FORM
10-Q




(Mark
One)


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





For
the Quarterly Period Ended June 30, 2009




OR





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




For the
transition period from ______________ to ______________




Commission
File No. 000-32429





GOLDSPRING, INC.


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





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





P.O. Box
1118


Virginia
City, NV 89440


(Address
of principal executive offices)


(775)
847-5272


(Registrant’s telephone number,
including area code)





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):





Large
accelerated filer o        Accelerated
filer o


o Non-accelerated
filer       x Smaller reporting
company




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




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




The
number of shares of Common Stock, $0.000666 par value, of the registrant
outstanding at August 3, 2009 was 3,609,751,058.













Table of
Contents





TABLE OF
CONTENTS





PART
      I.
                3Item
      1. Financial Statements.
                3CONDENSED
      CONSOLIDATED BALANCE SHEETS
                3CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS
                5CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS
                8CONDENSED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
                7NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                10Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
                27Item
      4. Controls and Procedures.
                33PART
      II.
                34Item
      1. Legal Proceedings.
                34Item
      1A. Risk Factors.
                34Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.
                40Item
      3. Defaults Upon Senior Securities.
                40Item
      4. Submission of Matter to Vote of Security Holders.
                40Item
      5. Other Information.
                40Item
      6. Exhibits.
                40SIGNATURES
                41EXHIBIT
      INDEXCertification
      of CEO Pursuant to Rule 15d-14(a)Certification
      of CFO Pursuant to Rule 15d-14(a)Certification
      of CEO Pursuant to Section 1350Certification
      of CFO Pursuant to Section 1350





Statement
Regarding Forward-Looking Statements





This
Form 10-Q contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. The statements contained in this report on
Form 10-Q that are not purely historical are forward-looking statements within
the meaning of applicable securities laws. Forward-looking statements include
statements regarding our “expectations,” “anticipation,” “intentions,”
“beliefs,” or “strategies” regarding the future. Forward looking statements also
include statements regarding fluctuations in the price of gold or certain other
commodities, (such as silver, copper, diesel fuel, and electricity); changes in
national and local government legislation, taxation, controls, regulations and
political or economic changes in the United States or other countries in which
we may carry on business in the future; business opportunities that may be
presented to or pursued by us; our ability to integrate acquisitions
successfully; operating or technical difficulties in connection with exploration
or mining activities; the speculative nature of gold exploration, including
risks of diminishing quantities or grades of reserves; and contests over our
title to properties. All forward-looking statements included in this report are
based on information available to us as of the filing date of this report, and
we assume no obligation to update any such forward-looking statements. Our
actual results could differ materially from the forward-looking statements.
Among the factors that could cause actual results to differ materially are the
factors discussed in Item 1A of Part II, “Risk Factors.”


2





PART I.


Item 1.Financial
Statements.





GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS




June 30,
                      2009
                    
                    
                    December 31,
                      2008(Unaudited)
                    
                    
                    (Audited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                    
                    $
                    417,118
                    
                    
                    $
                    322,938Other
      current assets, net
                    
                    
                    521,156
                    
                    
                    
                    -Total
      Current Assets
                    
                    
                    938,274
                    
                    
                    
                    322,938MINERAL
      RIGHTS, PLANT AND EQUIPMENTMineral
      rights
                    
                    
                    1,530,547
                    
                    
                    
                    1,530,547Plant
      and equipment, net
                    
                    
                    695,664
                    
                    
                    
                    489,236Total
      Mineral Rights, Plant and Equipment
                    
                    
                    2,226,211
                    
                    
                    
                    2,019,783DEBT
      DISCOUNT
                    
                    
                    977,167
                    
                    
                    
                    -RECLAMATION
      BOND DEPOSIT
                    
                    
                    766,768
                    
                    
                    
                    766,768OTHER
      LONG-LIVED ASSETS
                    
                    
                    374,174
                    
                    
                    
                    408,190TOTAL
      ASSETS
                    
                    $
                    5,282,594
                    
                    
                    $
                    3,517,679





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


3





GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS (Continued)




June 30,
                      2009
                    
                    
                    December 31,
                      2008(Unaudited)
                    
                    
                    (Audited)LIABILITIES AND STOCKHOLDERS’
      DEFICIENCYCURRENT
      LIABILITIESAccounts
      payable
                    
                    $
                    1,686,575
                    
                    
                    $
                    1,222,933Accrued
      expenses
                    
                    
                    221,918
                    
                    
                    
                    121,750Accrued
      interest payable
                    
                    
                    3,727,041
                    
                    
                    
                    3,458,734Convertible
      debentures
                    
                    
                    10,187,966
                    
                    
                    
                    10,187,966Other
      debt
                    
                    
                    2,654,540
                    
                    
                    
                    2,660,565Total
      Current Liabilities
                    
                    
                    18,478,040
                    
                    
                    
                    17,651,948LONG-TERM
      DEBT AND OTHER LONG-TERM LIABILITIESLong-term
      convertible debt obligation, net of current portion
                    
                    
                    4,282,563
                    
                    
                    
                    2,782,563Long-term
      debt obligation, net of current portion
                    
                    
                    620,000
                    
                    
                    
                    500,000Derivative
      liability
                    
                    
                    6.931,800
                    
                    
                    
                    5,368,333Long-term
      reclamation liability
                    
                    
                    1,146,154
                    
                    
                    
                    1,105,342Total
      Long-Term Debt and Other Long-Term Liabilities
                    
                    
                    12,980,517
                    
                    
                    
                    9,756,238Total
      Liabilities
                    
                    
                    31,458,557
                    
                    
                    
                    27,408,186COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      DEFICITCommon
      stock, $.000666 par value 3,950,000,000 shares authorized, shares issued
      and outstanding were 3,609,251,058 (June 30, 2009) and 3,380,948,371 (Dec.
      31, 2008)
                    
                    
                    2,403,761
                    
                    
                    
                    2,251,712Additional
      paid-in capital
                    
                    
                    26,696,170
                    
                    
                    
                    22,721,504Accumulated
      deficit
                    
                    
                    (55,275,894
                    )
                    
                    
                    (48,863,723
                    )Total
      Stockholders’ Deficiency
                    
                    
                    (26,175,963
                    )
                    
                    
                    (23,890,507
                    )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICICT
                    
                    $
                    5,282,594
                    
                    
                    $
                    3,517,679





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


4




GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)




Three
      Months Ended June 30,2009
                  
                  
                  2008REVENUE
      FROM GOLD SALES, Net
                  
                  $
                  ―
                  
                  
                  $
                  ―COST
      AND EXPENSESDepletion,
      depreciation and amortization
                  
                  
                  37,603
                  
                  
                  
                  60,000Reclamation,
      exploration and test mining expenses
                  
                  
                  642,077
                  
                  
                  
                  792,308General
      and administrative
                  
                  
                  309,603
                  
                  
                  
                  802,805Consultants
      and professional fees
                  
                  
                  75,000
                  
                  
                  
                  27,940Total
      Cost and Expenses
                  
                  
                  1,064,343
                  
                  
                  
                  1,683,053LOSS
      FROM OPERATIONS
                  
                  
                  (1,064,343
                  )
                  
                  
                  (1,683,053
                  )OTHER
      INCOME (EXPENSE):Financing
      cost – warrant issuances
                  
                  
                  (418,173
                  )
                  
                  
                  ―Other,
      net
                  
                  
                  (58,500
                  )
                  
                  
                  (61,875
                  )Interest
      expense
                  
                  
                  (821,051
                  )
                  
                  
                  (588,119
                  )Total
      Other Expense
                  
                  
                  (1,297,724
                  )
                  
                  
                  (649,994
                  )NET
      LOSS
                  
                  $
                  (2,362,067
                  )
                  
                  $
                  (2,333,047
                  )Net
      loss per common share – basic
                  
                  $
                  (0.0007
                  )
                  
                  $
                  (0.0008
                  )Basic
      weighted average common shares outstanding
                  
                  
                  3,522,895,698
                  
                  
                  
                  3,078,738,543





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


5





Six Months Ended June
      30,2009
                    
                    
                    2008REVENUE
      FROM GOLD SALES, Net
                    
                    $
                    ―
                    
                    
                    $
                    ―COST
      AND EXPENSESDepletion,
      depreciation and amortization
                    
                    
                    76,469
                    
                    
                    
                    120,000Reclamation,
      exploration and test mining expenses
                    
                    
                    2,092,393
                    
                    
                    
                    1,441,401General
      and administrative
                    
                    
                    692,217
                    
                    
                    
                    1,103,007Consultants
      and professional fees
                    
                    
                    145,406
                    
                    
                    
                    58,959Total
      Cost and Expenses
                    
                    
                    3,006,485
                    
                    
                    
                    2,723,367LOSS
      FROM OPERATIONS
                    
                    
                    (3,006,485
                    )
                    
                    
                    (2,723,367
                    )OTHER
      INCOME (EXPENSE):Financing
      cost – warrant issuances
                    
                    
                    (1,745,035
                    )
                    
                    
                    ―Other,
      net
                    
                    
                    (58,500
                    )
                    
                    
                    421,303Interest
      expense
                    
                    
                    (1,412,171
                    )
                    
                    
                    (1,329,310
                    )Total
      Other Expense
                    
                    
                    (3,405,686
                    )
                    
                    
                    (908,007
                    )NET
      LOSS
                    
                    $
                    (6,412,171
                    )
                    
                    $
                    (3,631,374
                    )Net
      loss per common share – basic
                    
                    $
                    (0.0018
                    )
                    
                    $
                    (0.0012
                    )Basic
      weighted average common shares outstanding
                    
                    
                    3,476,648,168
                    
                    
                    
                    2,078,738,543





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


6





GOLDSPRING,
INC.


CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICICT


For
the Quarter Ended June 30, 2009





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


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




Common
                            Shares Issued
                          
                          
                          Par value
                            $.000666
                            per share
                          
                          
                          Additional
                            Paid-in
                            Capital
                          
                          
                          Accumulated
                            Deficit
                          
                          
                          TotalDecember
      31, 2007 (Restated)
                          
                          
                          2,743,508,248
                          
                          
                          $
                          1,827,177
                          
                          
                          $
                          12,969,210
                          
                          
                          $
                          (32,376,040
                          )
                          
                          $
                          (17,579,653
                          )Common
      stock issued for:Debenture
      principal
                          
                          
                          196,155,028
                          
                          
                          
                          130,639
                          
                          
                          
                          1,949,634
                          
                          
                          
                          -
                          
                          
                          
                          2,080,273Debenture
      interest
                          
                          
                          151,961,857
                          
                          
                          
                          101,207
                          
                          
                          
                          1,456,497
                          
                          
                          
                          -
                          
                          
                          
                          1,557,704Mineral
      rights
                          
                          
                          3,866,667
                          
                          
                          
                          2,575
                          
                          
                          
                          76,983
                          
                          
                          
                          -
                          
                          
                          
                          79,558Consulting
      services
                          
                          
                          7,166,704
                          
                          
                          
                          4,773
                          
                          
                          
                          106,323
                          
                          
                          
                          -
                          
                          
                          
                          111,096Mining
      software
                          
                          
                          2,434,892
                          
                          
                          
                          1,622
                          
                          
                          
                          8,118
                          
                          
                          
                          -
                          
                          
                          
                          9,740Directors
                          
                          
                          20,000,000
                          
                          
                          
                          13,320
                          
                          
                          
                          221,080
                          
                          
                          
                          -
                          
                          
                          
                          234,400Employees
                          
                          
                          10,665,714
                          
                          
                          
                          7,103
                          
                          
                          
                          132,787
                          
                          
                          
                          -
                          
                          
                          
                          139,890Private
      placement
                          
                          
                          137,000,000
                          
                          
                          
                          91,242
                          
                          
                          
                          1,428,758
                          
                          
                          
                          -
                          
                          
                          
                          1,520,000529,250,862
                          
                          
                          
                          352,481
                          
                          
                          
                          5,380,180
                          
                          
                          
                          -
                          
                          
                          
                          5,732,661Warrant
      cost and stock based option compensation
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          3,434,323
                          
                          
                          
                          -
                          
                          
                          
                          3,434,323Liquidated
      damages
                          
                          
                          108,189,261
                          
                          
                          
                          72,054
                          
                          
                          
                          937,791
                          
                          
                          
                          -
                          
                          
                          
                          1,009,845Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (16,487,683
                          )
                          
                          
                          (16,487,683
                          )December
      31, 2008
                          
                          
                          3,380,948,371
                          
                          
                          $
                          2,251,712
                          
                          
                          $
                          22,721,504
                          
                          
                          $
                          (48,863,723
                          )
                          
                          $
                          (23,890,507
                          )Common
      stock issued for:Debenture
      interest
                          
                          
                          125,202,687
                          
                          
                          
                          83,385
                          
                          
                          
                          1,182,656
                          
                          
                          
                          -
                          
                          
                          
                          1,266,041Employees
                          
                          
                          4,500,000
                          
                          
                          
                          2,997
                          
                          
                          
                          55,503
                          
                          
                          
                          -
                          
                          
                          
                          58,500Private
      placement
                          
                          
                          98,600,000
                          
                          
                          
                          65,667
                          
                          
                          
                          920,333
                          
                          
                          
                          -
                          
                          
                          
                          986,000228,302,687
                          
                          
                          
                          152,049
                          
                          
                          
                          2,158,492
                          
                          
                          
                          -
                          
                          
                          
                          2,310,541Warrant
      cost and stocked based option compensation
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          1,816,174
                          
                          
                          
                          -
                          
                          
                          
                          1,816,174Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (6,412,171
                          )
                          
                          
                          (6,412,171
                          )June
      30, 2009
                          
                          
                          3,609,251,058
                          
                          
                          $
                          2,403,761
                          
                          
                          $
                          26,696,170
                          
                          
                          $
                          (55,275,894
                          )
                          
                          $
                          (26,175,963
                          )





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


7





GOLDSPRING,
INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)





Six Month
      Period Ended
                    June 30,2009
                  
                  
                  2008OPERATING
      ACTIVITIES:Net
      loss
                  
                  $
                  (6,412,171
                  )
                  
                  $
                  (3,631,374
                  )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                  
                  
                  76,469
                  
                  
                  
                  350,833Stock
      warrants and stock based compensation
                  
                  
                  1,874,674
                  
                  
                  
                  533,000Interest
      and liquidated damages paid through the issuance of stock
                  
                  
                  1,266,041
                  
                  
                  
                  1,709,911Accretion
      and debt discount interest
                  
                  
                  105,596
                  
                  
                  
                  ―Payments
      through the issuance of company stock
                  
                  
                  83,500
                  
                  
                  
                  358,380Derivative
      change fair value, net
                  
                  
                  ―
                  
                  
                  
                  130,604Net
      loss adjusted for non-cash operating activities
                  
                  
                  (3,005,531
                  )
                  
                  
                  (548,646
                  )Changes
      in operating assets and liabilities:Prepaid
      and other current assets
                  
                  
                  ―
                  
                  
                  
                  20,834Accounts
      payable
                  
                  
                  463,641
                  
                  
                  
                  98,969Accrued
      expenses
                  
                  
                  368,476
                  
                  
                  
                  (1,767,544
                  )Other
      operating assets and liabilities
                  
                  
                  ―
                  
                  
                  
                  ―Other
                  
                  
                  4,999
                  
                  
                  
                  151,192NET
      CASH USED IN OPERATING ACTIVITIES
                  
                  
                  (2,168,415
                  )
                  
                  
                  (2,045,195
                  )INVESTING
      ACTIVITIES:Mineral
      claims
                  
                  
                  ―
                  
                  
                  
                  (39,220
                  )Acquisition
      / sale of plant and equipment
                  
                  
                  (128,880
                  )
                  
                  
                  (18,041
                  )NET
      CASH USED IN INVESTING ACTIVITIES
                  
                  
                  (128,880
                  )
                  
                  
                  57,261
                  )FINANCING
      ACTIVITIES:Principal
      payments on Note Payable
                  
                  
                  (6,025
                  )
                  
                  
                  (12,297
                  )Net
      proceeds from the issuance of company stock
                  
                  
                  902,500
                  
                  
                  
                  500,000Proceeds
      from the issuance of note payable
                  
                  
                  1,495,000
                  
                  
                  
                  1,000,000NET
      CASH PROVIDED BY FINANCING ACIVITIES
                  
                  
                  2,391,475
                  
                  
                  
                  1,487,703INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALANTS
                  
                  
                  94,180
                  
                  
                  
                  195,089CASH
      AND CASH EQUIVALENTS, BEGINNING OF YEAR
                  
                  
                  322,938
                  
                  
                  
                  174,996CASH
      AND CASH EQUIVALENTS, END OF YEAR
                  
                  $
                  417,118
                  
                  
                  $
                  370,085SUPPLEMENTAL
      CASH FLOW INFORMATION:INCOME
      TAXES
                  
                  $
                  ―
                  
                  
                  $
                  ―INTEREST
      PAID
                  
                  $
                  ―
                  
                  
                  $
                  ―


8





GOLDSPRING,
INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)





Supplemental
      disclosure of non-cash investing and financing activities:Issuance
      of company stock for interest
                  
                  $
                  1,266,041
                  
                  
                  $
                  700,066Issuance
      of company stock for liquidated damages
                  
                  $
                  ―
                  
                  
                  $
                  1,009,845Conversion
      of debt principal into company’s common shares
                  
                  $
                  ―
                  
                  
                  $
                  970,273Issuance
      of company stock to employees
                  
                  $
                  58,500
                  
                  
                  $
                  ―Issuance
      of company stock for directors’ fees
                  
                  $
                  ―
                  
                  
                  $
                  234,400Seller
      note for acquisition of  land
                  
                  $
                  120,000
                  
                  
                  $
                  ―Issuance
      of company stock for consulting services
                  
                  $
                  ―
                  
                  
                  $
                  114,200Issuance
      of company stock for software
                  
                  
                  ―
                  
                  
                  
                  9,740Issuance
      of company shares for acquisition of mineral claims
                  
                  $
                  ―
                  
                  
                  $
                  32,490Issuance
      of company stock for financing fees
                  
                  
                  36,000
                  
                  
                  
                  ―





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


9





Table of
Contents





GOLDSPRING,
INC.


