 9)
                  
                  $
                  687,928
                  
                  
                  $
                  32,400Convertible
      Debentures Payable - Mandatory Redemption payment (Note 9)
                  
                  
                  4,412,058
                  
                  
                  
                  742,905Convertible
      Notes Payable - 2006 & 2007 (Note 9)
                  
                  
                  1,620,000
                  
                  
                  
                  1,128,970Promissory
      Notes – July 2005 Financing (Note 10)
                  
                  
                  1,200,000
                  
                  
                  
                  1,250,470Promissory
      Notes – Plum Mine (Note 10)
                  
                  
                  250,000
                  
                  
                  
                  53,125Promissory
      Notes Payable – December 2007 (Note 10)
                  
                  
                  600,000
                  
                  
                  
                  122,573Promissory
      Notes Payable – February 2008 (Note 10)
                  
                  
                  600,000
                  
                  
                  
                  114,059Convertible
      Notes Payable – 2008 (Note 9)
                  
                  
                  2,500,000
                  
                  
                  
                  312,833$
                  11,869,986
                  
                  
                  $
                  3,757,362





The
Winfield Group consists of Mr. Winfield and Santa Fe Financial Corporation,
Portsmouth Square and InterGroup Corporation, and combined, 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.  As of September 30,
2009, the Company is in technical default of the terms on several outstanding
notes payable and accordingly the entire note balances of the defaulted notes
have been recorded as current liabilities.





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.


32





ITEM
4. CONTROLS AND PROCEDURES




A. 
Disclosure




As of the
end of the period covered by this Annual Report on Form 10-Q, management
performed, with the participation of our Chief Executive Officer and Chief
Financial 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 Chief Executive Officer and our
Chief Financial 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 September 30, 2009 are
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 September 30, 2009 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.




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 that
we expect to have a material adverse impact on our business, results of
operations, financial condition or cash flows.




Item
1A.  Risk
Factors





An
investment in our common stock involves risk. You should carefully consider the
following risk factors, in addition to those discussed elsewhere in this report,
in evaluating our company, its business, and prospects. The following risks
could cause our business, financial condition, and operating results to be
materially and adversely affected.


33




We
have limited resources and our inability to obtain additional financing could
negatively affect our growth and success.




We have
incurred substantial losses since our inception, and we are currently
experiencing a cash flow deficiency from operations. Our current cash flow and
capital resources are limited, and we may require additional funds to pursue our
business. We may not be able to secure further financing in the future. If we
are not able to obtain additional financing on reasonable terms, we may not be
able to execute our business strategy, conduct our operations at the level
desired, or even to continue business.




We
have received a qualified report from our independent auditors




Our
independent auditors report on our financial statements indicates that our
recurring losses from operations and working capital deficit raise substantial
doubt about our ability to continue as a going concern





Inability
to raise sufficient funds to increase growth





Our
recent financings have only provided capital to continue existing operations but
not to continue significant exploration and growth. Without the ability to
attract sufficient amounts of capital at any one time, it is unlikely that we
can achieve profitability in the foreseeable future.




We
will not be successful unless we recover precious metals and sell them for a
profit.




Our
success depends on our ability to recover precious metals, process them, and
successfully sell them for more than the cost of production. The success of this
process depends on the market prices of metals in relation to our costs of
production. We may not always be able to generate a profit on the sale of gold
or other minerals because we can only maintain a level of control over our costs
and have no ability to control the market prices. The total cash costs of
production at any location are frequently subject to great variation from year
to year as a result of a number of factors, such as the changing composition of
ore grade or mineralized material production, and metallurgy and exploration
activities in response to the physical shape and location of the ore body or
deposit. In addition costs are affected by the price of commodities, such as
fuel and electricity. Such commodities are at times subject to volatile price
movements, including increases that could make production at certain operations
less profitable. A material increase in production costs or a decrease in the
price of gold or other minerals could adversely affect our ability to earn a
profit on the sale of gold or other minerals.




We
do not have proven or probable reserves, and there is no assurance that the
quantities of precious metals we produce will be sufficient to recover our
investment and operating costs.




Our
success depends on our ability to produce sufficient quantities of precious
metals to recover our investment and operating costs. We do not have proven or
probable reserves. There can be no assurance that our exploration activities
will result in the discovery of sufficient quantities of mineralized material to
lead to a commercially successful operation.




The cost of our exploration and
acquisition activities is substantial, and there is no assurance that the
quantities of minerals we discover or acquire will justify commercial operations
or replace reserves established in the future.





