SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549










FORM
      10-QSB







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




For
      the
      quarterly period ended June 30, 2006




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
              (State
                or other jurisdiction of
              incorporation
                or organization)
            7389
              (Primary
                Standard Industrial
              Classification
                Code Number)
            65-0955118
              (I.R.S.
                Employer
              Identification
                No.)




P.O.
      Box
      1118


Virginia
      City, NV 89440


(775)
      847-5272


(Address,
      including zip code, and telephone number,


including
      area code, of registrant's principal executive offices)





Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
      period that the issuer was required to file such reports), and (2)has been
      subject to such filing requirements for the past 90 days.


Yes x No o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of the issuer's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-QSB or any
      amendment to this Form 10-QSB x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12-b2 of the Exchange Act). o Yes x No





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the last practicable date: 800,000,000 shares of Common Stock, $0.000666
      Par Value per share, as of August11, 2006.









TABLE
      OF
      CONTENTS




PART
                I - FINANCIAL INFORMATIONITEM
                1.
            UNAUDITED
                FINANCIAL STATEMENTS
            F-1Consolidated
                Balance Sheet as of June 30, 2006 (Unaudited)
            F-1Consolidated
                Statement of Operations (Unaudited)
            F-3Consolidated
                Statement of Cash Flows (Unaudited)
            F-5Notes
                to Financial Statements
            F-6ITEM
                2.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
            1ITEM
                3.
            CONTROLS
                AND PROCEDURES
            7PART
                II - OTHER INFORMATIONITEM
                1.
            LEGAL
                PROCEEDINGS
            8ITEM
                2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            14ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES
            14ITEM
                4
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            14ITEM
                5.
            OTHER
                INFORMATION
            14ITEM
                6
            EXHIBITS
                AND REPORTS ON FORM 8-K
            15SIGNATURES
            16




**S** **tatement
      Regarding Forward-Looking Statements**





*The
      statements contained in this report on Form 10-QSB 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 1, “Business - Risk Factors” in our Form 10-KSB for the year ended
      December 31, 2005.*










**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1 - FINANCIAL STATEMENTS**





**GOLDSPRING,
      INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEET**





**June
                30, 2006**
              (Unaudited)**ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            110,089Accounts
                receivable, net
            
            
            65,564Prepaid
                expenses and other current assets
            
            
            404,690Inventories
            
            
            -Deferred
                financing fees, net
            
            
            328,515TOTAL
                CURRENT ASSETS
            
            
            908,858PLANT,
                EQUIPMENT, MINE DEVELOPMENT, AND MINERAL PROPERTIES, NET:Mineral
                properties
            
            
            1,669,837Plant,
                Equipment, Mine Development
            
            
            1,542,243TOTAL
                PROPERTY AND EQUIPMENT
            
            
            3,212,080OTHER
                ASSETS:Reclamation
                deposit
            
            
            377,169Other
            
            
            -TOTAL
                OTHER ASSETS
            
            
            377,169TOTAL
                ASSETS
            
            $
            3,836,619





The
      accompanying notes are an integral part of these financial
      statements




F-1




**LIABILITIES
      AND SHAREHOLDERS' DEFICIENCY**





CURRENT
                LIABILITIESAccounts
                Payable
            
            $
            405,567Accrued
                Expenses
            
            
            1,345,597Accrued
                liquidated damages
            
            
            1,913,418Accrued
                interest
            
            
            940,625Short-Term
                Lease Obligations
            
            
            29,401Current
                portion of long-term debt
            
            
            12,490,052TOTAL
                CURRENT LIABILITIES
            
            
            17,124,160LONG-TERM
                DEBT AND OTHER LONG-TERM LIABILITIESLong-term
                debt, net of current portion
            
            
            111,935Long-term
                Lease obligation, net of current portion
            
            
            61,688Long-term
                Asset retirement obligations
            
            
            553,190TOTAL
                LONG-TERM DEBT AND OTHER LONG-TERM LIABILITIES
            
            
            726,813TOTAL
                LIABILITIES
            
            $
            17,850,973SHAREHOLDERS'
                DEFICITCommon
                stock, $.000666 par value, 800,000,000 shares authorized , 800,000,000
                shares issued and outstanding
            
            $
            532,800Treasury
                Stock
            
            
            -Additional
                paid-in capital
            
            
            11,106,017Accumulated
                deficit - Prior years
            
            
            (23,524,302
            )Accumulated
                deficit - Current year
            
            
            (2,128,869
            )TOTAL
                SHAREHOLDERS’ DEFICIENCY
            
            
            (14,014,354
            )TOTAL
                LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
            
            $
            3,836,619





The
      accompanying notes are an integral part of these financial
      statements




F-2




**GOLDSPRING,
      INC.**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**


**For
      the three month periods ended June 30,**




**2006**
            
            
            **2005**(Unaudited)
            
            
            (Unaudited)REVENUE
                FROM GOLD SALES
            
            $
            125,454
            
            $
            691,861COSTS
                AND EXPENSESCosts
                Applicable to sales (exclusive of depreciation, depletion and amortization
                shown separately below)
            
            
            -
            
            
            -Depletion,
                depreciation and amortization
            
            
            140,010
            
            
            80,899Reclamation,
                Exploration and Test Mining Expenses
            
            
            343,392
            
            
            1,541,290General
                and administrative
            
            
            142,064
            
            
            234,281Other
            
            
            113,372
            
            
            174,196TOTAL
                COSTS AND EXPENSES
            
            
            739,378
            
            
            2,030,666OTHER
                INCOME (EXPENSE)Other
                (See Note 6)
            
            
            
            
            
            (985,835
            )Interest
                expense
            
            
            (497,812
            )
            
            (468,623
            )Interest
                income
            
            
            -
            
            
            -NET
                LOSS
            
            $
            (1,111,736
            )
            $
            (2,793,623
            )Net
                loss per common share - basic
            
            $
            (0.0017
            )
            $
            (0.011
            )Basic
                weighted average common shares outstanding
            
            
            712,649,897
            
            
            243,982,021





The
      accompanying notes are an integral part of these financial
      statements





F-3




**GOLDSPRING,
      INC.**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**


**For
      the six month periods ended June 30,**


**2006**
            
            
            **2005**(Unaudited)
            
            
            (Unaudited)REVENUE
                FROM GOLD SALES
            
            $
            663,260
            
            $
            1,203,951COSTS
                AND EXPENSESCosts
                Applicable to sales (exclusive of depreciation, depletion and amortization
                shown separately below)
            
            
            -
            
            
            -Depletion,
                depreciation and amortization
            
            
            290,034
            
            
            156,686Reclamation,
                Exploration and Test Mining Expenses
            
            
            769,708
            
            
            2,811,380General
                and administrative
            
            
            322,137
            
            
            518,535Consulting
                and professional services
            
            
            268,189
            
            
            678,464TOTAL
                COSTS AND EXPENSES
            
            
            1,650,068
            
            
            4,165,065OTHER
                INCOME (EXPENSE)Disposal
                of Assets
            
            
            105,397
            
            
            -Liquidated
                Damages (See Note 6)
            
            
            -
            
            
            (2,860,468
            )Interest
                expense
            
            
            (1,247,458
            )
            
            (723,366
            )Interest
                income
            
            
            -
            
            
            13,526(1,142,061
            )
            
            (3,570,308
            )NET
                LOSS
            
            
            (2,128,869
            )
            
            (6,531,422
            )Net
                loss per common share - basic
            
            $
            (0.0038
            )
            $
            (0.0313
            )Basic
                weighted average common shares outstanding
            
            
            563,928,820
            
            
            208,705,670




The
      accompanying notes are an integral part of these financial
      statements




F-4








**GOLDSPRING,
      INC.**


**CONDENSED STATEMENTS
      OF CASH FLOWS**


For
                the six month period ended June 30,**2006**
              (Unaudited)
            
            
            **2005**
              (Restated)Cash
                flows from operating activities:Net
                loss
            
            $
            (2,128,869
            )
            $
            (6,531,422
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation,
                depletion, and amortization
            
            
            290,036
            
            
            156,686Liquidated
                damages from November 2004 restructuring converted into common
                stock
            
            
            -
            
            
            2,860,468Interest
                expense related to the November 2004 restructuring paid with common
                stock
            
            
            1,574,582(Increase)
                Decrease in operating assets:Finished
                goods inventory
            
            
            52,000
            
            
            60,401Inventory
            
            
            (10,824
            )
            
            (32,964
            )Prepaid
                and other current assets
            
            
            (366,366
            )
            
            5,295Accounts
                receivable
            
            
            4,436
            
            
            -Increase
                (decrease) in operating liabilities:Accounts
                payable
            
            
            (862,007
            )
            
            1,071,571Accrued
                expenses
            
            
            984,711
            
            
            74,171A
                Accrued liquidated damages
            
            
            -
            
            
            681,189Accrued
                interest
            
            
            (381,294
            )
            
            363,600Other
            
            
            60,788
            
            
            (355,847
            )Total
                Adjustments to Reconcile Net Loss Used in Operating
                Activities
            
            
            1,346,062
            
            
            4,884,570Net
                cash used in operating activities
            
            
            (782,807
            )
            
            (1,646,852
            )Investing
                activities:Equipment
                deposit
            
            
            -
            
            
            (10,000
            )Acquisition
                of plant, equipment and mineral properties
            
            
            (19,739
            )
            
            (71,754
            )Net
                cash used in investing activities
            
            
            (19,739
            )
            
            (81,754
            )Financing
                activities:Proceeds
                from financing, net
            
            
            950,000
            
            
            -Principal
                payment Note Payable
            
            
            (64,230
            )
            
            (176,901
            )Net
                Cash flows provided by financing activities
            
            
            885,770
            
            
            (176,901
            )Net
                Increase (Decrease) in cash
            
            
            83,224
            
            
            (1,905,507
            )Cash
                - beginning of period
            
            
            26,865
            
            
            1,951,802Cash
                - end of period
            
            $
            110,089
            
            $
            46,295Supplemental
                disclosures of non-cash investing and financing activities:Issuance
                of notes for liquidated damages for failure to deliver
                shares
            
            $
            -
            
            
            403,175Issuance
                of notes for mandatory redemption payment (See Note 6)
            
            $
            -
            
            $
            6,885,184Purchase
                and cancellation of Company’s Common Stock in connection with the
                mandatory redemption payment (See Note 6)
            
            
            -
            
            
            6,801,975Issuance
                of Common Stock for Acquisition of Mining Claims
            
            
            -
            
            
            170,000Issuance
                of Note for Acquisition of Mining Claims
            
            
            -
            
            
            160,000Conversion
                of debt into common shares
            
            
            4,449,490
            
            
            1,118,994Issuance
                of common stock for interest expense
            
            
            1,574,582
            
            
            787,675Issuance
                of common stock for liquidated damages
            
            
            -
            
            
            2,829,210


The
      accompanying notes are an integral part of these financial
      statements




F-5




GOLDSPRING,
      INC.


NOTES
      TO
      FINANCIAL STATEMENTS


June
      30,
      2006 and 2005





**NOTE
      1 - DESCRIPTION OF BUSINESS, GOING CONCERN, MANAGEMENT PLANS AND BASIS OF
      PRESENTATION**





**Description
      of Business**





We
      are a
      North American precious metals mining company with an operating gold and silver
      test mine in northern Nevada. The primary nature of our business is the
      exploration and development of mineral producing properties. Our Company was
      formed in mid-2003, and 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. During 2005,
      we acquired additional properties around the Plum project in Northern Nevada,
      expanding our footprint and creating opportunities for exploration. We are
      an
      emerging company, looking to build on our success through the acquisition of
      other mineral properties in North America with reserves and exploration
      potential that can be efficiently put into near-term production. Our objectives
      are to increase production; increase reserves through exploration and
      acquisitions; expand our footprint at the Plum mine; and maximize cash flow
      and
      the return for our shareholders. We were incorporated in the State of Florida
      effective October 19, 1999 under the name of Click and Call, Inc.. On June
      7,
      2000, we filed an amendment to our Articles of Incorporation changing our name
      to STARTCALL.COM, INC. On March 10, 2003, we changed our name to GoldSpring,
      Inc.





**Going
      Concern**





The
      financial statements are presented on the basis that our company is a going
      concern, which contemplates the realization of assets and the satisfaction
      of
      liabilities in the normal course of business over a reasonable length of time.
      We have incurred operating losses since its inception. This condition raises
      substantial doubt as to our ability to continue as a going concern.





**Management
      Plans**





Our
      plans
      for the continuation of our company as a going concern include developing our
      Plum Mine into a profitable operation and potentially supplementing financing
      of
      our operations through sales of our unregistered common stock and borrowings
      from affiliates, third parties and other shareholders. There are no assurances,
      however, with respect to the future success of these plans. The financial
      statements do not contain any adjustments, which might be necessary, if we
      are
      unable to continue as a going concern.





**Basis
      of Presentation**





The
      accompanying 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-QSB and Article 10 of
      Regulation S-B. 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 six-month period ended June 30, 2006 are
      not
      necessarily indicative of the results that may be expected for the year ending
      December 31, 2006. For further information, refer to the financial statements
      and footnotes thereto included in our Form 10-KSB Report for the fiscal year
      ended December 31, 2005.




F-6




**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




**Forward-Looking
      Statements**





The
      following discussion contains, in addition to historical information,
      forward-looking statements regarding GoldSpring, Inc. (“we,” the "Company," or
      "GSPG"), that involve risks and uncertainties. Our actual results could differ
      materially. For this purpose, any statements contained in this Report that
      are
      not statements of historical fact may be deemed to be forward-looking
      statements. Without limiting the generality of the foregoing, words such as
      "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate,"
      or "continue" or the negative or other variations thereof or comparable
      terminology are intended to identify forward-looking statements. Factors that
      could cause or contribute to such differences include possible need for
      additional financing; dependence on management; government regulation; and
      other
      factors discussed in this report and the Company's other filings with the
      Securities and Exchange Commission.





Summarized
      below are the significant accounting policies of GoldSpring, Inc. (“we,”
“GoldSpring,” or the “Company”). Unless otherwise indicated, amounts provided in
      these notes to the financial statements pertain to continuing
      operations.




*Principles
      of Consolidation*




The
      consolidated financial statements include the accounts of our company and its
      wholly owned subsidiaries. All material inter-company transactions and balances
      have been eliminated in consolidation.