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


June 30,
2009 and 2008




Note
1 - Basis of Presentation




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




Note
2 — Interim Financial Statements




The
accompanying interim unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 8 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In our opinion, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the six month period ended June 30, 2009 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2009. For further information, refer to the financial statements
and footnotes thereto included in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2008.




Note
3 — Going Concern




The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America
which contemplate continuation of the Company as a going concern. However, the
Company has year end losses from operations and had no revenues from operations
during the six month ended June 30, 2009.   During the six months
ended June 30, 2009, the Company incurred a net loss of
$6,412,171.  Further, the Company has inadequate working capital to
maintain or develop its operations, and is dependent upon funds from private
investors and the support of certain stockholders.





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




Note
4 — Summary of Significant Accounting Policies




Terms
and Definitions




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




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




Principles
of Consolidation




The
consolidated financial statements include the accounts of our company and its
wholly owned subsidiaries: GoldSpring, LLC, Ecovat Copper Nevada, LLC, The Plum
Mining Company, LLC, and the Plum Mine Special Purpose Company LLC. All material
inter-company transactions and balances have been eliminated in
consolidation.  Certain reclassifications have been made in the 2008
results to conform to the presentation used in 2009.




Cash
and Cash Equivalents




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




Fair
Value of Financial Instruments




The
carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable, and accrued expenses approximate fair market value because of the short
maturity of those instruments. Furthermore, convertible debenture and other
notes payable amounts approximate fair value at June 30, 2009 and December 31,
2008.


10





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 FASB issued 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 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.




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 Notes 5 and
6.




Revenue
Recognition




The
Company recognizes revenue in accordance with the provisions of SAB 104 “Revenue Recognition in Financial
Statements”, which states that revenue is realized or realizable and
earned when all of the following four criteria are met:




1)
              Persuasive
      evidence of an arrangement exists,
 2)
              Delivery
      has occurred or services have been
rendered,
 3)
              The
      seller’s price to the buyer is fixed or determinable,
  and
 4)
              Collectability
      is reasonably assured.





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




Stock
Issued For Services




We base
the value of stock issued for services on the market value of our common stock
at the date of issue or our estimate of the fair value of the services received,
whichever is more reliably measurable.




Deferred
Financing Charges




During
the six month periods ended June 30, 2009 and 2008 we recorded deferred
financing charges associated with the issue of promissory notes payable totaling
$0 and $230,833 respectively. We amortize the charges over the respective lives
of the promissory notes payable as interest expense. During the quarter ended
June 30, 2009 and 2008 we recognized $0 and $75,000 respectively of interest
expense related to the amortization of deferred financing fees.


11





Plant
and Equipment




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




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




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




Mineral
Rights




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




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




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




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




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




Reclamation
Liabilities and Asset Retirement Obligations




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




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


12





Share
Based Compensation





The
Company accounts for share based compensation in accordance with SFAS 123R,
“Share Based Payments.”  Accordingly, the Company measures the cost of
employee services received in exchange for an award of equity instruments based
on the grant date fair value of the award and recognizes cost over the requisite
service period.




Earnings
Per Common Share




In
calculating earnings per common share, we compute basic earnings per share by
dividing net loss by the weighted average number of common shares outstanding,
excluding the dilutive effects of common stock equivalents. For the six months
ended June 30, 2009 and 2008, we had net losses for which the affect of common
stock equivalents would be anti-dilutive. Accordingly only basic and dilutive
loss per share is presented.




Use
of Estimates




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




Risks and
Uncertainties




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




Income
Taxes




We
recognize deferred tax assets and liabilities based on differences between the
financial reporting and tax bases of assets and liabilities using the enacted
tax rates and laws that are expected to be recovered. We provide a valuation
allowance for deferred tax assets for which we do not consider realization of
such assets to be more likely than not.





Recent
Authoritative Pronouncements




Recent
accounting pronouncements that the Company has adopted or that will be required
to adopt in the future are summarized below.





Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles





In June
2009, the Financial Accounting Standards Board issued Statement “FASB” issued
Statement No. 168, “The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles” (“SFAS No. 168”).  SFAS
No. 168 will become the single source of authoritative nongovernmental U.S.
generally accepted accounting principles (“GAAP”), superseding existing FASB,
American Institute of Certified Public Accountants (“AICPA”), Emerging Issues
Task Force (“EITF”), and related accounting literature.  SFAS No. 168
reorganizes the thousands of GAAP pronouncements into roughly 90 accounting
topics and displays them using a consistent structure.  Also included
is relevant Securities and Exchange Commission guidance organized using the same
topical structure in separate sections.  SFAS No. 168 will be
effective for financial statements issued for reporting periods that end after
September 15, 2009.  This statement will have an impact on the
Company’s financial statements since all future references to authoritative
accounting literature will be references in accordance with SFAS No.
168.


13





Subsequent
Events





In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”.(“SFAS No. 165”)
This Statement establishes general standards of accounting for and disclosures
of events that occur after the balance sheet date but before financial
statements are issued or are available to be issued.  It requires the
disclosure of the date through which an entity has evaluated subsequent events
and the basis for that date and is effective for interim and annual periods
ending after June 15, 2009.  The adoption of SFAS No. 165 is not
expected to have a material impact on the Company’s financial
statements.





Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly





In April
2009, the FASB issued FSP FAS No. 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly". This FSP provides additional
guidance for estimating fair value in accordance with FASB Statement No. 157,
Fair Value Measurements, when the volume and level of activity for the asset or
liability have significantly decreased. This FSP also includes guidance on
identifying circumstances that indicate a transaction is not orderly. FSP FAS
No. 157-4 is effective for interim and annual reporting periods ending after
June 15, 2009, and shall be applied prospectively.  The implementation
of FSP FAS No. 157-4 did not have a material on the Company’s financial position
and results of operations.





Recognition
and Presentation of Other-Than-Temporary Impairments





In April
2009, the FASB issued FSP FAS No. 115-2 and FAS No. 124-2, “Recognition and
Presentation of Other-Than-Temporary Impairments ". The objective of an
other-than-temporary impairment analysis under existing U.S. generally accepted
accounting principles (GAAP) is to determine whether the holder of an investment
in a debt or equity security for which changes in fair value are not regularly
recognized in earnings (such as securities classified as held-to-maturity or
available-for-sale) should recognize a loss in earnings when the investment is
impaired. An investment is impaired if the fair value of the investment is less
than its amortized cost basis. FSP FAS No. 115-2 and FAS No. 124-2 is effective
for interim and annual reporting periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. Earlier adoption for
periods ending before March 15, 2009, is not permitted.  The
implementation of FSP FAS No. 115-2 and FAS No. 124-2 did not have a material
impact on the Company’s financial position and results of
operations.





Interim
Disclosures about Fair Value of Financial Instruments





In April
2009, the FASB issued FSP FAS No. 107-1 and APB No. 28-1, “Interim Disclosures
about Fair Value of Financial Instruments". This FSP amends SFAS No. 107,
Disclosures about Fair Value of Financial Instruments, to require disclosures
about fair value of financial instruments for interim reporting periods of
publicly traded companies as well as in annual financial statements. This FSP
also amends APB Opinion No. 28, Interim Financial Reporting, to require those
disclosures in summarized financial information at interim reporting periods.
FSP FAS No. 107-1 is effective for interim reporting periods ending after June
15, 2009, with early adoption permitted for periods ending after March 15,
2009.  The implementation of FSP FAS No. 107-1 did not have a material
impact on the Company’s financial position and results of
operations





Interim
Disclosure about Fair Value of Financial Instruments





In April
2009, the FASB issued FASB Staff Position “FSP” No. SFAS 107-1 and APB 28-1,
“Interim Disclosures about Fair Value of Financial Instruments”.  This
FSP amends SFAS No. 107 to require disclosures about fair values of financial
instruments for interim reporting periods as well as in annual financial
statements.  The FSP also amends Accounting Principles Board Opinions
“APB Opinion” No. 28 to require those disclosures in summarized financial
information at interim reporting periods.  This FSP becomes effective
for interim reporting periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009.  The adoption of
this FSP is not expected to have a material impact on our consolidated financial
statements.