Mineral
exploration, particularly for gold and other precious metals, is highly
speculative in nature, involves many risks, and frequently is nonproductive.
There can be no assurance that our exploration and acquisition activities will
be commercially successful. Once gold mineralization is discovered, it may take
a number of years from the initial phases of drilling until production is
possible, during which time the economic feasibility of production may change.
Substantial expenditures are required to acquire existing gold properties, to
establish ore reserves through drilling and analysis, to develop metallurgical
processes to extract metal from the ore, and in the case of new properties, to
develop the processing facilities and infrastructure at any site chosen for
mineral exploration. There can be no assurance that any gold reserves or
mineralized material that may be discovered or acquired in the future will be in
sufficient quantities or of adequate grade to justify commercial operations or
that the funds required for mineral production operation can be obtained on a
timely or reasonable basis. Mineral exploration companies must continually
replace mineralized material or reserves depleted by production. As a result,
there can be no assurance that we will be successful in replacing any reserves
or mineralized material acquired or established in the future.


34




The
price of gold fluctuates on a regular basis and a downturn in price could
negatively impact our operations and cash flow.




Our
operations are significantly affected by changes in the market price of gold.
Gold prices can fluctuate widely and may be affected by numerous factors, such
as expectations for inflation, levels of interest rates, currency exchange
rates, central bank sales, forward selling or other hedging activities, demand
for precious metals, global or regional political and economic crises, and
production costs in major gold-producing regions, such as South Africa and the
former Soviet Union. The aggregate effect of these factors, all of which are
beyond our control, is impossible for us to predict. The demand for and supply
of gold affect gold prices, but not necessarily in the same manner as supply and
demand affect the prices of other commodities. The supply of gold consists of a
combination of new mineral production and existing stocks of bullion and
fabricated gold held by governments, public and private financial institutions,
industrial organizations, and private individuals. As the amount produced in any
single year constitutes a small portion of the total potential supply of gold,
normal variations in current production do not have a significant impact on the
supply of gold or on its price. If gold prices decline substantially, it could
adversely affect the realizable value of our assets and potential future results
of operations and cash flow.





The use of hedging instruments may
not prevent losses being realized on subsequent price decreases or may prevent
gains being realized from subsequent price increases.




We may
from time to time sell some future production of gold pursuant to hedge
positions. If the gold price rises above the price at which future production
has been committed under these hedge instruments, we will have an opportunity
loss. However, if the gold price falls below that committed price, our revenues
will be protected to the extent of such committed production. In addition, we
may experience losses if a hedge counterparty defaults under a contract when the
contract price exceeds the gold price. As of the date of filing of this report,
we have no open hedge positions.




Since
our business consists of exploring for or acquiring gold prospects, a drop in
the price of gold will negatively affect our asset values, cash flows, potential
revenues and profits.




We plan
to pursue opportunities to acquire properties with gold mineralized material or
reserves with exploration potential. The price that we pay to acquire these
properties will be influenced, in large part, by the price of gold at the time
of the acquisition. Our potential future revenues are expected to be derived
from the production and sale of gold from these properties or from the sale of
some of these properties. The value of any gold reserves and other mineralized
material, and the value of any potential mineral production therefrom, will vary
in direct proportion to variations in those mineral prices. The price of gold
has fluctuated widely as a result of numerous factors beyond our control. The
effect of these factors on the price of gold, and therefore the economic
viability of any of our projects, cannot accurately be predicted. Any drop in
the price of gold would negatively affect our asset values, cash flows,
potential revenues, and profits.




We
compete with other mineral exploration and mining companies




We
compete with other mineral exploration and mining companies or individuals,
including large, established mining companies with substantial capabilities and
financial resources, to acquire rights to mineral properties containing gold and
other minerals. There is a limited supply of desirable mineral lands available
for claim staking, lease, or other acquisition. There can be no assurance that
we will be able to acquire mineral properties against competitors with
substantially greater financial resources than we have.


35




Our
activities are inherently hazardous and any exposure may exceed our insurance
limits or may not be insurable.




Mineral
exploration and operating activities are inherently hazardous. Operations in
which we have direct or indirect interests will be subject to all the hazards
and risks normally incidental to exploration and production of gold and other
metals, any of which could result in work stoppages, damage to property, and
possible environmental damage. The nature of these risks is such that
liabilities might exceed any liability insurance policy limits. It is also
possible that the liabilities and hazards might not be insurable, or we could
elect not to insure ourselves against such liabilities because of the high
premium costs, in which event, we could incur significant costs that could have
a material adverse effect on our financial condition.




We
do not have proven or probable reserves, and our mineral calculations are only
estimates; any material change may negatively affect the economic viability of
our properties.