*Cash
      and Cash Equivalents*




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




*Fair
      Value of Financial Instruments*




The
      carrying amounts of cash and cash equivalents, accounts receivable, accounts
      payable, and accrued expenses approximate fair market value because of the
      short
      maturity of those instruments. Furthermore, convertible debenture and other
      notes payable amounts approximate fair value at June 30, 2006 and 2005. Pursuant
      to EITF No. 0027 “Application of Issue No. 98-5 to Certain Convertible
      Instruments” we were required allocate value to the warrant issued with the
      debenture, and to record a discount on the debenture for its conversion feature.
      We are in default on these convertible debentures and thus have recorded these
      notes at face value.




*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*




In
      August
      2001, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 144 “Accounting for the Impairment
      or Disposal of Long-Lived Assets,” which supersedes both SFAS No. 121,
“Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
      to
      Be Disposed Of” and the accounting and reporting provisions of Accounting
      Practice Bulletin (“APB”) Opinion No. 30, “Reporting the Results of Operations —
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
      Unusual and Infrequently Occurring Events and Transactions,” for the disposal of
      a segment of a business (as previously defined in that opinion).This statement
      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. Therefore, discontinued operations will
      no longer be measured at net realizable value or include amounts for operating
      losses that have not yet occurred.




F-7


SFAS
      No.
      144 retains the fundamental provisions of SFAS No. 121 for recognizing and
      measuring impairment losses on long-lived assets held for use and long-lived
      assets to be disposed of by sale, while also resolving significant
      implementation issues associated with SFAS No. 121. We adopted SFAS No. 144
      in
      our evaluation of the fair value of certain assets described in these financial
      statement footnotes.




*Inventories*




We
      state
      inventories at the lower of average cost or net realizable value. At June 30,
      2006 and 2005, our inventories consisted of $0 and $228,286, respectively,
      of
      doré and bullion in our accounts at refineries. At June 30, 2005 we had $32,965
      of supplies and reagents compared to $10,825 at June 30, 2006. We were unable
      to
      estimate our in-process inventories at June 30, 2006, as our gold production
      processes are still in their inception stage, and we do not yet have sufficient
      data available to accurately calculate in-process inventory. We value
      inventories at the lower of full cost of production or net realizable value
      based on current metals prices. We determine net realizable value by estimating
      value based on current metals prices, less cost to convert stockpiled and
      in-process inventories to finished products.





*Revenue
      Recognition*




Sales
      of
      gold and silver ore are recorded when title and risk of loss transfer to the
      refiner at current spot metals prices. Sales are calculated based upon assay
      of
      the ore’s precious metal content and its weight. Recorded values are adjusted
      upon final settlement from the refiner that usually occurs within 24 days of
      delivery. If we have reason to believe that the final settlement will materially
      affect our recognition of revenue because of a difference between the refiner’s
      assay of precious metals contained in the dore and ours, we establish a reserve
      against the sale.




*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. We have not issued stock for services
      in
      the first two quarters of 2006 and do not intend to do so during the remainder
      of 2006.




*Deferred
      Financing Charges*




During
      the first quarter of 2006 we recorded deferred financing charges associated
      with
      the issue of promissory notes payable totaling $0. We amortize the charges
      over
      the respective lives of the promissory notes payable as interest expense. During
      the quarter ended June 30, 2006 we recognized $66,712 of interest expense
      related to the amortization of deferred financing fees.




*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.




F-8




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 7 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
      Properties*




We
      defer
      acquisition costs until we determine the viability of the property. Since we
      do
      not have proven and probable reserves as defined by 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 property on a quarterly basis to
      determine whether an impairment has incurred in accordance with the Financial
      Accounting Standards Board (FASB) 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.




We
      carry
      our property acquisition and capitalized plant and equipment costs at cost
      less
      accumulated amortization and write-downs.




*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 be related to asset retirements we recognize the obligations in
      accordance with Statement of Position No. 96-1.




In
      August
      2001, the Financial Accounting Standards Board issued SFAS No. 143, “Accounting
      for Asset Retirement Obligations.”




SFAS
      143
      established a uniform methodology for accounting for estimating reclamation
      and
      abandonment costs. The Standard requires that the fair value of a liability
      for
      an asset retirement obligation be recognized in the period in which it is
      incurred. SFAS No. 143 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. In our
      case, the long-lived asset is directly related to the mining infrastructure
      costs being expensed by our Company. Since we do not yet have proven or probable
      reserves as defined by Industry Guide 7, and in accordance with FASB No. 143
      our
      asset retirement obligation was expensed directly to reclamation expense.




F-9




*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 periods
      ended June 30, 2006 and 2005, we had net losses for which the affect of common
      stock equivalents would be anti-dilutive, accordingly only basic loss per share
      is presented.




*Recent
      Authoritative Pronouncements*




On
      December 16, 2004, the Financial Accounting Standards Board (the "FASB") issued
      Statement of Financial Accounting Standards, or Statement, No. 123 (revised
      2004), Share-Based Payment ("Statement 123(R)"), which is a revision of FASB
      Statement No. 123, Accounting for Stock-Based Compensation ("Statement 123").
      Statement 123(R) supersedes Accounting Principles Board Opinion No. 25 ("APB
      25"), Accounting for Stock Issued to Employees, and amends FASB Statement No.
      95, Statement of Cash Flows. Generally, the approach in Statement 123(R) is
      similar to the approach described in Statement 123. Statement 123(R) requires
      that all share-based payments to employees, including grants of employee stock
      options, be recognized in the income statement based on their fair values.
      Pro
      forma disclosure is no longer permitted. Statement 123(R) is effective for
      small
      business issuers at the beginning of the first interim or annual period
      beginning after December 15, 2005. As permitted by Statement 123, we currently
      account for share-based payments to employees using APB 25's intrinsic value
      method. We adopted Statement 123(R) on January 1, 2006 using the modified
      prospective method.




In
      November 2004, the FASB issued Statement of Financial Accounting Standards
      (SFAS) 151, "Inventory Costs - an amendment of ARB No. 43, Chapter 4." SFAS
      151
      seeks to clarify the accounting for abnormal amounts of idle facility expense,
      freight, handling costs and wasted material (spoilage) in the determination
      of
      inventory carrying costs. The statement requires such costs to be treated as
      a
      current period expense. This statement is effective November 1, 2005 for the
      Company. The Company does not believe that the adoption of SFAS 151 will have
      a
      significant impact on its consolidated financial statements.




In
      May
      2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections -
      a
      Replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS 154 requires
      retrospective application to prior period financial statements of changes in
      accounting principle, unless it is impracticable to determine either the
      period-specific effects or the cumulative effect of the change. SFAS 154 also
      redefines "restatement" as the revising of previously issued financial
      statements to reflect the correction of an error. This statement is effective
      for accounting changes and corrections of errors made in fiscal years beginning
      after December 15, 2005 (or fiscal 2007 for the Company). The Company does
      not
      believe that the adoption of SFAS 154 will have a significant impact on its
      consolidated financial statements.





*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.




F-10




*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.




**NOTE
      3 - NOTES PAYABLE STOCKHOLDERS**




As
      of
      June 30, 2006, the Company is in default of the terms on outstanding notes
      payable with several of its note holders with principal balances due of
      $9,041,625 and accrued interest of $558,215.





**NOTE
      4 - COMMON STOCK**





During
      the three months ended March 31, 2006, the Company issued 212,150,563 shares
      of
      common stock valued at $3,276,100 in connection with the partial conversion
      of
      principal and interest of certain convertible debentures (see Note
      7).





During
      the three months ended June 30, 2006, the Company issued 247,802,225 shares
      of
      common stock valued at $2,747,972 in connection with the partial conversion of
      principal and interest of certain convertible debentures (see Note
      7).





**NOTE
      5 - WARRANTS**





Transactions
      involving warrants are summarized as follows:





**Number
                of Warrants**
            
            
            **Weighted
                Average Exercise Price**Balance
                - January 1, 2006
            
            
            58,190,101
            
            $
            0.155Warrants
                issued during the period
            
            
            -
            
            
            -Warrants
                expired during the period
            
            
            -
            
            
            -Warrants
                exercised during the period
            
            
            -
            
            
            -Balance
              - June 30, 2006 (all exercisable)
            
            
            58,190,101
            
            $
            0.155





**NOTE
      6 - OTHER ITEMS**





**LIQUIDATED
      DAMAGES**





For
      the
      first two quarters of 2005 (ended June 30, 2005), we recorded liquidated damages
      expenses due to investors
      of our March 2004 offering and subsequent November 30, 2004 restructuring as
      follows:




F-11




Liquidated
                damages relating to:November
                30, 2004 Non-Registration Provisions
            
            $
            2,761,939Failure
                to timely deliver shares upon notice of converting note
                holders
            
            
            98,529$
            2,860,468




These
      liquidated damages ceased in October 2005 when our Registration Statement was
      declared effective.




*Non-Registration
      Provisions*




Our
      November 2004 subscription agreement required us to file a registration
      statement with the Securities and Exchange Commission no later than December
      30,
      2004 and to cause the registration statement to be declared effective no later
      than February 14, 2005. Our former Chief Executive Officer withdrew our pending
      registration statement and did not submit a new registration statement during
      the period of his purported control of our company. His failure to submit the
      registration statement to the SEC by December 30, 2004 triggered liquidated
      damages to accrue under the November 2004 subscription agreement. Accordingly,
      at December 31, 2004, we had accrued $222,013 of liquidated damages relating
      to
      Non-Registration Provisions. The liquidated damages continued to accrue in
      the
      amount of $222,013 for each 30-day period after December 30, 2004 until our
      registration statement was declared effective in October 2005.




*Failure
      to Timely Deliver Conversion Shares*




On
      December 20, 2004, we received notice from holders of approximately $500,000
      of
      convertible notes payable of their intention to convert into shares of our
      common stock. As a result, we recorded the issuance of 4,243,791 shares on
      December 20, 2004. We were required to deliver certificates representing
      unrestricted, free-trading stock within three business days of our receipt
      of
      the notices of conversion (the “Delivery Date”). The failure to deliver the
      shares by the Delivery Date resulted in liquidated damages of 1% of the Note
      principal amount being converted per business day after the Delivery Date.
      Our
      former Chief Executive Officer did not deliver the stock certificates within
      the
      required period. On March 18, 2005 we delivered the certificates representing
      the shares of common stock to these converting note holders. The 84 -day delay
      in delivering the shares resulted in liquidated damages of $403,175. We
      recognized these damages during the fourth quarter of 2004 and the first quarter
      of 2005. We issued convertible notes for the amount of liquidated damages due.




**MANDATORY
      REDEMPTION PAYMENT**




Under
      the
      terms of the November 2004 subscription agreement, convertible note holders
      have
      the right to a mandatory redemption payment in the event we are prohibited
      or
      otherwise fail to deliver shares of our common stock to converting note holders.
      The mandatory redemption payment is calculated as an amount equal to multiplying
      the number of shares of common stock otherwise deliverable upon conversion
      of
      the note’s principal and interest multiplied by the highest price of our common
      stock for the period beginning with the Deemed Conversion Date (the date the
      holder elects to convert the note) and ending with the payment date. On March
      7,
      2005, we received a mandatory redemption payment demand relating to our failure
      to deliver stock certificates representing 29,573,803 shares of our common
      stock. Under the mandatory redemption payment provisions of the November 2004
      subscription agreement, we repurchased the 29,573,803 shares of common stock
      at
      $0.23 per share, or $6,801,975. We issued a secured convertible note in the
      aggregate amount of $6,885,184 with a 12% interest rate for the 29,573,803
      shares and accrued interest.




F-12




**LITIGATION**




***The
      State Court Case***




On
      November 9, 2004, we filed a lawsuit in Maricopa County (Arizona) Superior
      Court
      against defendants Stephen B. Parent, Ron Haswell, Walter Doyle, Seth Shaw,
      Antonio Treminio, together with their spouses, and Ecovery, Inc., a Nevada
      corporation, or Ecovery.




The
      12-count complaint alleges claims for violations of Arizona’s racketeering act,
      state-law securities fraud (primary and secondary liability), common-law fraud,
      negligent misrepresentation, breach of fiduciary duty, negligence/gross
      negligence, breach of contract, unjust enrichment/restitution, theft/conversion,
      conspiracy liability, and injunctive relief. In essence, the complaint alleges
      that Stephen Parent misrepresented the value of certain placer mining claims
      that his company, Ecovery, sold to us in 2003 in exchange for approximately
      99,000,000 shares of our stock; that Ecovery no longer had good title to the
      mining claims when they were sold to us; that Mr. Parent and the other
      named defendants conspired to defraud us out of approximately 24,000,000 shares
      of our stock; and that Mr. Parent misappropriated more than $300,000 in company
      funds.




On
      November 29, 2004, we moved for a temporary restraining order, or TRO,
      prohibiting Mr. Parent and his spouse from selling, transferring, assigning,
      or
      otherwise disposing of up to approximately 46,000,000 shares of our stock
      in their possession. After a hearing, at which the Parents appeared through
      counsel, the Honorable Anna M. Baca granted the motion, conditioned on the
      posting of an $8 million bond. We did not post the bond, and the TRO was
      subsequently dissolved.




On
      or
      about December 9, 2004, Mr. Parent and fellow GoldSpring directors Jerrie W.
      Gasch and Purnendu K. Rana Medhi purportedly seized control of our company.
      Afterward, the Parent-led GoldSpring purported to fire Greenberg Traurig, LLP,
      or GT, as counsel for our company in this litigation and to hire Ronan &
Firestone, PLC, or Ronan, as substitute counsel. Thereafter, on December 22,
      2004, Ronan filed a stipulation to dismiss the lawsuit, purportedly on behalf
      of
      our company. Also on December 22, 2004, the Parents filed their answer, in
      which
      they generally denied the allegations of the complaint.




On
      December 29, 2004, GT filed a motion on behalf of our company to strike the
      stipulation to dismiss that Ronan had filed. Judge Baca heard oral argument
      on
      the motion on February 2, 2005 and took the matter under advisement. Further
      oral argument was heard on March 22, 2005. In light of the preliminary
      injunction that was issued in a related shareholder action in federal district
      court (discussed below), and the resolutions passed by our Board of Directors
      on
      February 22, 2005, Judge Baca granted the motion in an Order dated March 22,
      2005 and struck Ronan’s purported stipulation to dismiss.