14





Amendments
to the Impairment Guidance of EITF Issue No. 99-20





In
January 2009, the FASB issued FSP Emerging Issues Task Force ("EITF") Issue No.
99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20". This
FSP amends the impairment guidance in EITF Issue No. 99-20, “Recognition of
Interest Income and Impairment on Purchased Beneficial Interests and Beneficial
Interests That Continue to Be Held by a Transferor in Securitized Financial
Assets,” to achieve more consistent determination of whether an
other-than-temporary impairment has occurred. The FSP also retains and
emphasizes the objective of an otherthan- temporary impairment assessment and
the related disclosure requirements in FASB Statement No. 115, Accounting for
Certain Investments in Debt and Equity Securities, and other related guidance.
This Issue is effective for interim and annual reporting periods ending after
December 15, 2008, and shall be applied prospectively. Retrospective application
to a prior interim or annual reporting period is not permitted. The adoption of
FSP EITF 99-20-1 did not have a material effect on the Company’s consolidated
financial statements





Accounting
for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance
or Other Financing





In June
2009, the FASB issued FSP Emerging Issues Task Force ("EITF") Issue No. 09-1,
“Accounting for Own-Share Lending Arrangements in Contemplation of Convertible
Debt Issuance or Other Financing”. This Issue is effective for fiscal years
beginning on or after December 15, 2009, and interim periods within those fiscal
years for arrangements outstanding as of the beginning of those fiscal years.
Share lending arrangements that have been terminated as a result of counterparty
default prior to the effective date of this Issue but for which the entity has
not reached a final settlement as of the effective date are within the scope of
this Issue. This Issue requires retrospective application for all arrangements
outstanding as of the beginning of fiscal years beginning on or after December
15, 2009. This Issue is effective for arrangements entered into on or after the
beginning of the first reporting period that begins on or after June 15, 2009.
Early adoption is not permitted. The Company is currently assessing the impact
of FSP EITF 09-1 on its financial position and results of
operations.





Determining
the Fair Value of a Financial Asset When the Market for That Asset is Not
Active





In
October 2008, the FASB issued FSP FAS No. 157-3, “Determining the Fair Value of
a Financial Asset When the Market for That Asset is Not Active.”  This
FSP clarifies the application of SFAS No. 157, “Fair Value Measurements,” in a
market that is not active.  The FSP also provides examples for
determining the fair value of a financial asset when the market for that
financial asset is not active.  FSP FAS No. 157-3 was effective upon
issuance, including prior periods for which financial statements have not been
issued.  The impact of adoption was not material to the Company’s
consolidated financial condition or results of operations.





The
Hierarchy of Generally Accepted Accounting Principles





In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles.”  SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements.  SFAS No. 162 is effective 60
days following the SEC's approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity
with Generally Accepted Accounting Principles".  The implementation of
this standard will not have a material impact on the Company's consolidated
financial position and results of operations.


15





Determination
of the Useful Life of Intangible Assets





In April
2008, the FASB issued FSP FAS No. 142-3, “Determination of the Useful Life of
Intangible Assets”, which amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
intangible assets under SFAS No. 142 “Goodwill and Other Intangible
Assets”.  The intent of this FSP is to improve the consistency between the
useful life of a recognized intangible asset under SFAS No. 142 and the period
of the expected cash flows used to measure the fair value of the asset under
SFAS No. 141 (revised 2007) “Business Combinations” and other U.S. generally
accepted accounting principles.    The implementation of FSP FAS
No. 142-3 is not expected to have a material impact on its consolidated
financial statements.





Disclosure
about Derivative Instruments and Hedging Activities





In March
2008, the FASB issued SFAS No. 161, “Disclosure about Derivative Instruments and
Hedging Activities, an amendment of SFAS No. 133.” This statement requires that
objectives for using derivative instruments be disclosed in terms of underlying
risk and accounting designation. The Company was required to adopt SFAS No. 161
on January 1, 2009. The adoption of SFAS No.161 on January 1, 2009 did not have
a material effect on the Company’s consolidated financial
statements





Fair
Value Option for Financial Assets and Financial Liabilities





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – Including an amendment of SFAS No.
115,” which becomes effective on February 1, 2008, permits companies to choose
to measure many financial instruments and certain other items at fair value and
report unrealized gains and losses in earnings. Such accounting is optional and
is generally to be applied instrument by instrument. The election of this
fair-value option did not have a material effect on its consolidated financial
condition, results of operations, cash flows or disclosures.





Fair
Value Measurements





In
September 2006, the FASB No. 157, “Fair Value Measurements” (“SFAS No. 157”).
SFAS No. 157 defines fair value, establishes a framework for measuring fair
value in accordance with generally accepted accounting principles and expands
disclosures about fair value investments. SFAS No. 157 was effective for
financial assets and liabilities on January 1, 2008. The statement deferred the
implementation of the provisions of SFAS No. 157 relating to certain
non-financial assets and liabilities until January 1, 2009. The adoption of SFAS
No.157 on January 1, 2009 for financial assets and liabilities did not have a
material effect on the Company’s consolidated financial statements.





Note
5 — Mineral Rights




Mineral
rights at June 30, 2009 and 2008 consisted of the following:




2009
                  
                  
                  2008Comstock
      Placer Claims
                  
                  $
                  100,000
                  
                  
                  $
                  100,000Big
      Mike Copper Claims
                  
                  
                  69,138
                  
                  
                  
                  69,138Comstock
      Lode Claims
                  
                  
                  1,271,409
                  
                  
                  
                  1,102,409Water
      rights
                  
                  
                  90,000
                  
                  
                  
                  90,000$
                  1,530,547
                  
                  
                  $
                  1,361,547


16




Note
6 — Property and Equipment, net




Plant and
equipment at June 30, 2009 and 2008, consisted of the
following:





2009
                  
                  
                  2008Land
      and Building
                  
                  $
                  677,443
                  
                  
                  $
                  542,167Vehicle
      and Equipment
                  
                  
                  302,094
                  
                  
                  
                  430,969Processing
      and Lab
                  
                  
                  704,527
                  
                  
                  
                  452,017Furniture
      and Fixtures
                  
                  
                  49,391
                  
                  
                  
                  66,2281,733,455
                  
                  
                  
                  1,491,381Less
      accumulated depreciation
                  
                  
                  (1,037,791
                  )
                  
                  
                  (1,182,300
                  )$
                  695,664
                  
                  
                  $
                  309,081





Depreciation
expense for the six months ended June 30, 2009 and 2008 was $42,454 and
$120,000, respectively.  We use the straight-line method of
depreciation for financial reporting purposes, depreciating buildings over 15
years and other assets over useful lives ranging from 3 to 10
years.





Note
7 – Reclamation Bond Deposit





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




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





Note
8 — Long-term Reclamation Liability





We have
an accrued a long-term liability of $1,146,154 and $553,190 as of June 30, 2009
and 2008 respectively, with regard to our obligations to reclaim our Comstock
Mine facility based on our reclamation plan submitted and approved by the Nevada
State Environmental Commission and Division of Environmental Protection in 2008.
Costs of future expenditures for environmental remediation are discounted to
their present value. Such costs are based on management’s current estimate of
amounts expected to be incurred when the remediation work is performed within
current laws and regulations. It is reasonably possible that, due to
uncertainties associated with the application of laws and regulations by
regulatory authorities and changes in reclamation or remediation technology, the
ultimate cost of reclamation and remediation could change in the future. We
periodically review accrued liabilities for such reclamation and remediation
costs as evidence becomes available indicating that our liabilities have
potentially changed.  The reclamation liability accretion expense for
the six month period ended June 30, 2009 was $40,812 and the amortization of
Long-lived assets was $34,016 for the same period.