Substantial
expenditures are required to acquire existing gold properties with established
reserves or to establish proven or probable reserves through drilling and
analysis. We do anticipate expending sums for additional drilling and analysis
to establish proven or probable reserves on our properties. While we estimate
the amount of mineralized material we believe exists on our properties, our
calculations are estimates only, subject to uncertainty due to factors,
including the quantity and grade of ore, metal prices, and recoverability of
minerals in the mineral recovery process. There is a great degree of uncertainty
attributable to the calculation of any mineralized material, particularly where
there has not been significant drilling, mining, and processing. Until the
mineralized material located on our properties is actually mined and processed,
the quantity and quality of the mineralized material must be considered as an
estimate only. In addition, the quantity of mineralized material may vary
depending on metal prices. Any material change in the quantity of mineralized
material may negatively affect the economic viability of our properties. In
addition, there can be no assurance that we will achieve the same recoveries of
metals contained in the mineralized material as in small-scale laboratory tests
or that we will be able to duplicate such results in larger scale tests under
on-site conditions or during production.




Our
operations are subject to strict environmental regulations, which result in
added costs of operations and operational delays.




Our
operations are subject to environmental regulations, which could result in
additional costs and operational delays. All phases of our operations are
subject to environmental regulation. Environmental legislation is evolving in
some countries and jurisdictions in a manner that may require stricter standards
and enforcement, increased fines and penalties for non-compliance, more
stringent environmental assessments of proposed projects, and a heightened
degree of responsibility for companies and their officers, directors, and
employees. There is no assurance that any future changes in environmental
regulation will not negatively affect our projects.




We
have no insurance for environmental problems.




Insurance
against environmental risks, including potential liability for pollution or
other hazards as a result of the disposal of waste products occurring from
exploration and production, has not been available generally in the mining
industry. We have no insurance coverage for most environmental risks. In the
event of a problem, the payment of environmental liabilities and costs would
reduce the funds available to us for future operations. If we are unable to fund
fully the cost of remedying an environmental problem, we might be required to
enter into an interim compliance measure pending completion of the required
remedy.




We
are subject to federal laws that require environmental assessments and the
posting of bonds, which may add significant costs to our operations and delays
in our projects.




The
Bureau of Land Management requires that mining operations on lands subject to
its regulation obtain an approved plan of operations subject to environmental
impact evaluation under the National Environmental Policy Act. Any significant
modifications to the plan of operations may require the completion of an
environmental assessment or Environmental Impact Statement prior to approval.
Mining companies must post a bond or other surety to guarantee the cost of
post-mining reclamation. These requirements could add significant additional
cost and delays to any mining project undertaken by us. Our mineral exploration
operations are required to be covered by reclamation bonds deemed adequate by
regulators to cover these risks. We believe we currently maintain adequate
reclamation bonds for our operations.


36





Changes
in state laws, which are already strict and costly, can negatively affect our
operations by becoming stricter and costlier.




At the
state level, mining operations in Nevada are regulated by the Nevada Division of
Environmental Protection, or NDEP. Nevada state law requires our Nevada projects
to hold Nevada Water Pollution Control Permits, which dictate operating controls
and closure and post-closure requirements directed at protecting surface and
ground water. In addition, we are required to hold Nevada Reclamation Permits
required under Nevada law. These permits mandate concurrent and post-mining
reclamation of mines and require the posting of reclamation bonds sufficient to
guarantee the cost of mine reclamation. Other Nevada regulations govern
operating and design standards for the construction and operation of any source
of air contamination and landfill operations. Any changes to these laws and
regulations could have a negative impact on our financial performance and
results of operations by, for example, requiring changes to operating
constraints, technical criteria, fees or surety requirements.





Title
claims against our properties could require us to compensate parties, if
successful, and divert management’s time from operations.




There may
be challenges to our title in the properties in which we hold material
interests. If there are title defects with respect to any of our properties, we
might be required to compensate other persons or perhaps reduce our interest in
the effected property. The validity of unpatented mineral claims, which
constitute most of our holdings in the United States, is often uncertain and may
be contested by the federal government and other parties. The validity of an
unpatented mineral claim, in terms of both its location and its maintenance,
depends on strict compliance with a complex body of federal and state statutory
and decisional law. Although we have attempted to acquire satisfactory title to
our properties, we have not obtained title opinions or title insurance with
respect to the acquisition of the unpatented mineral claims. While we have no
pending claims or litigation pending contesting title to any of our properties,
there is nothing to prevent parties from challenging our title to any of our
properties. While we believe we have satisfactory title to our properties, some
risk exists that some titles may be defective or subject to challenge. Also, in
any such case, the investigation and resolution of title issues would divert
management’s time from ongoing exploration programs.




We
have never paid a cash dividend on our common stock and do not expect to pay
cash dividends in the foreseeable future.




We have
never paid cash dividends, and we do not plan to pay cash dividends in the
foreseeable future. Consequently, your only opportunity to achieve a return on
your investment in us will be if the market price of our common stock
appreciates and you sell your shares at a profit. There is no assurance that the
price of our common stock that will prevail in the market after this offering
will ever exceed the price that you pay.