In
      the
      same ruling, Judge Baca said that “there are serious conflicts in the continued
      representation of the Parents in this lawsuit by Gust Rosenfeld.” The Court was
      referring to the fact that Parent had hired Gust Rosenfeld as our counsel after
      purportedly taking over our company on December 9, 2004. The Court therefore
      ordered further briefing on whether Gust Rosenfeld should be disqualified as
      the
      Parents’ counsel. Shortly thereafter, on March 28, 2005, Gust Rosenfeld
      voluntarily withdrew as the Parents’ counsel. The Parents have since retained
      new counsel. The discovery process is currently ongoing.




Mr.
      Treminio has since been dismissed from the suit in accordance with the terms
      of
      a prior settlement agreement between Mr. Treminio and GoldSpring, Inc..
      Mr. Shaw filed an answer, *in
      pro per* ,
      on
      April 6, 2005, and generally denied the allegations of the complaint. Mr.
      Haswell, Mr. Doyle and Ecovery, Inc. have filed answers and generally denied
      the
      allegations of the complaint.





At
      the
      end of June 2006, the Company settled its claims against Mr. Shaw for a $75,000
      settlement and was in negotiations with another defendant for
      settlement.




F-13




***The
      Federal Court Case***




*Background*




Stephen
      B. Parent and several others purporting to represent a majority of the
      shareholders of our company adopted Consent Resolutions in Lieu of a Special
      Meeting of Shareholder’s dated December 9, 2004, and Mr. Parent, Jerrie W.
      Gasch, and Purnendu K. Rana Medhi, each of whom served as a director of our
      company until Mr. Medhi’s resignation in April 2005, adopted Directors’ Consent
      Resolutions (together the “December Consent Resolutions”) dated December 10,
      2004. Taken together, the December Consent Resolutions, by their purported
      terms, removed John F. Cook, Robert T. Faber, Leslie L. Cahan, Todd S. Brown,
      Christopher L. Aguilar, Stanley A. Hirschman, and Phil E. Pearce as directors,
      rescinded the restructuring of a $10 million financing transaction entered
      into
      in March 2004, removed Mr. Faber as President of our company, named Mr. Parent
      as President of our company and his wife as Secretary of our company, designated
      Mr. Parent as the sole signing officer of our company’s bank accounts, and
      terminated our company’s legal counsel.




On
      December 22, 2004, Robert T. Faber and Leslie L. Cahan (collectively, the
“plaintiffs”), who are shareholders and directors of our company, filed a
      lawsuit in the United States District Court for the District of Arizona,
      entitled Robert T. Faber, et al. v. Stephen B. Parent, et al., No.
      CV04-2960-PHX-EHC (“the Litigation”). The plaintiffs asserted claims in both
      their individual capacities and derivatively, on behalf of our company, against
      directors Stephen B. Parent, Jerrie W. Gasch, and Purnendu K. Rana Medhi
      (collectively, the “defendants”), alleging that, by adopting the Consent
      Resolutions, the defendants had unlawfully orchestrated an illegal coup to
      wrest
      control of our company from its current officers and directors. As discussed
      below, Messrs. Gasch and Medhi no longer support the Parent-led
      board.




*The
      Temporary Restraining Order*




Following
      a hearing on December 22, 2004, at which the Court heard evidence and argument
      of counsel, the Honorable Earl H. Carroll issued a December 23, 2004 Order
      Granting Plaintiffs’ Motion for Temporary Restraining Order, or TRO. The TRO
      precluded defendants and their agents from (1) making any withdrawals from
      any
      bank accounts of our company, other than reasonable withdrawals necessary to
      the
      daily operations of the business; (2) rescinding or interfering in any way
      with
      any transactions approved by our company’s Board of Directors prior to December
      9, 2004; (3) entering into any contracts or agreements with third parties on
      behalf of our company or disposing of or transferring any property or assets
      of
      our company; and (4) issuing or otherwise transferring any stock or debentures.




The
      Court
      subsequently continued the TRO through February 15, 2005 and confirmed that
      none
      of the defendants were to receive any payments from our company during the
      pendency of the TRO. Despite the Court’s Order, the defendants have since
      produced business records of our company demonstrating that, after adopting
      the
      December Consent Resolutions, the defendants arranged for our company to pay
      them a collective total of $38,721, including $20,869 in payments to Stephen
      Parent.




*The
      Preliminary Injunction and Notice of Appeal*




Following
      additional hearings in which the Court heard witness testimony and evidence,
      the
      Court issued an Order on February 15, 2005 granting plaintiffs’ Motion for a
      Preliminary Injunction. The Preliminary Injunction ordered the reinstatement
      of
      our company’s Board of Directors as it existed prior to December 10, 2004. As a
      result of the Court’s Order, John F. Cook, Robert T. Faber, Christopher L.
      Aguilar, Todd S. Brown, Leslie L. Cahan, Stanley A. Hirschman, and Phil E.
      Pearce have been reinstated as directors. Stephen B. Parent, Jerrie W. Gasch,
      and Purnendu K. Rana Medhi remained directors until Mr. Medhi’s resignation in
      April 2005. The Court’s February 15 Order also stayed the implementation of the
      Consent Resolutions, and directed us to hold a special shareholders meeting
      within 30 days.




F-14




In
      concluding that the Preliminary Injunction should issue, the Court stated,
“The
      Court is specifically concerned about the irreparable injury that would occur
      to
      GoldSpring and its shareholders and investors if Defendants [Mr. Parent, his
      wife, Jerrie W. Gasch, and Purnendu K. Rana Medhi] are permitted to manage
      the
      corporation. There is substantial evidence of Parent’s wrongdoing in his former
      position as CEO of GoldSpring, such as his misappropriation of corporate assets
      for his personal use. The Defendants’ attempt to rescind the [financing]
      transaction that was approved at the Board of Directors meeting on November
      30,
      2004 could adversely impact GoldSpring’s ability to meet its obligations under
      the agreement. Rescission of the refinancing transaction would prove detrimental
      for GoldSpring because the corporation would be forced to pay the $200,000.00
      monthly penalty for failing to file the S-1 Registration with the SEC within
      ninety (90) days of the March 22, 2004 agreement between GoldSpring and [various
      investors]. This penalty had accrued to over $1,000,000.00 as of November 30,
      2004.”




Thereafter,
      the defendants filed a motion for reconsideration in which they asked that
      the
      Preliminary Injunction be dissolved or, alternatively, that the Court clarify
      the injunction order and require the plaintiffs to post a bond. On February
      25,
      2005, the Court held a hearing on the defendants’ motion for reconsideration.
      The Court denied the defendants’ requests to dissolve the Preliminary Injunction
      and to require the posting of a bond. In response to defendants’ request for
      clarification of the injunction order, the Court ordered that our company is
      not
      to issue additional shares prior to the special shareholders meeting, and that
      the record date for the special shareholders meeting shall be December 9,
      2004.




Our
      company believed that this ruling would disenfranchise the investors that
      participated in the November 30, 2004 restructuring transaction by preventing
      them from receiving and voting the shares they are entitled to receive through
      the conversion of their notes. A December 9, 2004 record date would also have
      disenfranchised all shareholders that acquired their stock on the open market
      after December 9, 2004.




Therefore,
      on February 28, 2005, our company filed a legal memorandum with the Court
      addressing these issues. In it, we pointed out that applicable federal
      securities laws require us to provide shareholders with current financial
      statements, which will not be available until June 30, 2005, and that Florida
      law and our company’s bylaws require that a record date be fixed in advance
      rather than in the past. On March 14, 2005, the Court held a hearing on these
      issues. After hearing argument of counsel, the Court indicated that it agreed
      with our position.




Accordingly,
      on March 17, 2005, the Court vacated its earlier Order directing us to hold
      a
      special shareholders meeting and setting December 9, 2004 as the record date
      for
      purposes of that meeting. The Court also vacated the provision of its February
      25 Order prohibiting us from issuing additional shares. Finally, the Court
      reaffirmed its earlier Order reinstating our Board of Directors as it existed
      prior to December 10, 2004. In doing so, the Court ordered that the reinstated
      board shall remain in place until the Court orders otherwise.




On
      April
      13, 2005, a notice of appeal was filed on behalf of defendants (the Parents,
      the
      Gaschs, and the Medhis) seeking to reverse the Court’s March 17 Order. On April
      21, 2005, the Gaschs moved to dismiss their appeal. On June 10, 2005, the
      defendants (the Parents) filed their opening appellate brief. The plaintiffs
      filed their response brief on August 16, 2005. The defendants’ response brief
      was filed on October 3, 2005. The 9th Circuit Court of Appeals held oral
      arguments on the appeal on January 12, 2006.




On
      January 23, 2006, the United States Court of Appeals for the Ninth Circuit
      issued a Memorandum disposition in the matter of *Faber
      v. Parent* ,
      stating, “We reverse the district court’s decision to grant the preliminary
      injunction for failure to comply with the requirements of Rule 52(a). However,
      the injunction shall remain intact for a reasonable time not to exceed 90 days
      from the date on which this disposition is filed or until an earlier date on
      which the district court enters a succeeding preliminary injunction. During
      this
      time, the district court may issue a new preliminary injunction if, after
      undertaking the required analysis and making the necessary findings, it deems
      such an injunction appropriate.” The preliminary injunction, issued by the
      district court on February 15, 2005, had reinstated GoldSpring’s Board of
      Directors as it existed prior to Mr. Parent’s takeover of GoldSpring on December
      10, 2004. The Memorandum disposition also stated that, “If, after further
      proceedings, the district court does not order a new preliminary injunction,
      we
      leave it to the district court to restore, as near as possible, the situation
      that would have existed if the preliminary injunction had never been granted.”




F-15




*The
      Investors’ Motion to Intervene*




On
      March
      2, 2005, Longview Fund LP, Longview Equity Fund, Longview International Equity
      Fund, and Alpha Capital AG (collectively, the “Investors”) moved to intervene in
      the litigation. In doing so, the Investors sought to dissolve the portion of
      the
      Court’s February 25, 2005 Order that prohibited our company from issuing stock
      to them under the refinancing transaction.




In
      their
      motion to intervene, the Investors alleged that they are holders of more than
      $3
      million of Convertible Notes issued by us, which they received pursuant to
      the
      transaction in March 2004. The Investors further alleged that, under the terms
      of the Convertible Notes, they are entitled to convert the notes, in whole
      or in
      part, into our stock at any time. The Investors contended that, by preventing
      us
      from issuing stock, the Court’s February 25 Order is a de facto preliminary
      injunction in favor of the defendants, and effectively deprived the Investors
      of
      much of the benefits to which they are contractually entitled. Because the
      defendants had not met the requirements for injunctive relief, the Investors
      argued, that portion of the Court’s Order should be dissolved. Alternatively,
      the Investors asked the Court to order the defendants to post a $3.5 million
      bond to protect the Investors against any damages stemming from the de facto
      injunction.




On
      March
      7, 2005, the defendants filed their response to the Investors’ motion. They
      contended that Judge Carroll’s February 25 Order was not an injunction and, in
      any event, that the Investors had failed to meet the requirements for
      intervention. Accordingly, they argued that the motion should be denied.




On
      March
      18, 2005, the Court issued an Order denying the Investors’ motion as moot. The
      Court reasoned that, since its March 17 Order lifted the prohibition on the
      issuance of additional shares of our stock, the Investors had, in essence,
      already received the relief they requested in their motion to intervene.
      Therefore, the issues raised in that motion had become moot.




*The
      Company’s Motion Re: the Gust Rosenfeld Retainer*




After
      purportedly seizing control of our company on December 9, 2004, Stephen Parent,
      acting as the putative president of GoldSpring, authorized the payment of a
      $250,000 retainer to the law firm of Gust Rosenfeld using funds of our company.
      On March 1, 2005, we filed a motion for an order requiring Gust Rosenfeld to
      provide a detailed accounting of its use of these funds and to refund the unused
      portion.




On
      March
      14, 2005, Gust Rosenfeld sent us a refund check for $83,903.38 and a “ledger”
showing how the firm spent the other $166,096.62. Among other things, the ledger
      revealed that Gust Rosenfeld withdrew approximately $109,000 as payment for
      its
      attorneys’ fees and costs. The ledger also showed payments to other lawyers and
      outside vendors totaling approximately $57,000. Included in this amount were
      two
“refund” payments to Stephen Parent totaling $21,000.




We
      have
      filed a reply brief asking the Court to order Gust Rosenfeld to provide a more
      detailed accounting of its expenditures, including billing invoices for legal
      services it purportedly rendered to our company. We have also asked the Court
      to
      require Gust Rosenfeld to provide a written explanation for the payments to
      other lawyers and outside vendors, as well as the so-called refund payments
      to
      Parent.




*The
      “New” Consent Resolutions*




On
      March
      21, 2005, defendants Stephen and Judith Parent filed a “Motion for Order” asking
      the Court to remove certain directors of our company’s Board of Directors.
      Attached to the motion was a “Consent in Lieu of a Special Meeting of the
      Shareholders of GoldSpring, Inc.,” dated March 18, 2005 (the “March Consent”).
      The March Consent was nearly identical to the one adopted by the Parents and
      others on December 9, 2004. It purported to remove directors Robert T. Faber,
      John F. Cook, Leslie L. Cahan, Todd S. Brown, Christopher L. Aguilar, Stanley
      A.
      Hirschman, and Phillip E. Pierce as directors of our company. The March Consent
      was signed by shareholders Stephen Parent; Judith Parent; Aztech Environmental
      Industries, Inc.; Jasmine House, LLC; Frontline 2001, LLC; Jubilee
      Invest ment
      Trust PLC; Ronald M. Haswell; Mark and Jennifer Ward; Walter T. Plummer; Lynn
      Zollinger; Maia Ray; and Rita Hardy.




F-16




On
      March
      25, 2005, our company and the plaintiffs filed a joint response to the Parents’
Motion for Order. In it, we argued that (1) the shareholders who signed the
      March Consent did not hold a majority of our company’s stock, which rendered the
      Consent ineffective; (2) the Parents solicited more than ten shareholders,
      and
      therefore violated Securities and Exchange Commission Rule 14a; and (3) the
      Parents cannot obtain the relief they seek because they have not asserted an
      affirmative claim in court.