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




2009Long-term
      asset retirement obligation 1/1/2009
                    
                    $
                    1,105,342Additional
      obligations incurred
                    
                    
                    ―Increase
      in present value of the reclamation obligation (accretion
      expense)
                    
                    
                    40,812Long-term
      asset retirement obligation 06/30/2009
                    
                    $
                    1,146,154


17





Note
9 - Notes Payable Stockholders





Mr.
Winfield and his affiliates (“Winfield Group”) held various notes and debentures
issued by the Company that are reported in several different liabilities
accounts that are in default as of June, 2009.  The notes are as
follows:





Principal
                
                
                InterestConvertible
      Debentures Payable – Investors (Note 10)
                
                $
                687,928
                
                
                $
                6,391Convertible
      Debentures Payable - Mandatory Redemption payment (Note
10)
                
                
                4,412,058
                
                
                
                515,925Convertible
      Notes Payable - 2006 & 2007 (Note 10)
                
                
                1,620,000
                
                
                
                1,008,887Promissory
      Notes – July 2005 Financing (Note 11)
                
                
                1,200,000
                
                
                
                1,139,815Promissory
      Notes – Plum Mine (Note 11)
                
                
                250,000
                
                
                
                50,000Promissory
      Notes Payable – December 2007 (Note 11)
                
                
                600,000
                
                
                
                91,009Promissory
      Notes Payable – February 2008 (Note 11)
                
                
                600,000
                
                
                
                78,764Convertible
      Notes Payable – 2008 (Note 10)
                
                
                2,500,000
                
                
                
                236,877$
                11,869,986
                
                
                $
                3,127,663





The
Winfield Group consists of Mr. Winfield and Santa Fe Financial Corporation,
Portsmouth Square and InterGroup Corporation, and combined, represent the
Company’s largest creditor and a significant stockholder.  Mr.
Winfield is affiliated with these Companies through a direct controlling
interest and/or as their Chairman of the Board.  As of June 30, 2009,
the Company is in default of the terms on several outstanding notes payable and
accordingly the entire note balances of the defaulted notes have been recorded
as current liabilities.





Note
10 - Convertible Debentures




Convertible
debentures at June 30, 2009 and 2008 were as follows:




2009
                
                
                2008Convertible
      Debentures Payable-Investors
                
                $
                1,105,908
                
                
                $
                1,105,908Convertible
      Debentures Payable- Mandatory Redemption payment
                
                
                4,412,058
                
                
                
                5,322,058Convertible
      Notes Payable – 2006 & 2007
                
                
                2,170,000
                
                
                
                2,170,000Convertible
      Notes Payable – 2008
                
                
                2,500,000
                
                
                
                ―Total
                
                $
                10,187,966
                
                
                $
                8,597,966




Convertible Debentures
Payable - Investors




During
March 2004, we completed a private placement of securities transaction (the
“March Offering”), which generated $10 million in gross proceeds from a group of
accredited institutional and individual investors.





On
November 30, 2004, we restructured the March Offering and entered into a
new subscription agreement. We exchanged 21,739,129 shares of common stock and
21,739,129 warrants issued in the March Offering for:





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


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


18





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




On April
1, 2005, we defaulted on our first monthly payment. 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 accordingly we were
obligated to issue 33,817,594 shares of common stock. Under the terms of the
subscription agreement, we had three business days following receipt of the
conversion notice (the “Delivery Date”) to deliver free-trading common stock
certificates. The shares were due to be delivered in December 2004, however,
they were not delivered until 2005. Our failure to deliver shares, subjected us
to liquidated damages of 1% of the note principal amount being converted for
each late business day.





Convertible Debentures
Payable - Mandatory Redemption




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




On March
31, 2005, we entered into a Settlement Agreement (“Settlement”) with the Mr.
Winfield and agreed to convert the mandatory redemption payment into nine
Convertible Debentures (“the Debentures”). Accordingly, we accrued a liability
for approximately $6.9 million and reduced our paid-in-capital account for
approximately $3.5 million. The Debentures are subject to various covenants and
conditions, including, but not limited to anti-dilution rights and protective
rights.  The Debentures accrue interest at 12% per annum and are
payable in monthly installments of principal and interest over a 24 month period
with the remaining entire balance of unpaid principal and interest due on March
31, 2007.   We are currently in default on this
note.  The default interest rate is 18% per annum.





The
debentures are subject to the following terms:




Conversion
Rights


The
Debentures are convertible, in all or in part, into shares of our common stock
(“Conversion Shares”) at any time. The conversion price shall is equal to the
lesser of: (i) eighty-five percent (85%) of the average of the five (5) lowest
closing bid prices of the common stock as reported by Bloomberg L.P. for the
twenty (20) trading days preceding the date the Company was obligated to pay the
mandatory redemption Payment; and (ii) eighty-five percent (85%) of the average
of the five (5) lowest closing bid prices of the common stock as reported by
Bloomberg L.P. for the twenty (20) trading days preceding the date of any such
conversion; provided, however, until the effective date of the registration
statement (see below), the conversion price shall be fifty-percent (50%) of the
average of the five (5) lowest closing bid prices of the Common Stock as
reported by Bloomberg L.P. for the twenty (20) trading days preceding the date
of any such conversion. In no event shall the conversion price be higher than
(i) $0.1131 and (ii) the conversion price of the convertible notes (See Note 6),
as adjusted from time to time, whichever is lower.




Security
Agreement


Pursuant
to the terms of the Settlement Agreement, the Debentures are granted a priority
collateralized position, second only to our note payable to the Brockbank Trust
(See Note 7) in substantially all of our assets.


19





Convertible Debentures
Payable - Mandatory Redemption





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%.  In February 2008, we satisfied all obligations of these
notes.




Convertible
Notes Payable – 2006 & 2007





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





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





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





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





Convertible
Notes Payable –2008





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


20





The
Convertible Notes Payable -2008 contain a non-detachable convertible option that
was “in the money” at the commitment dates.  Accordingly, we applied
the accounting guidance of EITF 98-5, EITF 00-27 and EITF 08-4 to determine the
methodology for calculating the value of this embedded conversion
option.   Pursuant to EITF 98-5 and EITF 00-27, we used the
intrinsic value calculation (the difference between the conversion price and the
quoted market price of our shares at the commitment date multiplied by the
number of shares into which the security is convertible) to determine the value
of the convertible feature.  The Convertible Notes provide the
following Conversion Right: “Each Lender shall have the right at any time, and
from time to time, on or prior to the Maturity Date to convert all or any part
of the outstanding unpaid amount of the Note into fully paid and non-assessable
shares of Common Stock.”   In general, the value of the
conversion option is recorded as a debt discount and amortized over the term of
the note, but since the Lender has the right to convert into common shares at
the issuance date, the entire amount was recorded to interest expense in this
reporting period.





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




Note
11 —Other Debt




Other
Debt at June 30, 2009 and 2008 are as follows:





2009
                  
                  
                  2008Promissory
      Notes Payable - 2005 through 2008
                  
                  $
                  2,400,000
                  
                  
                  $
                  4,775,000Debt
      – Plum Mine
                  
                  
                  250,000
                  
                  
                  
                  250,000Equipment
      Financing - current portion
                  
                  
                  4,540
                  
                  
                  
                  10,292$
                  2,654,540
                  
                  
                  $
                  5,035,292




Promissory Notes Payable
–2005 through 2008





Promissory
Notes Payable at June 30, 2009 and 2008 are as follows:




2009
                
                
                2008Promissory
      Notes Payable-July 2005 Financing
                
                $
                1,200,000
                
                
                $
                1,200,000Promissory
      Notes Payable-September 2005 Financing
                
                
                ―
                
                
                
                300,000Promissory
      Notes Payable-December 2005 Financing
                
                
                ―
                
                
                
                575,000Promissory
      Notes Payable-February 2006 Financing
                
                
                ―
                
                
                
                250,000Promissory
      Notes Payable-March 2006 Financing
                
                
                ―
                
                
                
                150,000Promissory
      Notes Payable-July 2007 Financing
                
                
                ―
                
                
                
                300,000Promissory
      Notes Payable-October 2007 Financing
                
                
                ―
                
                
                
                200,000Promissory
      Notes Payable-March 2008
                
                
                ―
                
                
                
                600,000Promissory
      Notes Payable-December 2007 Financing
                
                
                600,000
                
                
                
                600,000Promissory
      Notes Payable-January 2008 Financing
                
                
                600,000
                
                
                
                600,000$
                2,400,000
                
                
                $
                4,775,000





Promissory Notes Payable -
July 2005 Financing




In July
of 2005, we borrowed $1.2 million from companies controlled by John V. Winfield,
a major investor. Proceeds from the notes were reduced by a 33.3% original issue
discount and other origination fees. Net proceeds received by the Company from
the borrowing were $740,000. The notes accrue interest at 15% per annum and are
payable in monthly installments of principal and interest over a 24 month period
with the remaining entire balance of unpaid principal and interest due on July
15, 2007.  The notes are collateralized by substantially all of the
Company’s assets subject to the security interest of the Brockbank Trust (See
Note 8). As of December 31, 2006 we had failed to make any monthly payments on
the notes and they are in default.  The default interest rate is 17%
per annum.


21





Promissory Notes Payable –
September 2005 through October 2007 Financing




In July
2008, the Company amended $2,175,000 principal amount of unsecured promissory
notes issued to Longview Fund, L.P. through the issuance of an Amended and
Restated Promissory Note issued by the Company in favor of Longview Fund,
L.P.  These amended notes have been reported as long-term debt (See
Note 9).