We
depend on key personnel, and our business may be severely disrupted if we lose
the services of our key executives and employees.





Our
business is dependent upon the knowledge and experience of our key engineers and
executive officers. Given the competitive nature of our industry, there is the
risk that one or more of our key engineers will resign their positions, which
could have a disruptive impact on our operations. If any of our key engineers or
executive officers do not continue in their present positions, we may not be
able to easily replace them and our business may be severely disrupted. If any
of these individuals joins a competitor or forms a competing company, we could
lose important know-how and experience and incur substantial expense to recruit
and train suitable replacements. Currently, only one of our key employees has an
employment contract which has a remaining term of at least 12 months and
non-compete provisions.  This lack of employment contracts and
binding  noncompete provisions significantly enhances the risk of
possibly losing these key personnel to our competitors.


37


If we fail to adequately manage our
growth, we may not be successful in growing our business and becoming
profitable.




We plan
to expand our business and the number of employees over the next 12 months. In
particular, we intend to hire additional operational personnel. Our inability to
hire and retain additional qualified employees could have a negative impact on
our chances of success.




The issuance of securities by us may
not have complied with or violated federal and state securities laws and, as a
result, the holders of these shares and warrants may have rescission
rights.




Securities
issued by us may not have complied with applicable federal and state securities
laws, the result of which is that the holders of these securities may have
rescission rights that could require us to reacquire the
securities.




Outstanding
convertible securities and warrants may result in substantial
dilution.




At
September 30, 2009 we had outstanding 3, 617,841,740 shares of common stock. In
addition, we had outstanding convertible notes and related interest plus various
common stock purchase warrants. At September 30, 2009, these notes, related
interest and warrants were convertible into or exercisable for a total of
approximately 2.2 billion additional shares of our common stock, subject to
further anti-dilution provisions.




Our
stock is a penny stock and trading of our stock may be restricted by the SEC’s
penny stock regulations, which may limit a stockholder’s ability to buy and sell
our stock.




Our stock
is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9,
which generally defines “penny stock” to be any equity security that has a
market price (as defined) less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. Our securities are covered
by the penny stock rules, which impose additional sales practice requirements on
broker-dealers that sell to persons other than established customers and
“accredited investors.” The term “accredited investor” refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC, which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer’s
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer’s confirmation. In addition, the penny stock rules
require that, prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock. NASD sales practice
requirements may also limit a stockbroker’s ability to buy or sell our
stock.


38


In
addition to the “penny stock” rules promulgated by the Securities and Exchange
Commission, the NASD has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to
recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer’s financial status, tax status, investment objectives, and
other information. Under interpretation of these rules, the NASD believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The NASD requirements make it more
difficult for broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy or sell our stock and have an adverse
effect on the market for our shares.





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





The
following private placement transactions raised a total of $950,000 in exchange
for 95,000,000 shares of our unregistered Common stock, were place with
accredited investors.  In general, the proceeds were used to fund
exploratory drilling and for general working capital.





·
            In the first quarter 2009,
      $950,000 for 95,000,000 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




Employees and
directors





During
the nine month period ended September 30, 2009, the following shares were issued
to employees and Company directors:





·
            Pursuant to his employment
      agreement, Larry Martin, the Company’s Chief Geologist, was issued a total
      of 2,500,000 of our unregistered common shares, valued at $32,500 or
      $0.0129 per share during
2009.





·
            Pursuant to his agreement with
      the Company, Dennis Anderson, the Company’s Senior Engineer, was issued a
      total of 2,500,000 of our unregistered common shares, valued at $30,000 or
      $0.012 per share during
2009.





As of
September 30, 2009, Mr. Faber, President and CFO, has unpaid wages and expenses
of $146,822.





Item 3. Defaults Upon Senior
Securities





As of
September 30, 2009, the Company is in default of the terms on several
outstanding notes payable with the Winfield Group with principal balance due of
$11,869,986 and accrued interest of $3,757,362 (See Note 8). Because we are in
default, the entire note balances of the defaulted notes have been recorded as
current liabilities.




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





Not
applicable.





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  September 30 ,2009
    (Unaudited)Consolidated
      Statement of Operations for the three-month periods ended September 30,
      2009 and 2008 (Unaudited)Consolidated
      Statement of Cash Flows for the three-month periods ended September 30,
      2009 and 2008 (Unaudited)Notes
      to Financial Statements




39





(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




(b) 
Reports filed on Form 8-K during the quarter ended September 30,
2009:





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:
      November 14, 2009
                      By:
                      /s/
      Robert A. ReseighName:
      Robert A. ReseighTitle:  
      Principal Executive OfficerBy:
                      /s/
      Robert T. FaberName:
      Robert T. FaberTitle:  
      Principal Financial Officer and Principal Accounting
    Officer




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