The
      Parents filed a reply and supplemental reply on March 20, 2005, and April 11,
      2005, respectively. In the reply, the Parents argued that the shareholders
      who
      signed the Consent do, in fact, hold a majority of the outstanding shares as
      of
      the date it was executed, and that any shares issued after that date are not
      to
      be counted. They also denied having solicited more than ten persons and denied
      any obligation to state an affirmative claim before seeking the relief asked
      for
      in their motion. In their supplemental reply, the Parents referred to our
      company’s recent Form 8-K filing (the “8-K”) with the Securities and Exchange
      Commission. In the 8-K, we disclosed that our company had issued (1) 59,203,918
      shares of restricted common stock in connection with the Settlement Agreement
      Regarding Failure to File a Registration Statement; (2) six secured convertible
      notes in an aggregate amount of $6,584,005 in connection with the Settlement
      Agreement Regarding Mandatory Redemption Payment; and (3) convertible notes
      in
      the amount of $403,175 in connection with the Settlement Agreement Regarding
      Failure to deliver shares due upon conversion. The Parents contended that the
      transactions referred to in the 8-K constituted an unfair dilution of the
“non-Merriman shareholders’” stock holdings.




On
      April
      20, 2005, we filed a Supplemental Notice to inform the Court that Messrs. Gasch
      and Medhi do not support the March Consent. In addition, we informed the Court
      that Mr. Gasch had signed a Declaration that (1) Mr. Gasch never agreed to
      serve
      on the proposed board of directors contemplated by the March Consent, (2) that
      Mr. Gasch does not support the March Consent and, if the March Consent
      constituted a valid shareholder resolution (which we do not believe) Mr. Gasch
      would immediately vote to reinstate the entire Board of Directors as it
      currently exists, (3) Mr. Gasch denounces and rescinds the purported Director’s
      Consent Resolutions dated December 10, 2004 and no longer supports any of the
      resolutions or purported corporate actions contemplated in that purported
      consent, and (4) Mr. Gasch has terminated Gust Rosenfeld as his counsel because
      he no longer wishes to be associated with or jointed represented by Mr. Parent.
      Mr. Medhi also informed us that he resigned as a director of our Board of
      Directors as currently constituted and as a member of the board of directors
      designated by earlier consent resolution. We informed the Court that these
      developments constitute additional reasons to deny the Parents’
motion.





On
      January 23, 2006, the United States Court of Appeals for the Ninth Circuit
      issued a Memorandum disposition in the matter of *Faber
      v. Parent* ,
      reversing the Preliminary Injunction, which had been granted by the United
      States District Court for the District of Arizona on February 15, 2005 for
      Mr.
      Parent’s failure to comply with the requirements of Rule 52(a). The Court of
      Appeals ordered that the injunction shall remain intact for a reasonable period
      of time not to exceed 90 days or until an earlier date on which the district
      court enters a succeeding preliminary injunction. The Court of Appeals remanded
      the case to the district court to allow the district court to conduct further
      proceedings, which may include issuing a new preliminary
      injunction.





*April
      18, 2006 Order*





O n
      April
      18, 2006, the United States District Court for the District of Arizona issued
      an
      Order Granting a Preliminary Injunction in favor of the Plaintiff which finally
      provided firm direction on several of the matters which were the subject of
      motions described above. The Order accomplished the following:




F-17




(i)
      it
      stayed the implementation of the Consent Resolutions purportedly passed on
      December 9, 2004 to effect the attempted takeover of the Company by Stephen
      Parent’s group;




(ii)
      it
      denied Defendants’ motion for an Order removing seven current directors from
      Goldspring’s Board (which would have had the effect of allowing Parent to
      rescind the refinancing transaction dated November 30, 2004 with the Merriman
      investors); and




(iii)
      it
      granted GoldSpring’s Motion for an Order requiring the law firm of Gust
      Rosenfeld PLC to provide a detailed accounting of the unreturned portion of
      the
      $250,000 retainer (namely $166,096.62), given to Gust Rosenfeld PLC by Mr.
      Parent in December 2004.




*Degerstrom
      Suit*




On
      April
      11, 2006, in the First Judicial District Court, Storey County, Nevada, wherein
      N.A. Degerstrom, Inc. (“Degerstrom”) sued the Company on various counts,
      including breach of contract, *quantum
      merit* ,
      foreclosure of mechanic's lien, and assertion that the Degerstrom lien has
      priority over all other liens on the Plum Mine property. The plaintiff claims
      damages in excess of $806,000 plus interest. The Company subsequently answered
      the Complaint and counterclaimed for breach of contract, breach of implied
      covenant of good faith and fair dealing, and for negligence, alleging damages
      in
      excess of $10,000.





The
      lawsuit arises out of a dispute as to how much the Company owes the Degerstrom
      for services provided. Pursuant to a December 27, 2005 agreement, the parties
      agreed that the amount to be paid by the Company to Degerstrom would be subject
      to volume reconciliation by aerial survey. According to Company management,
      pursuant to prepared aerial and ground surveys, the Company has been over-billed
      for amounts of ore and waste which have been hauled by Degerstrom. The results
      of the surveys are to be presented to the Court as evidence as to the Company’s
      affirmative defenses that it does not owe the amounts claimed by
      Degerstrom.





Additionally,
      the Company has what it believes to be valid counterclaims, arising out of
      activities of Degerstrom, including, but not limited to, negligent crushing
      of
      ore, failure to accurately measure and charge for waste and ore hauled and
      crushed, and failure to adequately man the job and provide sufficient equipment.
      These activities, as alleged in the Counterclaim, resulted in damages to the
      Company in excess of $10,000.





Degerstrom
      filed a mechanic's lien against the property of Plum, and at the time of filing
      of the Complaint, filed and recorded a lis pendens against the property of
      Plum
      based upon Degerstrom's claim. Counsel has advised management that the Company
      may challenge the lis pendens by asserting that the lis pendens is based upon
      a
      mechanic's lien which is overstated. However, the time is not ripe for the
      bringing of such a motion until the survey results have been presented and
      analyzed. Alternatively, Plum may request the court to establish a bond in
      an
      amount that would secure, pending litigation, Degerstrom's mechanic's lien
      claim. Typically, the court would charge one and one-half times the amount
      it
      found to be the mechanic's lien claim.





Management
      believes the ground and aerial surveys support a much lower amount of ore and
      waste which was processed by Degerstrom than is alleged in the Complaint, and
      if
      the Court accepts that volume reconciliation would be as established by such
      surveys (as is established in the written documentation between the parties),
      there is a reasonable probability of success in reduction, if not elimination,
      of the amount claimed by Degerstrom. However, until the Court rules on the
      method of volume reconciliation, it is premature to predict the probability
      of
      likelihood of success on the merits.




SALE
      OF
      ASSETS




On
      March
      21, 2006, the Company completed the sale of its Canadian subsidiaries, Clear
      Hills Iron Ltd. and Peace River Energy Ltd. to CaNev Resources, a Canadian
      Corporation. The assets divested in the transaction include 32 industrial
      (non-energy) mineral permits covering approximately 800 square miles in northern
      Alberta, Canada. In consideration for the assets, GoldSpring will receive
      CDN$1.1 million. CDN$100,000 of the sales price will be paid in cash, and the
      balance will be paid through a three percent production royalty.




F-18




EMPLOYMENT
      AGREEMENTS




We
      have
      an employment agreement with Robert T. Faber extending through August 2009.
      The
      employment agreement provides for Mr. Faber to serve as our Chief Financial
      Officer and was not modified after Mr. Faber was appointed President and Chief
      Executive Officer. The employment agreement provides for base compensation
      of
      $120,000 per year, subject to increases to up to $200,000 per year if our
      company achieves designated revenue levels. The employment agreement also
      provides for incentive compensation as determined by our board of directors.
      In
      addition, the employment agreement provides for Mr. Faber to be granted options
      to purchase shares of our common stock at prices ranging from $.50 to $2.00
      per
      share. Mr. Faber is entitled to a use of a company car, contributions to a
      401(k) plan, and life insurance coverage.




The
      employment agreement with Mr. Faber contains a covenant not to compete with
      our
      company for a period of two years immediately following termination of
      employment. We may terminate Mr. Faber for “cause” as defined in the employment
      agreement. We will be required to pay Mr. Faber’s compensation during the term
      of the agreement if we terminate him without cause.




**NOTE
      7 - NOTE FINANCINGS**





*Convertible
      Debentures-Investors*




We
      completed a private placement of securities transaction during March 2004
      (the “March Offering”). In connection with the offering, we received gross
      proceeds of $10 million from a group of accredited institutional and individual
      investors. Subsequent to the closing of the March Offering, we failed to meet
      certain provisions of the offering that required for us to provide for an
      effective registration statement with the Securities and Exchange
      Commission.





As
      a
      result, and effective November 30, 2004, we restructured the private
      placement transaction and entered into a new subscription agreement. In
      connection with the restructuring, we exchanged 8% convertible notes in the
      aggregate principal amount of approximately $11.1 million and four-year
      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,
      for
      21,739,129 shares of common stock and 21,739,129 warrants to purchase shares
      of
      common stock issued in the March Offering. 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 effectiveness of our registration statement covering the resale of the shares
      of common stock held by the investors. (See Notes 9 and 12).




The
      8%
      convertible notes mature in November 2006. We must make monthly payments of
      102% of 1/20 th of the
      initial principal amount, together with accrued interest. We have the option
      to
      repay such amounts in shares of our common stock at a conversion rate equal
      to
      85% of the average of the five lowest closing bid prices of our common stock
      during the 20 trading days preceding each payment date. We may prepay the
      outstanding principal amount by paying the holders of the notes 115% of the
      then-outstanding principal amount. Each holder of notes may convert the notes
      into shares of 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 a price
      equal
      to 70% of the average of the five lowest closing prices of our common stock
      during the 20 trading days preceding the closing date.




On
      April
      1, 2005, we failed to make our first payment on the notes and were in default
      of
      the terms of the convertible notes. On December 20, 2004, we received notice
      from holders of approximately $3.8 million of convertible notes of their
      intention to convert into shares of our common stock. The applicable conversion
      rate was approximately $0.11 per share, and we were obligated to issue
      33,817,594 shares of our common stock. Under the terms of the subscription
      agreement, we had three business days following receipt of the notice of
      conversion of notes to deliver to the note holders’ free-trading common stock
      certificates (the “Delivery Date”). Although the shares were due to be delivered
      in December 2004, they were not delivered until 2005. As a result of our failure
      to deliver shares, we were subject to liquidated damages that were settled
      by
      the issuance of notes payable to the investors.




F-19




*Convertible
      Debentures-Mandatory Redemption Payment*




The
      failure to deliver the shares by the Delivery Date resulted in liquidated
      damages of 1% of the note principal amount being converted per business day
      after the Delivery Date. We did not deliver the share certificates within the
      period required in the subscription agreement and as a result, in March of
      2005,
      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 forfeit his right to receive the
      shares in favor of the payment.




On
      June
      30, 2005, we entered into a Settlement Agreement (“Settlement”) with the Mr.
      Winfield and agreed to convert the mandatory redemption payment into six
      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 (See Note 12). 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 June 30, 2007. 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 be 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
      in substantially all of our assets.




*Mandatory
      Registration Rights*




The
      terms
      of the Debenture agreement require that we must file with the Securities and
      Exchange Commission on a Form SB-2 registration statement, or such other form
      that we are eligible to use, to register the Conversion Shares, together with
      any other shares of Common stock issuable hereunder for resale and distribution
      under the 1933 and cause to be filed not later than April 30, 2005 and declared
      effective not later than June 30, 2005. If we fail to make effective a
      registration statement we are subject to liquidated damages, an amount equal
      to
      two percent (2%) for each thirty (30) days or part thereof, thereafter of the
      principal amount of the Debenture remaining unconverted and purchase price
      of
      Conversion Shares issued upon conversion of the Debenture owned of record by
      the
      holder. The Company must pay the liquidated damages in cash or an
      amount ****** equal
      to
      two hundred percent of such cash liquidated damages if paid in additional shares
      of registered un-legended free ****** trading
      shares of common stock. As of December 31, 2005 we had failed to make any
      monthly payments on the debentures and are in default.




F-20




On
      December 20, 2004, we received notice from holders of approximately $500,000
      of
      convertible notes payable of their intention to convert into shares of our
      common stock. As a result, we recorded the issuance of 4,243,791 shares on
      December 20, 2004. We were required to deliver certificates representing
      unrestricted, free-trading stock within three business days of our receipt
      of
      the notices of conversion (the “Delivery Date”). The failure to deliver the
      shares by the Delivery Date resulted in liquidated damages of 1% of the Note
      principal amount being converted per business day after the Delivery Date.
      Our
      former Chief Executive Officer did not deliver the stock certificates within
      the
      required period. On March 18, 2005 we delivered the certificates representing
      the shares of common stock to these converting note holders. The 84 -day delay
      in delivering the shares resulted in liquidated damages of $403,175. We
      recognized these damages during the fourth quarter of 2004 and the first quarter
      of 2005. We issued convertible notes for the amount of liquidated damages
      due




Accordingly,
      at June 30, 2006 and June 30, 2005, we classified the following convertible
      debentures as current liabilities as follows:




**June
                30, 2006**
            
            
            **June
                30, 2005**Convertible
                Debentures Payable-Investors
            
            $
            2,799,219
            
            
            6,817,676Convertible
                Debentures Payable- Mandatory Redemption payment
            
            
            5,886,059
            
            
            6,885,184Convertible
                Debentures Payable- Failure to Deliver Shares
            
            $
            356,348
            
            
            403,175Total
            
            $
            9,041,626
            
            
            14,106,035




*Promissory
      Notes Payable—July Financing*




In
      July
      of 2005, we borrowed $1.2 Million from companies controlled by John V. Winfield,
      a major shareholder. 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. As of June 30, 2006 we had failed
      to
      make any monthly payments on the notes and are in default.




*Promissory
      Notes Payable—September Financing*




In
      September of 2005, we borrowed $300,000 from Longview Fund L.P., a major
      shareholder. 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 $165,500.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 and the Winfield
      convertible debentures of March 2005.




The
      notes
      share a security interest with the Winfield notes issued in July 2004. As of
      June 30, 2006 we had failed to make any monthly payments on the notes and are
      in
      default.