Promissory Notes Payable –
December 2007 Financing




In
December 2007, we completed a financing transaction with Mr. Winfield and his
affiliates which provided us with $500,000 in funding. In consideration for the
financing, we issued promissory notes with a face value of $600,000, reflecting
an original discount of sixteen and seventeen hundreds (16.17%) percent. The
notes evidencing the loan bear interest at the rate of 4.9% per annum, payable
on or prior to the one year anniversary of the respective loan
date.  As of December 31, 2008 we had failed to make any monthly
payments on the notes and they are in default.  The default interest
rate is 18% per annum.





Promissory Notes Payable –
January 2008 Financing




On
January 31, 2008, we completed a financing transaction with Mr. Winfield and his
affiliates which provided us with $500,000 in funding. In consideration for the
financing, we issued promissory notes with a face value of $600,000, reflecting
an original discount of sixteen and seventeen hundreds (16.17%) percent. The
notes evidencing the loan bear interest at the rate of 4.9% per annum, payable
on or prior to the one year anniversary of the respective loan date. 
..  As of January 31, 2009 we had failed to make any monthly payments
on the notes and they are in default.  The default interest rate is
18% per annum.





Debt - Plum
Mine




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





Note
12 — Long-term Convertible Debt Obligation





Convertible
debentures at June 30, 2009 and 2008 were as follows:


2009
                
                
                2008Long-term
      Convertible Notes Payable – July 2008 (Longview Amended and Restated
      Note)
                
                $
                2,782,563
                
                
                $
                ―Long-term
      Convertible Notes Payable – May 2009
                
                
                1,500,000
                
                
                
                ―Long-term
      Convertible Notes Payable, net of current portion
                
                $
                4,,282,563
                
                
                $
                -





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




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




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


22





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





Longview
Amended and Restated Notes at July 10, 2008 were as follows:





Principal
                
                
                InterestPromissory
      Notes Payable-September 2005 Financing
                
                $
                300,000
                
                
                $
                172,870Promissory
      Notes Payable-December 2005 Financing
                
                
                375,000
                
                
                
                211,966Promissory
      Notes Payable-February 2006 Financing
                
                
                250,000
                
                
                
                98,164Promissory
      Notes Payable-March 2006 Financing
                
                
                150,000
                
                
                
                56,237Promissory
      Notes Payable-July 2007 Financing
                
                
                300,000
                
                
                
                58,526Promissory
      Notes Payable-October 2007 Financing
                
                
                200,000
                
                
                
                -Promissory
      Notes Payable-March 2008 Financing
                
                
                600,000
                
                
                
                9,800$
                2,175,000
                
                
                $
                607,563




On March
10, 2008, we received the $500,000 balance of the financing from the December
11, 2007 financing agreement. In consideration for the financing, we issued
promissory notes with a face value of $600,000, reflecting an original discount
of sixteen and seventeen hundredths (16.17%) percent. The notes evidencing the
loan bear interest at the rate of 4.9% per annum, payable on or prior to the one
year anniversary of the respective loan date. On July 10, 2008, the Company
amended its promissory note with Longview Fund, L.P., which had outstanding
principal of $2,175,000 and related outstanding interest of $607,563 through the
issuance of an Amended and Restated Promissory Note in the aggregate amount of
$2,782,563 as summarized above.





Convertible Loan Agreement –
May 1,  2009





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





The terms
of the agreement are as follows:




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





23





Note
13 — Long-term Debt Obligation





Long-term
debt at June 30, 2009 and 2008 was as follows:




2009
                
                
                2008Long-term
      Debt - Winfield Debenture
                
                
                500,000
                
                
                
                ―Long-term
      Debt – Seller’s Note Land Purchase
                
                
                120,000
                
                
                
                320,000Long-term
      Debt - Equipment Financing
                
                
                4,540
                
                
                
                16,796Less
      current portion
                
                
                (4,540
                )
                
                
                (10,826
                )Long-term
      debt, net of current portion
                
                $
                620,000
                
                
                $
                325,970





Long-Term Debt – Winfield
Debenture




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





Long-term Debt - Seller’s
Note Land Purchase




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





Long-Term Debt - Equipment
Financing




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




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




2009
                
                $
                4,5402010
                
                $
                ―2011
                
                $
                ―2012
      and thereafter
                
                $
                ―Total
                
                $
                4,540




Note
14 — Stockholders’ Equity




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




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


24





Debenture Principal,
Debenture Interest and Liquidated Damages





The
following represents principal and interest payments on debt, made during the
three months ended June 30, 2009 with the issuance of our common
stock.




Note Description
                  
                  Interest
                    Payment
                    Number of
                    shares
                  
                  
                  Value of
                    Shares
                  
                  See NoteConvertible
      Debentures Payable-Investors
                  
                  
                  12,300,000
                  
                  
                  $
                  123,000
                  
                  Note
      10Convertible
      Debentures Payable - Mandatory Redemption payment
                  
                  
                  99,000,000
                  
                  
                  $
                  990,000
                  
                  Note
      10Long-Term
      Convertible Notes – July 2008 (Longview Amended and Restated
      Note)
                  
                  
                  13,902,687
                  
                  
                  $
                  153,041
                  
                  Note12





Private
Placements





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





·
            In the first quarter 2009,
      $950,000 for 95,000,000 shares at $0.01 per share and 95,000,000
      warrants. The warrants have an exercise price of $.015 and a term of
      six years.  We also issued 3.6 million shares as a placement
      fee.




Employees and
directors





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





·
            Pursuant to his employment
      agreement, Larry Martin, the Company’s Chief Geologist, was issued a total
      of 2,000,000 of our unregistered common shares, valued at $28,500 or
      $0.0145 per share during
2009.




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





Note
15- Earnings Per Share




Basic
earnings per share is computed by dividing net income, after deducting preferred
stock dividends accumulated during the period, by the weighted average number of
shares of common stock outstanding. Diluted earnings per share is computed by
dividing net income, after deducting preferred stock dividends accumulated
during the period, by the weighted average number of shares of common stock and
dilutive common stock equivalent shares outstanding. The amount of preferred
stock dividends is zero in all periods presented. For the quarters ended June
30, 2009 and June 30, 2008, there were approximately 1,885 million and 1,260
million, respectively, of common stock equivalent shares excluded from the
dilutive earnings per share calculation because they were anti-dilutive. The
following is a reconciliation of the number of shares used in the basic and
diluted computation of net income per share (in millions):


25





For the three month period ended
                  June 30,2009
                
                
                2008Weighted
      average number of common shares outstanding – basic
                
                
                3,477
                
                
                
                3,079Dilution
      from convertible debt, stock options and warrants
                
                
                1,794
                
                
                
                1,024Weighted
      average number of common shares outstanding – diluted
                
                
                5,271
                
                
                
                4,103




For the six month period ended
                    June 30,2009
                  
                  
                  2008Weighted
      average number of common shares outstanding – basic
                  
                  
                  3,523
                  
                  
                  
                  2,988Dilution
      from convertible debt, stock options and warrants
                  
                  
                  1,794
                  
                  
                  
                  1,024Weighted
      average number of common shares outstanding – diluted
                  
                  
                  5,317
                  
                  
                  
                  4,012





Note
16- Embedded Derivatives





“Derivative
liability” totaling $6,931,000 at June 30, 2009 represents the fair value of the
conversion feature (embedded derivatives) included in
debt.    SeeNote 10 - Convertible
Debentures: Embedded Derivatives and Note 12 — Long-term Convertible Debt
Obligation: Embedded Derivatives for additional information.




Note
17 - Unregistered Sales of Securities





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





·
            Pursuant to his employment
      agreement, Larry Martin, the Company’s Chief Geologist, was issued a total
      of 2,000,000 of our unregistered common shares, valued at $28,500 or
      $0.0145 per share during
2009.




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


26





Item 2. Management’s Discussion and Analysis
or Plan of Operations





The
following discussion provides information that we believe is relevant to an
assessment and understanding of the consolidated results of operations and
financial condition of our company. It should be read in conjunction with the
Consolidated Financial Statements and accompanying Notes also included in this
10-Q.





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




Overview




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





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




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





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





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





Results
of Operations and Operational Plan





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





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




Inventory
of Mineralized Material


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


27





The Plum
Mine, our project in the Comstock Lode District,  has a State issued
Mine Reclamation Permit (Permit No. NEV 0196) and an Operating Permit (NEV
2000109).  The Mine Reclamation Permit was updated in 2008 pursuant to
a required three year review and modification program.  Pursuant to
the 2008 approved Reclamation Plans, we secured a $1,106,882 mine reclamation
financial assurance instrument through the Nevada Division of Minerals’ Bond
Pool Program.  As required by the bond pool program, a cash deposit of
$766,768 was made. This reclamation bond allows mining and processing at
the currently permitted heap leach facility in the Comstock District of Storey
County.