F-21




*Promissory
      Notes Payable—December Financing*




In
      December of 2005, we borrowed $375,000 from Longview Fund L.P., a major
      shareholder, and $200,000 from Merriman Curhan Ford & Company. The notes
      accrue interest at 16% per annum, are uncollateralized and was payable including
      accrued interest on or before March 15, 2006 and has not been
      repaid




Accordingly,
      at June 30, 2006 we classified the following notes payable as current
      liabilities as follows:




**June
                30, 2006**Promissory
                Notes Payable-July Financing
            
            $
            1,200,000Promissory
                Notes Payable-September Financing
            
            
            300,000Promissory
                Notes Payable-December Financing
            
            
            575,000Promissory
                Notes Payable-first quarter 2006 Financing
            
            
            400,000Promissory
                Notes Payable-second quarter 2006 Financing
            
            
            600,000Total
            
            $
            3,075,000





*Notes
      Payable- Plum Mine*




We
      have a
      non-interest bearing note payable to a shareholder related to our purchase
      of
      the Plum Mining property. The note is payable in ten quarterly payments through
      June 2006.




*Notes
      Payable- Seller Note*




In
      connection with our acquisition of the Justice, Woodville and Keystone patented
      claims we issued a promissory note to the seller for $160,000. The note is
      payable in ten quarterly payments through June 2008.




*Notes
      Payable- 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
      averaged interest rate of 7.2%. The equipment purchased is pledged as collateral
      for the debt. At June 30, 2006 and June 30, 2005, we had the following amounts
      due under the financings as follows:




**June
                30, 2006**
            
            
            **June
                30, 2005**Short-term
                Debt-Current Plum Mine
            
            $
            9,426
            
            
            8,649Short-term
                Debt-Current Seller Note
            
            
            364,000
            
            
            450,000Other
                short-term Debt-Current
            
            $
            -
            
            
            -Total
            
            $
            373,426
            
            
            458,649





**June
                30, 2006**
            
            
            **June
                30, 2005**Long-term
                Debt-non current Plum Mine
            
            $
            28,735
            
            
            38,859Long-term
                Debt-non current Seller Note
            
            
            83,200
            
            
            -Other
                Long-term Debt -Non-current
            
            
            -
            
            
            -Total
            
            $
            111,935
            
            
            38,859




F-22




Principal
      payments on long-term debt related to equipment financing for the next five
      years are as follows:




2006
                (last six months)
            
            $
            5,0682007
            
            
            10,6772008
            
            
            11,4412009
            
            
            10,9762010
                and thereafter
            
            
            0





*Convertible
      Notes Payable-Failure to Deliver Shares*




In
      March
      of 2005, and pursuant to our settlement with investors for our failure to
      deliver shares of our common stock upon their conversion of debentures during
      2004 (See above), we issued convertible notes payable that accrue interest
      at 8%
      and are payable in equal monthly installments including interest beginning
      April
      1, 2006. In the event of our default on the notes the interest rate increased
      to
      15%.




*Conversion
      Rights*




The
      notes
      are convertible, in all or in part, into shares of our common stock at any
      time
      at an initial conversion price of $0.20, subject to certain anti-dilution
      provisions that include the sale of assets, reclassifications of our equity,
      issuance of additional shares and stock splits and dividends.




*Borrower’s
      Repayment Election* .




The
      Monthly Amount due on a repayment date shall be paid by the Company at its
      election (i) in cash at the rate of 102% of such monthly amount otherwise due
      on
      such repayment date within three (3) business days of the applicable repayment
      date, or (ii) with registered, freely transferable common stock at an applied
      conversion rate equal to 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 such repayment date.




On
      April
      1, 2005, we failed to make our first payment on the convertible debentures
      and
      were in default of the terms of the convertible notes. At June 30, 2006 and
      June
      30, 2005 we classified the following notes payable as current liabilities as
      follows:




**June
                30, 2006**
            
            
            **June
                30, 2005**Convertible
                Notes Payable
            
            $
            9,041,626
            
            
            14,106,035Promissory
                notes
            
            
            3,075,000
            
            
            -Total
            
            $
            12,116,626
            
            
            14,106,035




F-23




***Summary
      of Notes Payable***





At
      June
      30, 2006 and June 30, 2005 our notes payable balances were:




**June
                30, 2006**
            
            
            **June
                30, 2005**Convertible
                Debentures
            
            $
            9,041,626
            
            
            14,106,035Promissory
                Notes Payable
            
            
            3,075,000
            
            
            -Other
                Notes Payable
            
            $
            373,426
            
            
            458,649Total
                Current portion of long-term debt
            
            $
            12,490,052
            
            
            14,564,684





**June
                30, 2006**
            
            **June
                30, 2005**Long-term
                Debt-non current Plum Mine
            
            $
            28,735
            
            
            38,859Long-term
                Debt-non current Seller Note
            
            
            83,200
            
            
            -Other
                Long-term Debt -Non-current
            
            
            -
            
            
            -Total
                Long-term debt, net of current portion
            
            $
            111,935
            
            
            38,859





**NOTE
      8 - SUBSEQUENT EVENTS**





*Unfulfilled
      Note Conversion Requests*





During
      July and early August 2006, the Company received conversion notices from
      investors to convert principal and interest of certain convertible debentures
      valued at $1,296,116 into 140,648,283 shares of Common Stock (see Note 7).
      As
      the Company had issued all of its authorized Common Stock by the end of June
      2006, it was unable to honor the conversion notices and is therefore in default
      of its obligations under such debentures.





*Litigation*





The
      Company has reached a settlement with another defendant in its Arizona lawsuit.
      The first settlement was with Seth Shaw, as announced on June 26, 2006. This
      second settlement is with one of the other main defendants in the Company's
      Arizona Superior Court lawsuit, against several defendants, including its
      founder, Steve Parent. The Company has agreed to settle its claims against
      this
      second defendant pursuant to, among others, the following binding terms: 1)
      total payment by the defendant to GoldSpring of $100,000 with $20,000 to be
      paid
      on or before July 31, 2006, and the remaining balance of $80,000 to be paid
      on
      or before September 10, 2006; 2) dismissal by GoldSpring of the pending
      litigation against the defendant with prejudice (upon payment in full of the
      $100,000); 3) agreement that the settlement shall in no way be construed as
      an
      admission of liability or fault on the part of the defendant; and 4) mutual
      releases by each of Goldspring and the defendant to the other from liability
      related to the pending lawsuit. This second settlement helps to narrow the
      focus
      of the case with the remaining major defendants consisting primarily of Steve
      Parent and Ron Haswell .





On
      July
      31, 2006, the United States District Court for the District of Arizona in *Faber
      v. Parent, et al.* issued
      an
      order denying the Defendants’ Motion for New Trial (Reconsideration) which had
      requested that the Court vacate the April 18 th order
      (see Note 6). The Motion was denied as the Defendants failed to demonstrate
      clear error or offer new evidence.





*Amendment
      to Bylaws*





Effective
      as of August 10, 2006 , the Company has amended Article II, Section 12 of its
      Bylaws so that the record date for the taking of any action by shareholders
      may
      be a date within 120 days of the date of action, as opposed to the 70 day
      limitation previously set forth in the Bylaws.





F-24


**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.





The
      following discussion addresses matters we consider important for an
      understanding of our financial condition and results of operations as of and
      for
      the quarter ended June 30, 2006, as well as our future results.





*Overview*





We
      are a
      North American precious metals mining company with an operating gold and silver
      test mine in northern Nevada. Our Company was formed in mid-2003, and 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. During 2005, we acquired additional
      properties around the Plum project in Northern Nevada, expanding our footprint
      and creating opportunities for exploration. We are an emerging company, looking
      to build on our success through the acquisition of other mineral properties
      in
      North America with reserves and exploration potential that can be efficiently
      put into near-term production. Our objectives are to increase production;
      increase reserves through exploration and acquisitions; expand our footprint
      at
      the Plum mine; and maximize cash flow and return for our
      shareholders.




We
      started to reap the benefits of the operational improvement program that we
      initiated in 2005, including our first reported net profit for the first quarter
      of 2006. This program began with a complete review of every facet of the
      operation to insure maximum efficiency. We have nearly completed our review
      of
      the various processes and have implemented several changes, which have increased
      efficiencies. Most recently, we have made the decision to take over our mining
      operations, which were previously performed by an outside contractor. Although
      we had planned to have our mining operation completely in place by the end
      of
      May 2006, delays in financing have dictated that we rely on contract mining
      assistance through the middle to end of the fourth quarter. However, when we
      do
      take over operations, based on our mine plan and internal calculations, we
      anticipate that taking over the mining operations will reduce our gold
      production costs by $40 per ounce, resulting in a production cost of less than
      $350 per ounce.




Our
      first
      quarter production has been hampered by inclement weather in northern Nevada
      in
      late 2005 and early 2006. Our Plum Mine received fourteen inches of rain between
      mid-December and the end of February, filling our leach ponds, including our
      one
      hundred year storm pond, nearly to capacity. The high levels of effluents in
      the
      ponds prevented us from adding additional reagents to our leach pads. Because
      we
      were unable to add new material to the pad and put it under leach, we ceased
      mining operations in early-January. Our team at the mine did an excellent job,
      in a challenging situation, to insure the environmental integrity of our
      operation. The team worked closely with the regulatory authorities throughout
      this process. In order to resume mining and processing with the necessary
      reagents, the level of effluents in the ponds must be reduced through
      evaporation. The necessary level was reached in late June, which is when mining
      resumed.





Due
      to
      the five month cessation of mining activities, there was little ore to produce
      in the second quarter, and therefore revenues in the second quarter were
      markedly lower in the first quarter, when there was still a supply of ore,
      mined
      in the fourth quarter of 2005, to process and sell. A lapse in mining typically
      leads to reduced saleable materials in the next fiscal quarter as the
      mining-processing-sales cycle is approximately 60 - 90 days. However, as mining
      activities recommenced in late June, the fourth quarter should yield
      comparatively favorable revenue results.




Our
      Company has been involved in litigation with its founder since late 2004 when
      he
      attempted a takeover of the Company through a purported consent solicitation
      in
      violation of federal securities laws. On April 18, 2006, the United States
      District Court for the District of Arizona issued an Order Granting a
      Preliminary Injunction, which stayed the implementation of the Consent
      Resolutions purportedly passed on December 9, 2004 (a subsequent Motion by
      the
      Defendants for reconsideration of the Order was denied on July 31, 2006). This
      preliminary injunction removes a serious distraction that has plagued our
      Company since December 2004. We believe this matter is now behind us, allowing
      us to redirect our human and capital resources to our current mining operations
      and further potential opportunities to continue to expand our business. The
      Court’s decision also provides clarity to our investors and shareholders
      regarding control and direction of the Company. With the Federal Court nearly
      litigation behind us, we are actively seeking financing to meet our working
      capital needs and fuel our growth.




1




Our
      Company has also been sued by a former mining contractor to the Company for
      unpaid services in an alleged amount exceeding $800,000. The Company’s
      management believes that the results of aerial and ground survey (the method
      stated in writings between the parties for measuring amounts owed to Degerstrom
      for services rendered) demonstrate that Degerstrom’s claims are substantially
      overstated and will present the survey results to the Court to substantiate
      its
      position. Further detail is set forth in Item 1 of Part II below.





There
      are
      also several specific risk factors attendant to operation of a gold mining
      concern which bear repetition here due to events in 2006, although this is
      not
      intended to be a full blown list of risk factors (and we encourage you to review
      our October 11, 2005 424(b)(3) for a further discussion of risk factors
      attendant to our business):





·
            Weather
                - As disclosed in this Quarterly Report, excessive rains has caused
                material delays in our ability to operate as high levels of water
                in our
                leaching ponds and flooding have prevented us from being able to
                leach
                materials, a necessary part of the gold production process. Excessive
                snows, which can occur in the area in which the Plum Mine is located,
                would also hamper mining as the Plum Mine is an open pit
                mine.


·
            Current
                Political Instability in the Middle East - Commodities such as gold
                tend
                to have widely fluctuating markets, and the current problems in areas
                such
                as Lebanon and Iraq, which are causing much political and economic
                instability internationally, may very well be a contributing factor
                to the
                volatile gold market.




***Results
      of Operations and Operational Plan***





*Operational
      Improvements*




Our
      Plum
      Mine, which is located in Storey County, Nevada, went into test mining
      production in late third quarter 2004. We did not and have not since established
      reserves on this exploration project; therefore, all of our activities on this
      property are considered test mining or exploratory in nature. One of our top
      priorities is to improve efficiencies and increase test mining production at
      our
      Plum Mine. In March 2005, we initiated a program to improve the operational
      efficiency of our mining operation. As part of this program, we consolidated
      our
      corporate office with the Plum Mine office. We also made improvements to our
      processing plant and took over crushing operations from our third-party
      contractor, reducing costs and increasing our control over the crushing process.
      Our improvement program continued throughout the year. In November 2005, we
      retained licensed mining engineer Jim Golden to conduct a comprehensive review
      of all aspects of the Plum Mine operation, including the overall mine plan,
      with
      the objective of further improving efficiency, increasing production, and
      reducing costs. Our process improvement team, led by Jim Golden, is to be
      commended for their excellent progress to date.





Furthermore,
      Mine Development and Associates of Reno, Nevada has nearly completed a detailed
      mine plan and a reserve report for the Plum Mine. Recent changes have included
      revising the mine plan to reflect the current higher gold prices; adding various
      efficiencies in the processing area; and re-positioning personnel to maximize
      overall performance. The mine plan and reserve report are the culmination of
      a
      fifteen-month undertaking by our Company and Mine Development & Associates.
      In a further effort to reduce costs and increase efficiencies , we have
      decided to take over the mining operations from our outside contractor. We
      expect to complete this transition by the end of November 2006, with the delay
      beyond the original May 2006 targeted date due to the weather problems which
      have delayed production. We have successfully negotiated a mutual working
      arrangement (which has not been formalized) to cover those activities through
      November 2006, and we paid the contractor a $350,000 deposit for the initiation
      of mining and as a partial down payment for acquisition of the contractor’s
      mining fleet at the end of November 2006. Based on our mine plan and internal
      calculations, we anticipate that taking over the mining operations will reduce
      our gold production costs by $40 per ounce, resulting in a production cost
      of
      less than $350 per ounce.




2




In
      the
      second quarter, we have implemented changes to our crushing system,
      including:





·
            Reducing
                nominal size of material placed on the heap resulting in better overall
                recovery


·
            Improving
                the agglomeration system (agglomeration is treatment of materials
                with
                reagents to improve leaching)


·
            Introducing
                recovery reagents to the conveyed ore to allow for a cure period
                before
                leaching


·
            Construction
                of a new stacker to replace the rented stacker, [thus reducing costs
                and
                increasing reliability]


·
            Initiation
                of repairs on a conveyor line which will be used to initiate the
                next
                twenty foot lift





The
      second quarter also brought changes to the processing systems,
      including:





·
            Reduction
                in the amount of diatomaceous earth used in filtering solution in
                the
                Merrill-crowe plant


·
            New
                formulation of smelting reagents resulting in a cleaner
                slag


·
            Addition
                of a hood in the smelt for safety
                reasons





*Operational
      Details*




Our
      first
      and second quarter production has been hampered by inclement weather in northern
      Nevada in late 2005 and early 2006. Our Plum Mine received fourteen inches
      of
      rain between mid-December and the end of February, filling our leach ponds,
      including our one hundred year storm pond, and utility pond to capacity. The
      high levels of effluents in the ponds prevented us from adding additional
      reagents to our leach pads. Because we were unable to add new material to the
      pad and put it under leach, we made the decision to cease mining operations
      in
      early-January. Our team at the mine did an excellent job, in a challenging
      situation, to insure the environmental integrity of our operation. The team
      worked closely with the regulatory authorities throughout this process. In
      order
      to resume mining and processing with the necessary reagents, the level of
      effluents in the ponds must be reduced through evaporation. The amount of rain
      evaporated is estimated at 2.2 million gallons, and working with the Nevada
      Division of Environmental Protection to ensure proper evaporation, full mining
      production was able to resume in the last week of June 2006, only one month
      behind the originally anticipated schedule. We continued to work with the NDEP
      to ensure that we are in compliance with all environmental
      regulations.





Other
      operational activities in the second quarter included:





·
            In
                May, operation of the mine’s recovery plant concentrating on re-leached
                past ores


·
            In
                June, delivery of the first ore by the mining contractor to our crusher
                site using a Cat 988B FEL supported by two 35 ton trucks and addition
                of
                new lines to the leach pad which constituted the first ores to be
                leached
                since January 2006





Third
      quarter undertaken and planned activities include:





·
            Four
                50 ton Euclid R-50Haul-Paks were delivered in July and August replacing
                two 35 ton hauling vehicles.


·
            Continuation
                of mining in the Billie the Kid Pit where ore is to be stockpiled
                until
                the end of the third quarter, when crushing is due to continue at
                a steady
                state rate of approximately 1500 tons per
                day.


·
            In
                August and September, pre-stripping of the Lucerne Pit to expose
                consistent ore to be mineable through approximately the end of
                2008




3




*Exploration
      Details*




We
      also
      plan to continue our exploration program in 2006. In March 2006, we retained
      Larry Martin, a registered geologist, to oversee our exploration program at
      the
      Plum Mine and in the Comstock Lode district. We have allocated a budget of
      $500,000 to explore and develop our claims at the Plum Mine. We intend to target
      our exploration toward replenishing and expanding our mineralized material
      inventory at our existing mine and toward developing new mineral properties.
      The
      successful location of additional mineralized material on the existing property
      would allow us to expand the size and the lifespan of the Plum mining project,
      exclusive of new property acquisitions. It is our belief that we possess an
      advantage with our status as likely the only heap leach gold mining permit
      holder in the area. This permit is relatively difficult to obtain, and it is
      one
      that we can expand to include new areas in the event we locate and wish to
      process new deposits.





We
      recently commenced our exploration activities. Initially, we have started
      exploration in and around the Billie the Kid pit, and drilling results are
      expected to be posted by the end of the third quarter of 2006. Also, we have
      undertaken geologic mapping between the Billie the Kid pit, the Hartford pit
      and
      the Lucerne pit, and the results suggest that mapping will yield several
      mineralized structures.





*Placer
      Claims, Water Rights, and Mineral Permits*




We
      originally became a mineral company through an acquisition of unpatented placer
      mineral claims and the Big Mike copper claims in June 2003 from Ecovery, Inc.
      The transaction had an effectuation date of March 11, 2003. Specifically, that
      acquisition provided us with a number of Nevada-based placer claims, including
      the Gold Canyon and Spring Valley claims, and 17 unpatented lode claims called
      the Big Mike Copper property. This acquisition did not include any real property
      rights. In November 2003, we acquired the Plum mine facility as well as water
      rights that are usable at Plum Mine and the Gold Canyon and Spring Valley placer
      claims. In a separate transaction, we obtained mineral permits in Alberta,
      Canada in May 2004




The
      Big
      Mike Copper property is located in Pershing County, Nevada. It covers a total
      of
      310 acres and consists of 17 unpatented lode claims and one placer claim. We
      have not established any proven or probable reserves that meet the requirements
      of SEC Industry Guide 7. We have not completed any exploration activity on
      the
      project. The property includes an open pit, mineralized material in a stockpile
      and waste dumps. We are actively exploring opportunities to bring this project
      into production. The options being considered include finding a joint venture
      partner or selling the property and retaining a production royalty.




4




***Comparative
      Financial Information***




**Six
                Months ended June 30, 2006**
            
            
            **Six
                Months ended June 30, 2005**
            
            
            **Difference**Revenue
            
            $
            663,260
            
            $
            1,203,951
            
            $
            (540,691
            )Reclamation,
                Exploration and Test Mining Expense
            
            
            769,708
            
            
            2,811,380
            
            
            (2,041,672
            )General
                and Administration
            
            
            322,137
            
            
            518,535
            
            
            (196,398
            )Consulting
                and Professional Service
            
            
            268,189
            
            
            678,464
            
            
            (410,275
            )Liquidated
                Damages
            
            
            -
            
            
            2,860,468
            
            
            (2,860,468
            )Interest
                Expense
            
            
            1,247,458
            
            
            723,366
            
            
            524,092Net
                Loss
            
            
            ($2,128,869
            )
            
            ($6,531,422
            )
            $
            4,402,553







**Three
                Months ended June 30, 2006**
            
            
            **Three
                Months ended June 30, 2005**
            
            
            **Difference**Revenue
            
            $
            125,454
            
            $
            691,861
            
            $
            (566,407
            )Reclamation,
                Exploration and Test Mining Expense
            
            
            343,932
            
            
            1,541,290
            
            
            (1,197,358
            )General
                and Administration
            
            
            142,064
            
            
            234,281
            
            
            (92,217
            )Consulting
                and Professional Service
            
            
            113,372
            
            
            174,196
            
            
            (60,824
            )Liquidated
                Damages
            
            
            -
            
            
            985,835
            
            
            (985,835
            )Interest
                Expense
            
            
            497,812
            
            
            468,623
            
            
            29,189Net
                Loss
            
            
            ($1,111,736
            )
            
            ($2,793,623
            )
            $
            1,681,527





During
      the first six months of 2006, we sold 1,163 ounces of gold at an average price
      of $570 per ounce compared to gold sales of 2,817 ounces at an average price of
      $427 per ounce for the same period of 2005. Our gold production for the first
      six months of 2006 was adversely impacted by the weather conditions from mid
      December 2005 through February 2006. The accumulation of precipitation during
      this period filled our leach ponds, including our one hundred year storm pond,
      to capacity preventing us from adding additional reagents to our leach pads,
      which slowed production. In early January, we ceased mining since we could
      not
      efficiently leach any new material further reducing production. We did not
      have
      significant production in the second quarter as in the first because the
      cessation of mining in January left us with no raw product available, and all
      of
      our stockpiled ore was depleted during the first quarter of 2006.





Test
      Mining Expenses in the second quarter of 2006 were $1,197,358 less than for
      the
      first quarter of 2005. Test Mining Expenses for the first six months of 2006
      were $2,041,672 less than for the first six months of 2005. In early 2005 we
      initiated an operational improvement program. This program focused on enhancing
      the efficiencies of **e** ach
      of
      our processes as well as insuring we had the right personnel. **** We
      believe we are now starting to experience the benefits of the operational
      improvement program. We expect to realize further improvements in the upcoming
      months.




5




General
      and administrative expenses for the three months ended June 30, 2006 and June
      30, 2005 were $142,064 and $234,281, respectively. General and administrative
      expenses for the six months ended June 30, 2006 and June 30, 2005 were $322,137
      and $518,535 respectively. The marked decrease in general and administrative
      expenses for both comparison periods is based primarily upon the relocation
      of
      our Corporate office to the Plum Mine and the consolidation of functions
      reducing the number of corporate employees.




The
      $410,275 variance in consulting and professional services between the period
      consisting of the first six months of 2006 compared to the period consisting
      of
      the first six months of 2005 reflects a reduction in legal fees. In the first
      quarter 2005, we expensed approximately $180,000 of legal fees incurred by
      our
      Company’s founder during his purported takeover of our Company in December 2004.





The
      liquidated damages included in the tables above stemmed from Non-Registration
      Events Provisions in our November 2004 Subscription Agreement (“Non-Registration
      Provisions”). The Non-Registration Provisions required us to file a registration
      statement with the Securities and Exchange Commission no later than December
      30,
      2004 and to cause the registration statement to be declared effective no later
      than February 14, 2005. Our former Chief Executive Officer withdrew our pending
      registration statement and did not submit a new registration statement. His
      failure to submit the registration statement to the SEC by December 30, 2004
      triggered liquidated damages to be incurred at a rate of two percent (2%) of
      the
      principal amount of the Debenture for each thirty day period or part thereof
      for
      not having an effective Registration Statement. We have the option to pay the
      liquidated damages in cash or common stock. If we choose to pay in stock, we
      are
      required to pay 200% of the liquidated damages amount. Because our Company
      does
      not currently have sufficient funds to pay in cash, we intend to meet this
      obligation by issuing common shares. Thus, the total amount of liquidated
      damages recorded for the third quarter represents 200% of the cash total. The
      liquidated damages ceased when our registration statement became effective
      on
      October 3, 2005.




Interest
      expense for the second quarter of 2006 was $29,189 higher than the same quarter
      of 2005, and interest expense for the first six months of 2006 was $524,092
      higher than for the first six months of 2005. This variance reflects the
      issuance of $6,885,184 interest bearing note issued in March 2005 pursuant
      to
      the November 2004 subscription agreement. Specifically, we received a mandatory
      redemption payment demand relating to our failure to deliver stock certificates
      representing 29,573,803 shares of our common stock. Under the mandatory
      redemption payment provisions of the November 2004 subscription agreement,
      we
      repurchased the 29,573,803 shares of common stock at $0.23 per share, or
      $6,801,975. We issued a secured convertible note in the aggregate amount of
      $6,885,184 with a 12% interest rate for the 29,573,803 shares and accrued
      interest. The incremental interest recognized on this note for the second
      quarter 2006 was approximately $279,308. At June 30, 2006, our Company had
      approximately $12,601,987 of outstanding debt bearing an average interest rate
      of 15%, and at June 30, 2005, our Company had approximately $14,603,543 of
      outstanding debt bearing an average interest rate of 12%.




***Liquidity
      and Capital Resources***




We
      are
      actively seeking additional capital to meet our working capital needs and to
      grow our business. We recognize that our cash resources are limited. Our
      continued existence and plans for future growth depend on our ability to obtain
      the capital necessary to operate, through the generation of revenue or the
      issuance of additional debt or equity. In 2005, we raised an aggregate of
      $1,575,000 through five financing transactions. In the first six months of
      2006,
      we completed several additional financing transactions, which provided us with
      $1,000,000 in funding. 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
      Plum Mine location. As disclosed in the report of our independent registered
      public accounting firm in our financial statements included in this Form 10-KSB
      for the year ended December 31, 2005, our recurring losses and negative cash
      flow from operations raise substantial doubt about our ability to continue
      as a
      going concern.




6




Furthermore,
      the litigation in which our Company has been involved since late 2004 has
      strained the Company’s financial resources. (See Part II, Item 1, “Legal
      Proceedings,” for a detailed discussion.) If we are unable to resolve the
      litigation in the near future, the ongoing legal costs may impact our ability
      to
      continue as a going concern.  In
      the
      first quarter of 2006, we completed additional financing transactions, which
      provided us with $400,000 in funding. In consideration for the funding, we
      issued promissory notes with a term of ninety (90) days and an interest rate
      of
      sixteen percent (16%) per annum. The default interest rate on the note is
      twenty-two percent (22%). The funds were used for working capital and general
      corporate purposes.




In
      April
      2006, we obtained a financing commitment in the amount of $2.2 million from
      a
      group of our existing investors, for which $600,000 has been advanced. We expect
      to close the transaction in the next 90 days, subject to completion of certain
      closing conditions. Upon closing, the funds will be deployed to expand our
      Plum
      Mine operation in northern Nevada. Specifically, we plan to take over the mining
      operations from our contract miner and have committed $500,000 to conduct
      further exploration at the Plum property. We believe, with this additional
      financing, that we have sufficient resources to operate throughout the next
      twelve months.




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.




**Item
      3.****Controls
      and Procedures**




Based
      on
      the most recent evaluation, which was completed as of the end of the period
      covered by this Form 10-QSB, we believe our company’s disclosure controls and
      procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) are
      effective to ensure that information required to be disclosed by us in this
      report is accumulated and communicated to our management, including our
      principal executive officer and principal financial officer, as appropriate,
      to
      allow timely decisions regarding required disclosure. We do not believe that
      any
      internal control deficiencies due to lack of segregated accounting functions
      and
      limited accounting staff constitute material weaknesses because of the use
      of
      accounting personnel from the consolidated offices with our Plum Mine operation
      and use of outside consultants, along with oversight from our Audit Committee.
      We are also in the process of taking further corrective measures to remedy
      the
      deficiencies in future periods.





There
      have been no changes during the quarter ended June 30, 2006 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
      materially affected, or are reasonably likely to materially affect, our internal
      controls over our financial reporting.