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




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





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





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





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





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


28





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





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





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





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





 ̈   Expanded
the permitted drilling area





 ̈  
Updated  and expanded the mine reclamation permit and reclamation
bond





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





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





2009
Developments




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





The major
planned improvements to the processing facilities include the:





·
            Construction and operation of two
      new crushed ore storage
areas;





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





·
            Expansion of the leach solution
      pumping systems;





·
            Formation of a new pregnant
      solution pond; and





·
            Expansion of the Merrill Crowe
      processing plant.





The
Nevada Division of Environmental Protection, Bureau of Mining Regulations and
Reclamation, has begun its review of the application.  Major
modification applications typically take nearly 180 days to
complete.  Under the modified permit, the Company initially plans to
mine and process at a rate of 720,000 tons of gold and silver ore per
year.  The majority of the ore that will be processed in the milling
circuit will have a high percentage of the contained precious metals recovered
because of efficiencies afforded by the milling process.


29





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




In
anticipation of mining resumption, the Company has procured a 300 ton per day
ball mill and related equipment.  The ball mill is being added to
process the high grade gold and silver mineralization, optimizing gold and
silver recovery.  Precious metal recovery using the ball mill and
grinding to 100 Mesh should be around 95% versus 75% for heap
leaching.




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




There are
also risks involved in the fact that one individual and his affiliates, as of
June 30, 2009, beneficially own in excess of 24% of our voting stock. Pursuant
to financing agreements, this convertible debt holder and his affiliates with a
61 day notice can waive the 4.9% ownership restriction, allowing him to convert
100% of his convertible debt and related interest, which totals $11,493,205 at
June 30, 2009, into our common shares. This group, if they waive the ownership
restriction and convert all convertible debt and related interest into our
voting common stock,may take actions that could conflict with your interests.This includes the election
of Company directors, approval of actions generally requiring the approval of
the holders of our voting stock, including adopting amendments to our articles
of incorporation and bylaws and approving mergers, certain acquisitions or sales
of all or substantially all of our assets, which could delay or prevent someone
from acquiring or merging with us or limit the ability of our other stockholders
to approve transactions that they may deem to be in their best
interests.




DWC Resources Letter of
Intent





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





Sutro
Tunnel Sublease




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




30





Comparative
Financial Information





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




Comparative
Financial Information





Three
Months Ended June 30, 2009





Quarter
                  ended
                  June 30,
                  2009
                
                
                Quarter
                  ended
                  June 30,
                  2008
                
                
                DifferenceRevenue
                
                $
                —
                
                
                $
                —
                
                
                $
                —Depletion
      and amortization
                
                
                37,603
                
                
                
                60,000
                
                
                
                (22,397
                )Reclamation,
      Exploration and Test Mining Expense
                
                
                642,077
                
                
                
                792,308
                
                
                
                (150,231
                )General
      and Administration
                
                
                309,663
                
                
                
                802,805
                
                
                
                (493,142
                )Consulting
      and Professional Service
                
                
                75,000
                
                
                
                27,940
                
                
                
                47,060Financing
      cost – warrant issuances
                
                
                418,173
                
                
                
                —
                
                
                
                418,173Other,
      net
                
                
                58,500
                
                
                
                61,875
                
                
                
                (3,375
                )Interest
      Expense
                
                
                821,051
                
                
                
                588,119
                
                
                
                232,932Net
      Loss
                
                $
                (2,362,067
                )
                
                
                (2,333,047
                )
                
                $
                29,020




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





Reclamation,
Exploration and Test Mining Expenses were $ 150,231 less for the three month
period ended June 30, 2009 compared to the three month period ended June 30,
2008. This variance reflects the suspension of developmental drilling during the
quarter ended June 30, 2009 to focus on quantifying the drill assay information
our December 2007 through January 2009.drill campaign.





The
second calendar quarter 2009 General and Administrative expenses decreased by
$493,142 from the second calendar quarter 2008.  Second calendar
quarter 2008 General and Administrative expenses were higher because of employee
stock option expense of $429,000.  This compares to $0 for the second
calendar quarter 2009.





Consulting
and professional expenses for the three month period ended June 30, 2009 were
$75,000 compared to $27,940 for the three month ended June 30, 2008, amounting
to $47,060 quarter over quarter increase.  The increase in expenses
reflects higher legal fees and the contracting of a consultant during the second
calendar quarter 2009.





The
second calendar quarter 2009 Financing cost – warrant issuance expense
represents the fair value calculation for the 60 million warrants issued in
conjunction with the May 2009 financing. The fair value of each warrant was
estimated at the date of the grant using the Black-Scholes option pricing
model.  Black-Scholes utilizes assumptions related to volatility, the
risk free interest rate, the dividend yield (which is assumed to be zero, as the
Company has not paid, nor anticipates paying any, cash dividends and employee
exercise behavior.  Expected volatilities utilized in the model are
based mainly on the historical volatility of the Company’s stock price and other
factors.


31





Interest
expense for the three month period ended June 30, 2009 increased by $232,932
from June 30, 2008. This variance reflects the issuance of additional interest
bearing notes and debt discount of $65,144 associated with fair value
calculation for the May 2009 financing.




Six
Months Ended June 30, 2009





Six months
                  ended
                  June 30,
                  2009
                
                
                Six months
                  ended
                  June 30,
                  2008
                
                
                DifferenceRevenue
                
                $
                —
                
                
                $
                —
                
                
                $
                —Depletion
      and amortization
                
                
                76,469
                
                
                
                120,000
                
                
                
                (43,531
                )Reclamation,
      Exploration and Test Mining Expense
                
                
                2,092,393
                
                
                
                1,441,401
                
                
                
                650,992General
      and Administration
                
                
                692,217
                
                
                
                1,103,007
                
                
                
                (410,790
                )Consulting
      and Professional Service
                
                
                145,406
                
                
                
                58,959
                
                
                
                86,447Financing
      cost – warrant issuances
                
                
                1,745,035
                
                
                
                —
                
                
                
                1745,035Other,
      net
                
                
                58,500
                
                
                
                (551,907
                )
                
                
                610,407Interest
      Expense
                
                
                1,602,151
                
                
                
                1,329,310
                
                
                
                272,841Net
      Loss
                
                $
                (6,412,171
                )
                
                
                (3,631,374
                )
                
                $
                2,780,797




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





Reclamation,
Exploration and Test Mining Expenses were $ 650,992 greater for the six month
period ended June 30, 2009 compared to the six month period ended June 30, 2008.
The variance reflects the increased developmental drilling activities in 2009
and the permit application cost.





The six
month period ended June 30, 2009 General and Administrative expenses decreased
by $410,790 from the first six months of 2008.  General and
Administrative expenses were higher for the six month period ended June 30, 2009
because of employee stock option expense of $429,000.  This compares
to $0 for the six month period ended June 30, 2009.





Consulting
and professional expenses for the six month period ended June 30, 2009 were
$145,406 compared to $58,959 for the six month period ended June 30, 2008,
amounting to $86,447 increase.  The increase in expenses reflects
higher legal fees and the contracting of a consultant during the second calendar
quarter 2009.





The 2009
Financing cost – warrant issuance expense represents the fair value calculation
for the 95 million warrants issued in conjunction with six (6) private
placements during the quarter plus the 60 million warrants issued in conjunction
with the May 2009 financing.  The fair value of each warrant was
estimated at the date of the grant using the Black-Scholes option pricing
model.  Black-Scholes utilizes assumptions related to volatility, the
risk free interest rate, the dividend yield (which is assumed to be zero, as the
Company has not paid, nor anticipates paying any, cash dividends and employee
exercise behavior.  Expected volatilities utilized in the model are
based mainly on the historical volatility of the Company’s stock price and other
factors.


32





Other,
net of increase of $610,407 in the 2009 compared to 2008 reflects an accrual
adjustment to liquidated damages resulting from the extinguishment of
debt.





Interest
expense for the six month period ended June 30, 2009 increased by $207,696 from
the six month period June 30, 2008. This variance reflects the issuance of
additional interest bearing notes ($17.4 million of interest bearing debt at
June 30, 2009 compared to $14.0 million at June 30, 2008) and debt discount of
$65,144 associated with fair value calculation for the May 2009
financing.





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





Liquidity
and Capital Resources





We
recognize that our cash resources are limited. Our continued existence and plans
for mining production depend on our ability to obtain the capital necessary to
operate, through the issuance of additional debt, royalty financing or equity.
During the first six months of 2009, we secured an aggregate of $2,950,000 in
financing. Specifically, we raised $950,000 through six private placements
during the first calendar quarter of 2009 and In May 2009 we secured $2 million
if formal debt commitments of which $1.5 million has been funded as of the date
of this report.  While this additional funding may meet our immediate
working capital needs, if we are not able to generate sufficient revenues and
cash flows or obtain additional or alternative funding, we will be unable to
continue as a going concern. We have yet to realize an operating profit at our
Company. As disclosed in the report of our independent registered public
accounting firm in our financial statements Form 10-K for the year ended
December 31, 2008, our recurring losses and negative cash flow from operations
raise substantial doubt about our ability to continue as a going
concern.