7




**PART
      II - OTHER INFORMATION**





**Item
      1.**  **Legal
      Proceedings**





***The
      State Court Case***




On
      November 9, 2004, we filed a lawsuit in Maricopa County (Arizona) Superior
      Court
      against defendants Stephen B. Parent, Ron Haswell, Walter Doyle, Seth Shaw,
      Antonio Treminio, together with their spouses, and Ecovery, Inc., a Nevada
      corporation, or Ecovery.




The
      12-count complaint alleges claims for violations of Arizona’s racketeering act,
      state-law securities fraud (primary and secondary liability), common-law fraud,
      negligent misrepresentation, breach of fiduciary duty, negligence/gross
      negligence, breach of contract, unjust enrichment/restitution, theft/conversion,
      conspiracy liability, and injunctive relief. In essence, the complaint alleges
      that Stephen Parent misrepresented the value of certain placer mining claims
      that his company, Ecovery, sold to us in 2003 in exchange for approximately
      99,000,000 shares of our stock; that Ecovery no longer had good title to the
      mining claims when they were sold to us; that Mr. Parent and the other
      named defendants conspired to defraud us out of approximately 24,000,000 shares
      of our stock; and that Mr. Parent misappropriated more than $300,000 in company
      funds.




On
      November 29, 2004, we moved for a temporary restraining order, or TRO,
      prohibiting Mr. Parent and his spouse from selling, transferring, assigning,
      or
      otherwise disposing of up to approximately 46,000,000 shares of our stock in
      their possession. After a hearing, at which the Parents appeared through
      counsel, the Honorable Anna M. Baca granted the motion, conditioned on the
      posting of an $8 million bond. We did not post the bond, and the TRO was
      subsequently dissolved.




On
      or
      about December 9, 2004, Mr. Parent and fellow GoldSpring directors Jerrie W.
      Gasch and Purnendu K. Rana Medhi purportedly seized control of our company.
      Afterward, the Parent-led GoldSpring purported to fire Greenberg Traurig, LLP,
      or GT, as counsel for our company in this litigation and to hire Ronan &
Firestone, PLC, or Ronan, as substitute counsel. Thereafter, on December 22,
      2004, Ronan filed a stipulation to dismiss the lawsuit, purportedly on behalf
      of
      our company. Also on December 22, 2004, the Parents filed their answer, in
      which
      they generally denied the allegations of the complaint.




On
      December 29, 2004, GT filed a motion on behalf of our company to strike the
      stipulation to dismiss that Ronan had filed. Judge Baca heard oral argument
      on
      the motion on February 2, 2005 and took the matter under advisement. Further
      oral argument was heard on March 22, 2005. In light of the preliminary
      injunction that was issued in a related shareholder action in federal district
      court (discussed below), and the resolutions passed by our Board of Directors
      on
      February 22, 2005, Judge Baca granted the motion in an Order dated March 22,
      2005 and struck Ronan’s purported stipulation to dismiss.




In
      the
      same ruling, Judge Baca said that “there are serious conflicts in the continued
      representation of the Parents in this lawsuit by Gust Rosenfeld.” The Court was
      referring to the fact that Parent had hired Gust Rosenfeld as our counsel after
      purportedly taking over our company on December 9, 2004. The Court therefore
      ordered further briefing on whether Gust Rosenfeld should be disqualified as
      the
      Parents’ counsel. Shortly thereafter, on March 28, 2005, Gust Rosenfeld
      voluntarily withdrew as the Parents’ counsel. The Parents have since retained
      new counsel. The discovery process is currently ongoing.




Mr.
      Treminio has since been dismissed from the suit in accordance with the terms
      of
      a prior settlement agreement between Mr. Treminio and GoldSpring, Inc..
      Mr. Shaw filed an answer, *in
      pro per* ,
      on
      April 6, 2005, and generally denied the allegations of the complaint. Mr.
      Haswell, Mr. Doyle and Ecovery, Inc. have filed answers and generally denied
      the
      allegations of the complaint.





At
      the
      end of June 2006, the Company settled its claims against Mr. Shaw for a $75,000
      settlement and was in negotiations with another defendant for
      settlement.




8




***The
      Federal Court Case***




*Background*




Stephen
      B. Parent and several others purporting to represent a majority of the
      shareholders of our company adopted Consent Resolutions in Lieu of a Special
      Meeting of Shareholder’s dated December 9, 2004, and Mr. Parent, Jerrie W.
      Gasch, and Purnendu K. Rana Medhi, each of whom served as a director of our
      company until Mr. Medhi’s resignation in April 2005, adopted Directors’ Consent
      Resolutions (together the “December Consent Resolutions”) dated December 10,
      2004. Taken together, the December Consent Resolutions, by their purported
      terms, removed John F. Cook, Robert T. Faber, Leslie L. Cahan, Todd S. Brown,
      Christopher L. Aguilar, Stanley A. Hirschman, and Phil E. Pearce as directors,
      rescinded the restructuring of a $10 million financing transaction entered
      into
      in March 2004, removed Mr. Faber as President of our company, named Mr. Parent
      as President of our company and his wife as Secretary of our company, designated
      Mr. Parent as the sole signing officer of our company’s bank accounts, and
      terminated our company’s legal counsel.




On
      December 22, 2004, Robert T. Faber and Leslie L. Cahan (collectively, the
“plaintiffs”), who are shareholders and directors of our company, filed a
      lawsuit in the United States District Court for the District of Arizona,
      entitled Robert T. Faber, et al. v. Stephen B. Parent, et al., No.
      CV04-2960-PHX-EHC (“the Litigation”). The plaintiffs asserted claims in both
      their individual capacities and derivatively, on behalf of our company, against
      directors Stephen B. Parent, Jerrie W. Gasch, and Purnendu K. Rana Medhi
      (collectively, the “defendants”), alleging that, by adopting the Consent
      Resolutions, the defendants had unlawfully orchestrated an illegal coup to
      wrest
      control of our company from its current officers and directors. As discussed
      below, Messrs. Gasch and Medhi no longer support the Parent-led
      board.




*The
      Temporary Restraining Order*




Following
      a hearing on December 22, 2004, at which the Court heard evidence and argument
      of counsel, the Honorable Earl H. Carroll issued a December 23, 2004 Order
      Granting Plaintiffs’ Motion for Temporary Restraining Order, or TRO. The TRO
      precluded defendants and their agents from (1) making any withdrawals from
      any
      bank accounts of our company, other than reasonable withdrawals necessary to
      the
      daily operations of the business; (2) rescinding or interfering in any way
      with
      any transactions approved by our company’s Board of Directors prior to December
      9, 2004; (3) entering into any contracts or agreements with third parties on
      behalf of our company or disposing of or transferring any property or assets
      of
      our company; and (4) issuing or otherwise transferring any stock or debentures.




The
      Court
      subsequently continued the TRO through February 15, 2005 and confirmed that
      none
      of the defendants were to receive any payments from our company during the
      pendency of the TRO. Despite the Court’s Order, the defendants have since
      produced business records of our company demonstrating that, after adopting
      the
      December Consent Resolutions, the defendants arranged for our company to pay
      them a collective total of $38,721, including $20,869 in payments to Stephen
      Parent.




*The
      Preliminary Injunction and Notice of Appeal*




Following
      additional hearings in which the Court heard witness testimony and evidence,
      the
      Court issued an Order on February 15, 2005 granting plaintiffs’ Motion for a
      Preliminary Injunction. The Preliminary Injunction ordered the reinstatement
      of
      our company’s Board of Directors as it existed prior to December 10, 2004. As a
      result of the Court’s Order, John F. Cook, Robert T. Faber, Christopher L.
      Aguilar, Todd S. Brown, Leslie L. Cahan, Stanley A. Hirschman, and Phil E.
      Pearce have been reinstated as directors. Stephen B. Parent, Jerrie W. Gasch,
      and Purnendu K. Rana Medhi remained directors until Mr. Medhi’s resignation in
      April 2005. The Court’s February 15 Order also stayed the implementation of the
      Consent Resolutions, and directed us to hold a special shareholders meeting
      within 30 days.




9




In
      concluding that the Preliminary Injunction should issue, the Court stated,
“The
      Court is specifically concerned about the irreparable injury that would occur
      to
      GoldSpring and its shareholders and investors if Defendants [Mr. Parent, his
      wife, Jerrie W. Gasch, and Purnendu K. Rana Medhi] are permitted to manage
      the
      corporation. There is substantial evidence of Parent’s wrongdoing in his former
      position as CEO of GoldSpring, such as his misappropriation of corporate assets
      for his personal use. The Defendants’ attempt to rescind the [financing]
      transaction that was approved at the Board of Directors meeting on November
      30,
      2004 could adversely impact GoldSpring’s ability to meet its obligations under
      the agreement. Rescission of the refinancing transaction would prove detrimental
      for GoldSpring because the corporation would be forced to pay the $200,000.00
      monthly penalty for failing to file the S-1 Registration with the SEC within
      ninety (90) days of the March 22, 2004 agreement between GoldSpring and [various
      investors]. This penalty had accrued to over $1,000,000.00 as of November 30,
      2004.”




Thereafter,
      the defendants filed a motion for reconsideration in which they asked that
      the
      Preliminary Injunction be dissolved or, alternatively, that the Court clarify
      the injunction order and require the plaintiffs to post a bond. On February
      25,
      2005, the Court held a hearing on the defendants’ motion for reconsideration.
      The Court denied the defendants’ requests to dissolve the Preliminary Injunction
      and to require the posting of a bond. In response to defendants’ request for
      clarification of the injunction order, the Court ordered that our company is
      not
      to issue additional shares prior to the special shareholders meeting, and that
      the record date for the special shareholders meeting shall be December 9,
      2004.




Our
      company believed that this ruling would disenfranchise the investors that
      participated in the November 30, 2004 restructuring transaction by preventing
      them from receiving and voting the shares they are entitled to receive through
      the conversion of their notes. A December 9, 2004 record date would also have
      disenfranchised all shareholders that acquired their stock on the open market
      after December 9, 2004.




Therefore,
      on February 28, 2005, our company filed a legal memorandum with the Court
      addressing these issues. In it, we pointed out that applicable federal
      securities laws require us to provide shareholders with current financial
      statements, which will not be available until June 30, 2005, and that Florida
      law and our company’s bylaws require that a record date be fixed in advance
      rather than in the past. On March 14, 2005, the Court held a hearing on these
      issues. After hearing argument of counsel, the Court indicated that it agreed
      with our position.




Accordingly,
      on March 17, 2005, the Court vacated its earlier Order directing us to hold
      a
      special shareholders meeting and setting December 9, 2004 as the record date
      for
      purposes of that meeting. The Court also vacated the provision of its February
      25 Order prohibiting us from issuing additional shares. Finally, the Court
      reaffirmed its earlier Order reinstating our Board of Directors as it existed
      prior to December 10, 2004. In doing so, the Court ordered that the reinstated
      board shall remain in place until the Court orders otherwise.




On
      April
      13, 2005, a notice of appeal was filed on behalf of defendants (the Parents,
      the
      Gaschs, and the Medhis) seeking to reverse the Court’s March 17 Order. On April
      21, 2005, the Gaschs moved to dismiss their appeal. On June 10, 2005, the
      defendants (the Parents) filed their opening appellate brief. The plaintiffs
      filed their response brief on August 16, 2005. The defendants’ response brief
      was filed on October 3, 2005. The 9th Circuit Court of Appeals held oral
      arguments on the appeal on January 12, 2006.




On
      January 23, 2006, the United States Court of Appeals for the Ninth Circuit
      issued a Memorandum disposition in the matter of *Faber
      v. Parent* ,
      stating, “We reverse the district court’s decision to grant the preliminary
      injunction for failure to comply with the requirements of Rule 52(a). However,
      the injunction shall remain intact for a reasonable time not to exceed 90 days
      from the date on which this disposition is filed or until an earlier date on
      which the district court enters a succeeding preliminary injunction. During
      this
      time, the district court may issue a new preliminary injunction if, after
      undertaking the required analysis and making the necessary findings, it deems
      such an injunction appropriate.” The preliminary injunction, issued by the
      district court on February 15, 2005, had reinstated GoldSpring’s Board of
      Directors as it existed prior to Mr. Parent’s takeover of GoldSpring on December
      10, 2004. The Memorandum disposition also stated that, “If, after further
      proceedings, the district court does not order a new preliminary injunction,
      we
      leave it to the district court to restore, as near as possible, the situation
      that would have existed if the preliminary injunction had never been granted.”




10




*The
      Investors’ Motion to Intervene*




On
      March
      2, 2005, Longview Fund LP, Longview Equity Fund, Longview International Equity
      Fund, and Alpha Capital AG (collectively, the “Investors”) moved to intervene in
      the litigation. In doing so, the Investors sought to dissolve the portion of
      the
      Court’s February 25, 2005 Order that prohibited our company from issuing stock
      to them under the refinancing transaction.




In
      their
      motion to intervene, the Investors alleged that they are holders of more than
      $3
      million of Convertible Notes issued by us, which they received pursuant to
      the
      transaction in March 2004. The Investors further alleged that, under the terms
      of the Convertible Notes, they are entitled to convert the notes, in whole
      or in
      part, into our stock at any time. The Investors contended that, by preventing
      us
      from issuing stock, the Court’s February 25 Order is a de facto preliminary
      injunction in favor of the defendants, and effectively deprived the Investors
      of
      much of the benefits to which they are contractually entitled. Because the
      defendants had not met the requirements for injunctive relief, the Investors
      argued, that portion of the Court’s Order should be dissolved. Alternatively,
      the Investors asked the Court to order the defendants to post a $3.5 million
      bond to protect the Investors against any damages stemming from the de facto
      injunction.




On
      March
      7, 2005, the defendants filed their response to the Investors’ motion. They
      contended that Judge Carroll’s February 25 Order was not an injunction and, in
      any event, that the Investors had failed to meet the requirements for
      intervention. Accordingly, they argued that the motion should be denied.




On
      March
      18, 2005, the Court issued an Order denying the Investors’ motion as moot. The
      Court reasoned that, since its March 17 Order lifted the prohibition on the
      issuance of additional shares of our stock, the Investors had, in essence,
      already received the relief they requested in their motion to intervene.
      Therefore, the issues raised in that motion had become moot.