As of
June 30, 2009, the Company is in default of the terms on several outstanding
notes payable with the Winfield Group totaling $11,869,986 of principal and
$3,206,442 of interest.  The Winfield Group consists of Mr. Winfield,
Sante Fe Financial Corporation, Portsmouth Square and InterGroup Corporation,
Combined, the Winfield Group represent the Company’s largest creditor and a
significant stockholder.  Mr. Winfield is affiliated with these
Companies through a direct controlling interest and/or as their Chairman of the
Board.  Because we are in default, the entire note balances of the
defaulted notes have been recorded as current liabilities.




Item 3. Quantitative and Qualitative
Disclosures About Market Risks





An
investment in our common stock involves risk. You should carefully consider the
following risk factors.





Our
exposure to market risk for changes in interest rates relates primarily to the
market-driven increase or decrease in interest rates, and the impact of those
changes on the Company’s ability to realize a return on invested or available
funds. We ensure the safety and preservation of our invested principal funds by
limiting default risk, market risk and reinvestment risk. We mitigate default
risk by investing in short term high-credit investment grade securities and/or
commercial checking and savings accounts.





ITEM
4. CONTROLS AND PROCEDURES




A. 
Disclosure




As of the
end of the period covered by this Annual Report on Form 10-Q, management
performed, with the participation of our Chief Executive Officer and Chief
Financial Officer, an evaluation of the effectiveness of our disclosure controls
and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.
Our disclosure controls and procedures are designed to ensure that information
required to be disclosed in the report we file or submit under the Exchange Act
is recorded, processed, summarized, and reported within the time periods
specified in the SEC’s forms, and that such information is accumulated and
communicated to our management including our Chief Executive Officer and our
Chief Financial Officer, to allow timely decisions regarding required
disclosures. Based on the evaluation as described above, our internal control
over disclosure controls and procedures as of June 30, 2009 are
effective.


33





B.
 Internal Control over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes
those policies and procedures that:





(i)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets;





(ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements; and





(iii)
provide reasonable assurance regarding prevention or timely detection of
unauthorized transactions.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.





In making
this assessment, our management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated
Frameworkand Internal
Control over Financial Reporting-Guidance for Smaller Public
Companies.





We
believe that internal control over financial reporting is effective as of
December 31, 2008. This annual report does not include an attestation report of
the company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only management's report in this annual
report.





There
have been no changes during the quarter ended June 30, 2009 in our Company's
internal control over financial reporting identified in connection with the
evaluation required by Exchange Act Rules 13a-15(d) and 15d-15(d) that have
material affected, or are reasonably likely to materially affect, our internal
controls over our financial reporting.




PART
II - OTHER INFORMATION





Item 1. Legal Proceedings





From time
to time, we are involved in lawsuits, claims, investigations and proceedings
that arise in the ordinary course of business. There are no matters pending that
we expect to have a material adverse impact on our business, results of
operations, financial condition or cash flows.




Item
1A.  Risk
Factors





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


34




We
have limited resources and our inability to obtain additional financing could
negatively affect our growth and success.
  We have
incurred substantial losses since our inception, and we are currently
experiencing a cash flow deficiency from operations. Our current cash flow and
capital resources are limited, and we may require additional funds to pursue our
business. We may not be able to secure further financing in the future. If we
are not able to obtain additional financing on reasonable terms, we may not be
able to execute our business strategy, conduct our operations at the level
desired, or even to continue business.
  We
have received a qualified report from our independent auditors
  Our
independent auditors report on our financial statements indicates that our
recurring losses from operations and working capital deficit raise substantial
doubt about our ability to continue as a going concern
 
 Inability
to raise sufficient funds to increase growth
 
 Our
recent financings have only provided capital to continue existing operations but
not to continue significant exploration and growth. Without the ability to
attract sufficient amounts of capital at any one time, it is unlikely that we
can achieve profitability in the foreseeable future.
  We
will not be successful unless we recover precious metals and sell them for a
profit.
  Our
success depends on our ability to recover precious metals, process them, and
successfully sell them for more than the cost of production. The success of this
process depends on the market prices of metals in relation to our costs of
production. We may not always be able to generate a profit on the sale of gold
or other minerals because we can only maintain a level of control over our costs
and have no ability to control the market prices. The total cash costs of
production at any location are frequently subject to great variation from year
to year as a result of a number of factors, such as the changing composition of
ore grade or mineralized material production, and metallurgy and exploration
activities in response to the physical shape and location of the ore body or
deposit. In addition costs are affected by the price of commodities, such as
fuel and electricity. Such commodities are at times subject to volatile price
movements, including increases that could make production at certain operations
less profitable. A material increase in production costs or a decrease in the
price of gold or other minerals could adversely affect our ability to earn a
profit on the sale of gold or other minerals.
  We
do not have proven or probable reserves, and there is no assurance that the
quantities of precious metals we produce will be sufficient to recover our
investment and operating costs.
  Our
success depends on our ability to produce sufficient quantities of precious
metals to recover our investment and operating costs. We do not have proven or
probable reserves. There can be no assurance that our exploration activities
will result in the discovery of sufficient quantities of mineralized material to
lead to a commercially successful operation.
  The cost of our exploration and
acquisition activities is substantial, and there is no assurance that the
quantities of minerals we discover or acquire will justify commercial operations
or replace reserves established in the future.
  Mineral
exploration, particularly for gold and other precious metals, is highly
speculative in nature, involves many risks, and frequently is nonproductive.
There can be no assurance that our exploration and acquisition activities will
be commercially successful. Once gold mineralization is discovered, it may take
a number of years from the initial phases of drilling until production is
possible, during which time the economic feasibility of production may change.
Substantial expenditures are required to acquire existing gold properties, to
establish ore reserves through drilling and analysis, to develop metallurgical
processes to extract metal from the ore, and in the case of new properties, to
develop the processing facilities and infrastructure at any site chosen for
mineral exploration. There can be no assurance that any gold reserves or
mineralized material that may be discovered or acquired in the future will be in
sufficient quantities or of adequate grade to justify commercial operations or
that the funds required for mineral production operation can be obtained on a
timely or reasonable basis. Mineral exploration companies must continually
replace mineralized material or reserves depleted by production. As a result,
there can be no assurance that we will be successful in replacing any reserves
or mineralized material acquired or established in the future.
  35





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




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





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




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




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




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




We
compete with other mineral exploration and mining companies




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


36




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




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




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




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




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




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




We
have no insurance for environmental problems.




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




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




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


37





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




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





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




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




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




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


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


38





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




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




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




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




Outstanding
convertible securities and warrants may result in substantial
dilution.




At June
30, 2009 we had outstanding 3, 609,751,058 shares of common stock. In addition,
we had outstanding convertible notes and related interest plus various common
stock purchase warrants. At June 30, 2009, these notes, related interest and
warrants were convertible into or exercisable for a total of approximately 1.8
billion additional shares of our common stock, subject to further anti-dilution
provisions.




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




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




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


39




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





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





·
            In the first quarter 2009,
      $950,000 for 95,000,000 shares at $0.01 per share and 95,000,000
      warrants. The warrants have an exercise price of $.015 and a term of
      six years




Employees and
directors





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





·
            Pursuant to his employment
      agreement, Larry Martin, the Company’s Chief Geologist, was issued a total
      of 2,000,000 of our unregistered common shares, valued at $28,500 or
      $0.0145 per share during
2009.





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





As of
June 30, 2009, Mr. Faber, President and CEO, has unpaid wages and expenses of
$132,623.





Item 3. Defaults Upon Senior
Securities





As of
June 30, 2009, the Company is in default of the terms on several outstanding
notes payable with the Winfield Group with principal balance due of $11,869,986
and accrued interest of $3,206,442 (See Note 8). Because we are in default, the
entire note balances of the defaulted notes have been recorded as current
liabilities.




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





Not
applicable.





Item 5. Other Information




None.




Item 6. Exhibits and Reports on Form
8-K





(a)
            The following documents are filed
      as part of this Report:




(1)
            Financial statements filed as
      part of this Report:




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


40





(2) Exhibits
filed as part of this Report:





Exhibit
                  Number
                
                Exhibit23.11
                
                Sample
      Loan Documents from May 2009 Financing31.1
                
                Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Rule
      13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange
      Act of 1934, as amended.32.1
                
                Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of
2002




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


None





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, 2009
                        By:
                        /s/ Robert T.
FaberName:Robert
      T. FaberTitle:President
      and Chief Executive OfficerBy:
                        /s/ Robert T.
FaberName:Robert
      T. FaberTitle:Chief
      Financial
Officer


41