*The
      Company’s Motion Re: the Gust Rosenfeld Retainer*




After
      purportedly seizing control of our company on December 9, 2004, Stephen Parent,
      acting as the putative president of GoldSpring, authorized the payment of a
      $250,000 retainer to the law firm of Gust Rosenfeld using funds of our company.
      On March 1, 2005, we filed a motion for an order requiring Gust Rosenfeld to
      provide a detailed accounting of its use of these funds and to refund the unused
      portion.




On
      March
      14, 2005, Gust Rosenfeld sent us a refund check for $83,903.38 and a “ledger”
showing how the firm spent the other $166,096.62. Among other things, the ledger
      revealed that Gust Rosenfeld withdrew approximately $109,000 as payment for
      its
      attorneys’ fees and costs. The ledger also showed payments to other lawyers and
      outside vendors totaling approximately $57,000. Included in this amount were
      two
“refund” payments to Stephen Parent totaling $21,000.




We
      have
      filed a reply brief asking the Court to order Gust Rosenfeld to provide a more
      detailed accounting of its expenditures, including billing invoices for legal
      services it purportedly rendered to our company. We have also asked the Court
      to
      require Gust Rosenfeld to provide a written explanation for the payments to
      other lawyers and outside vendors, as well as the so-called refund payments
      to
      Parent.




*The
      “New” Consent Resolutions*




On
      March
      21, 2005, defendants Stephen and Judith Parent filed a “Motion for Order” asking
      the Court to remove certain directors of our company’s Board of Directors.
      Attached to the motion was a “Consent in Lieu of a Special Meeting of the
      Shareholders of GoldSpring, Inc.,” dated March 18, 2005 (the “March Consent”).
      The March Consent was nearly identical to the one adopted by the Parents and
      others on December 9, 2004. It purported to remove directors Robert T. Faber,
      John F. Cook, Leslie L. Cahan, Todd S. Brown, Christopher L. Aguilar, Stanley
      A.
      Hirschman, and Phillip E. Pierce as directors of our company. The March Consent
      was signed by shareholders Stephen Parent; Judith Parent; Aztech Environmental
      Industries, Inc.; Jasmine House, LLC; Frontline 2001, LLC; Jubilee Investment
      Trust PLC; Ronald M. Haswell; Mark and Jennifer Ward; Walter T. Plummer; Lynn
      Zollinger; Maia Ray; and Rita Hardy.




11




On
      March
      25, 2005, our company and the plaintiffs filed a joint response to the Parents’
Motion for Order. In it, we argued that (1) the shareholders who signed the
      March Consent did not hold a majority of our company’s stock, which rendered the
      Consent ineffective; (2) the Parents solicited more than ten shareholders,
      and
      therefore violated Securities and Exchange Commission Rule 14a; and (3) the
      Parents cannot obtain the relief they seek because they have not asserted an
      affirmative claim in court.




The
      Parents filed a reply and supplemental reply on March 20, 2005, and April 11,
      2005, respectively. In the reply, the Parents argued that the shareholders
      who
      signed the Consent do, in fact, hold a majority of the outstanding shares as
      of
      the date it was executed, and that any shares issued after that date are not
      to
      be counted. They also denied having solicited more than ten persons and denied
      any obligation to state an affirmative claim before seeking the relief asked
      for
      in their motion. In their supplemental reply, the Parents referred to our
      company’s recent Form 8-K filing (the “8-K”) with the Securities and Exchange
      Commission. In the 8-K, we disclosed that our company had issued (1) 59,203,918
      shares of restricted common stock in connection with the Settlement Agreement
      Regarding Failure to File a Registration Statement; (2) six secured convertible
      notes in an aggregate amount of $6,584,005 in connection with the Settlement
      Agreement Regarding Mandatory Redemption Payment; and (3) convertible notes
      in
      the amount of $403,175 in connection with the Settlement Agreement Regarding
      Failure to deliver shares due upon conversion. The Parents contended that the
      transactions referred to in the 8-K constituted an unfair dilution of the
“non-Merriman shareholders’” stock holdings.




On
      April
      20, 2005, we filed a Supplemental Notice to inform the Court that Messrs. Gasch
      and Medhi do not support the March Consent. In addition, we informed the Court
      that Mr. Gasch had signed a Declaration that (1) Mr. Gasch never agreed to
      serve
      on the proposed board of directors contemplated by the March Consent, (2) that
      Mr. Gasch does not support the March Consent and, if the March Consent
      constituted a valid shareholder resolution (which we do not believe) Mr. Gasch
      would immediately vote to reinstate the entire Board of Directors as it
      currently exists, (3) Mr. Gasch denounces and rescinds the purported Director’s
      Consent Resolutions dated December 10, 2004 and no longer supports any of the
      resolutions or purported corporate actions contemplated in that purported
      consent, and (4) Mr. Gasch has terminated Gust Rosenfeld as his counsel because
      he no longer wishes to be associated with or jointed represented by Mr. Parent.
      Mr. Medhi also informed us that he resigned as a director of our Board of
      Directors as currently constituted and as a member of the board of directors
      designated by earlier consent resolution. We informed the Court that these
      developments constitute additional reasons to deny the Parents’
motion.





On
      January 23, 2006, the United States Court of Appeals for the Ninth Circuit
      issued a Memorandum disposition in the matter of *Faber
      v. Parent* ,
      reversing the Preliminary Injunction, which had been granted by the United
      States District Court for the District of Arizona on February 15, 2005 for
      Mr.
      Parent’s failure to comply with the requirements of Rule 52(a). The Court of
      Appeals ordered that the injunction shall remain intact for a reasonable period
      of time not to exceed 90 days or until an earlier date on which the district
      court enters a succeeding preliminary injunction. The Court of Appeals remanded
      the case to the district court to allow the district court to conduct further
      proceedings, which may include issuing a new preliminary
      injunction.





*April
      18, 2006 Order*





O n
      April
      18, 2006, the United States District Court for the District of Arizona issued
      an
      Order Granting a Preliminary Injunction in favor of the Plaintiff which finally
      provided firm direction on several of the matters which were the subject of
      motions described above. The Order accomplished the following:




12




(i)
      it
      stayed the implementation of the Consent Resolutions purportedly passed on
      December 9, 2004 to effect the attempted takeover of the Company by Stephen
      Parent’s group;




(ii)
      it
      denied Defendants’ motion for an Order removing seven current directors from
      Goldspring’s Board (which would have had the effect of allowing Parent to
      rescind the refinancing transaction dated November 30, 2004 with the Merriman
      investors); and




(iii)
      it
      granted GoldSpring’s Motion for an Order requiring the law firm of Gust
      Rosenfeld PLC to provide a detailed accounting of the unreturned portion of
      the
      $250,000 retainer (namely $166,096.62), given to Gust Rosenfeld PLC by Mr.
      Parent in December 2004.





On
      July
      31, 2006, the Court issued an order denying the Defendants’ Motion for New Trial
      (Reconsideration) which had requested that the Court vacate the April
      18 th order.
      The Motion was denied as the Defendants failed to demonstrate clear error or
      offer new evidence.





*Degerstrom
      Suit*





On
      April
      11, 2006, in the First Judicial District Court, Storey County, Nevada, wherein
      N.A. Degerstrom, Inc. (“Degerstrom”) sued the Company on various counts,
      including breach of contract, *quantum
      merit* ,
      foreclosure of mechanic's lien, and assertion that the Degerstrom lien has
      priority over all other liens on the Plum Mine property. The plaintiff claims
      damages in excess of $806,000 plus interest. The Company subsequently answered
      the Complaint and counterclaimed for breach of contract, breach of implied
      covenant of good faith and fair dealing, and for negligence, alleging damages
      in
      excess of $10,000.





The
      lawsuit arises out of a dispute as to how much the Company owes the Degerstrom
      for services provided. Pursuant to a December 27, 2005 agreement, the parties
      agreed that the amount to be paid by the Company to Degerstrom would be subject
      to volume reconciliation by aerial survey. According to Company management,
      pursuant to prepared aerial and ground surveys, the Company has been over-billed
      for amounts of ore and waste which have been hauled by Degerstrom. The results
      of the surveys are to be presented to the Court as evidence as to the Company’s
      affirmative defenses that it does not owe the amounts claimed by
      Degerstrom.





Additionally,
      the Company has what it believes to be valid counterclaims, arising out of
      activities of Degerstrom, including, but not limited to, negligent crushing
      of
      ore, failure to accurately measure and charge for waste and ore hauled and
      crushed, and failure to adequately man the job and provide sufficient equipment.
      These activities, as alleged in the Counterclaim, resulted in damages to the
      Company in excess of $10,000.





Degerstrom
      filed a mechanic's lien against the property of Plum, and at the time of filing
      of the Complaint, filed and recorded a lis pendens against the property of
      Plum
      based upon Degerstrom's claim. Counsel has advised management that the Company
      may challenge the lis pendens by asserting that the lis pendens is based upon
      a
      mechanic's lien which is overstated. However, the time is not ripe for the
      bringing of such a motion until the survey results have been presented and
      analyzed. Alternatively, Plum may request the court to establish a bond in
      an
      amount that would secure, pending litigation, Degerstrom's mechanic's lien
      claim. Typically, the court would charge one and one-half times the amount
      it
      found to be the mechanic's lien claim.





Management
      believes the ground and aerial surveys support a much lower amount of ore and
      waste which was processed by Degerstrom than is alleged in the Complaint, and
      if
      the Court accepts that volume reconciliation would be as established by such
      surveys (as is established in the written documentation between the parties),
      there is a reasonable probability of success in reduction, if not elimination,
      of the amount claimed by Degerstrom. However, until the Court rules on the
      method of volume reconciliation, it is premature to predict the probability
      of
      likelihood of success on the merits.





13




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





Not
      applicable.





**Item
      3.**  **Defaults
      Upon Senior Securities**





In
      connection with our acquisition of the Plum Mining Company, LLC, we issued
      a
      promissory note to the seller for $1 million (the balance of the purchase
      price). At June 30, 2006, the outstanding balance on the Note was $400,000.
      We
      are in default on this Note.




Under
      the
      terms of our November 2004 subscription agreement, we issued 8% convertible
      notes in the aggregate principal amount of $11.1 million to an investor group.
      Under the terms of the notes, our first principal and interest repayment was
      scheduled for April 1, 2005. We are in default on these notes. The default
      interest rate is 12%.




In
      March
      2005, we issued a secured convertible note in the aggregate amount of $6,885,184
      with a 12% interest rate for the 29,573,803 shares and accrued interest due
      under the mandatory redemption payment provisions of our November 2004
      subscription agreement. Payments on this note were scheduled to begin on April
      1, 2005. We are in default on this note, causing the interest rate to increase
      to the default rate of 18%.




On
      July
      15, 2005, we completed a financing transaction, which provided us with $800,000
      in funding. In consideration for the financing, we issued promissory notes
      with
      a face value of $1.2 million, reflecting an original issue discount of
      thirty-three and one-third (33.3%) percent. The term of the notes is two years,
      with an optional extension of one year at the option of the investor. The annual
      interest rate on the notes is 15% of the face value and is payable monthly.
      On
      September 28, 2005, we completed another financing transaction under the same
      terms and conditions as the July 2005 financing. The September 2005 financing
      provided us with $200,000 in funding. We have not made the monthly interest
      payments on these notes, and thus we are in default. The default interest rate
      on these notes is 22%.




During
      the fourth quarter of 2005, we completed three financing transactions, which
      provided us with a total of $575,000 in funding. In consideration for the
      financing, we issued promissory notes with a term of ninety (90) days and an
      interest rate of sixteen percent (16%) per annum. The default interest rate
      on
      the notes is twenty-two percent (22%). These notes had a maturity date of May
      15, 2006, at which time all outstanding principal and interest became due.




We
      are
      working with the above-referenced note holders to cure the defaults. The above
      referenced notes, including interest, have a total value of approximately
      $12,116,626 at June 30, 2006. While failure to reach a resolution would likely
      cause us to seek external funding in order to meet our obligations, there can
      be
      no assurance that such funding would be available.




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





Not
      applicable.





**Item
      5.**  **Other
      Information**




Not
      applicable.




14




**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 June 30, 2006
                (Unaudited)




·
            Consolidated
                Statement of Operations for the three- and six-month periods ended
                June
                30, 2006 and 2005 (Unaudited)




·
            Consolidated
                Statement of Cash Flows for the six-month periods ended June 30,
                2006 and
                2005 (Unaudited)




·
            Notes
                to Financial Statements




(2)  Exhibits
      filed as part of this Report:




ExhibitNumber
            Exhibit31.1
            Certification
                of Chief Executive Officer and Chief Financial
                Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated
                under
                theSecurities
                Exchange Act of 1934, as amended.32.1
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuantto
                Section 906 of the Sarbanes-Oxley Act of
                2002





(b)  Reports filed on Form 8-K during the quarter ended June 30, 2006:




(1)
            A
                Report on Form 8-K was filed with the Securities and Exchange Commission
                on April 24, 2006 under Item 8.01 relating to the U.S. District Court
                for
                the District of Arizona’s issuance an Order in the matter of*Faber
                v. Parent*,
                which accomplished the following:
              
              (i)
                it stayed the implementation of the Consent Resolutions purportedly
                passed
                on December 9, 2004 to effect the attempted takeover of the Company
                by
                Stephen Parent’s group;
              
              (ii)
                it denied Defendants’ motion for an Order removing seven current directors
                from Goldspring’s Board; and
              
              (iii)
                it granted GoldSpring’s Motion for an Order requiring the law firm of Gust
                Rosenfeld PLC to provide a detailed accounting of the unreturned
                portion
                of the $250,000 retainer (namely $166,096.62), given to Gust Rosenfeld
                PLC.




(2)
            A
                report on Form 8-K was filed with the Securities and Exchange Commission
                on May 9, 2006 under Item 8.01 relating to disclosure of the first
                quarter
                net profit at Plum Mine.




15




(3)
            A
                report on Form 8-K was filed with the Securities and Exchange Commission
                on August 10, 2006 under Items 5.01 and 8.01 relating to disclosure
                regarding an amendment to the Company’s Bylaws and an update to federal
                court litigation involving the
                Company.




**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:
                August 14, 2006
            By:
            /s/
                Robert T. FaberName:
            Robert
                T. FaberTitle:
            President
                  and Chief Executive Officer




By:
            /s/
                Robert T. FaberName:
            Robert
                T. FaberTitle:
            Chief
                  Financial and Accounting
                  Officer




16