SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549











FORM
      10-KSB









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





For
      the
      fiscal year ended December 31, 2007





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




P.O.
      Box
      1118


Virginia
      City, NV 89440


(775)
      847-5272


(Address,
      including zip code, and telephone number,


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





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


Yes x No
      o





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





State
      issuer's revenues for the most recent fiscal year: $395,451





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates based on the average bid and asked price as of April 3, 2008:
      $56,200,000





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the last practicable date: 2,990,552,847 shares of Common Stock, $0.000666
      Par Value, as of April 3, 2008.









TABLE
      OF
      CONTENTS




PART
                IITEM
                1
            
            DESCRIPTION
                OF BUSINESS
            
            3ITEM
                2
            
            DESCRIPTION
                OF PROPERTY
            
            12ITEM
                3
            
            LEGAL
                PROCEEDINGS
            
            15ITEM
                4
            
            SUBMISSION
                OF MATTERS TO VOTE OF SECURITY HOLDERS
            
            16PART
                IIITEM
                5
            
            MARKET
                FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
                MATTERS
            
            16ITEM
                6
            
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
            
            17ITEM
                7
            
            FINANCIAL
                STATEMENTS
            
            26ITEM
                8
            
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            
            26ITEM
                8A
            
            CONTROLS
                AND PROCEDURES
            
            26ITEM
                8B
            
            OTHER
                INFORMATION
            
            27PART
                IIIITEM
                9
            
            DIRECTORS
                AND EXECUTIVE OFFICERS OF THE REGISTRANT
            
            27ITEM
                10
            
            EXECUTIVE
                COMPENSATION
            
            28ITEM
                11
            
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS  AND MANAGEMENT AND
                RELATED STOCKHOLDER MATTERS
            
            30ITEM
                12
            
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS
            
            31ITEM
                13
            
            EXHIBITS
                AND REPORTS ON FORM 8-K
            
            31ITEM
                14
            
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            
            32SIGNATURES
            
            33INDEX
                TO CONSOLIDATED FINANCIAL STATEMENTS
            
            F-1





**Statement
      Regarding Forward-Looking Statements**





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




2




**PART
      I**





**Item
      1.****Description
      of Business**




***Overview***




We
      are a
      North American precious metals mining company with extensive, contiguous
      property in the Comstock Lode District and an operating gold and silver mine.
      In
      the Company's relatively short history, it secured permits, built an
      infrastructure and brought the Comstock Lode project into production. Since
      2005, the Company has been acquiring additional properties around its Comstock
      Lode project in northern Nevada, expanding its footprint and creating
      opportunities for exploration. The Company's objectives are to optimize
      production, increase reserves through exploration and acquisitions, expand
      its
      footprint in the Comstock, and maximize shareholder value .




2007
      began with the temporary closure of mining operation. This shutdown allowed
      the
      Company to focus on the geology to gain a comprehensive understanding of the
      mineralization at the Hartford complex. In addition, the company commenced
      a
      drilling program in December 2007 to further delineate the ore body and to
      determine the most effective process for mining operations. The goal is to
      define and map the ore body and to prepare geologic cross sections to be
      utilized in mine planning and as a result, to be able to build a new mine model
      using geostatistics and extensive drill hole data.





There
      is
      also ongoing metallurgic testing to attempt to maximize recovery of the high
      grade fraction of the ore and to determine optimum size to continue heap
      leaching. The Company is also assessing whether if a small mill sould be added
      to increase overall recovery and to determine if previously leached ore has
      been
      adequately leached and to determine optimum heap height.





The
      exploration drilling program commenced in December 2007 with 4 drill holes.
      The
      Company intends to continue the exploration drilling program throughout 2008;
      however, lack of sufficient funds could impact the pace of the drilling
      program.





The
      Company turned a corner in the first quarter of 2007 with the final settlement
      of the Parent litigation as continued financial and human resource drain which
      all but consumed the Company is finally over. Given the end of this litigation,
      change in Board composition and continued challenges in capital raising efforts,
      the Company’s management has determined that there is a need to reevaluate the
      Company’s business plan with a view toward the best way to maximize shareholder
      value and protection of our secured creditors. In addition, in December 2007
      the
      Company settled its litigation with N.A. Degerstrom. The lawsuit originated
      out
      of a dispute as to how much the Company owed Degerstrom for services provided.
      Pursuant to a December 27, 2005 agreement, the parties agreed that the amount
      to
      be paid by the Company to Degerstrom would be subject to volume reconciliation
      by aerial survey. GoldSpring, pursuant to prepared aerial and ground surveys,
      asserted the Company had been over-billed for amounts of ore and waste which
      had
      been hauled by Degerstrom. Degerstrom, according to the original lawsuit,
      claimed in excess of $806,000 plus interest for services provided, totaling
      approximately $1,000,000. Under the settlement agreement, GoldSpring will pay
      Degerstrom $250,000 and both parties agree to dismiss their claims against
      the
      other. The agreement is subject to GoldSpring remitting $100,000 by December
      11,
      2007 and the balance of $150,000 by January 31, 2008.  These
      payments were made in a timely manner.




3




We
      are
      actively seeking financing to meet our working capital needs and fuel our
      growth. If we are unable to secure such financing, we may be unable to continue
      as a going concern.




The
      following table sets forth certain information regarding our current
      projects.




**Name**
            
            **Location**
            
            **Type**Comstock
                Lode Properties
            
            Storey
                and Lyon County, Nevada
            
            Gold
                and silver lode claims- open pit test miningComo
            
            Lyon
                County, Nevada
            
            Gold
                and silver lode claimsGold
                Canyon
            
            Lyon
                County, Nevada
            
            Placer
                gold claimsSpring
                Valley
            
            Lyon
                County, Nevada
            
            Placer
                gold claims





Our
      Comstock Lode exploration project is located between Carson City and Virginia
      City, Nevada, about 30 miles southeast of Reno in an area known as American
      Flat. Our Gold Canyon and Spring Valley placer claims are located in Lyon
      County, Nevada, five miles south of our Plum property, in American Flat / Gold
      Hill, Nevada. Our Big Mike Copper property is located approximately two hours
      east of Reno near Winnemucca, Nevada.




Our
      Plum
      exploration activities include open pit gold and silver test mining. As defined
      by SEC Industry Guide 7, we have not yet established any proven or probable
      reserves at this project. Therefore, all of our activities are considered test
      mining and exploratory in nature. Test mining at Plum commenced in the third
      quarter of 2004. We have not as yet explored or developed our Como claims.
      We
      also have not completed any exploratory activities on our Gold Canyon, Spring
      Valley, or Big Mike properties. We have not established reserves on any of
      these
      properties. Therefore, there can be no assurance that we will be able to produce
      sufficient gold to cover our investment and operating costs.




***Employees***




We
      approximately have 10 employees, including our managers, administrative
      staff, engineers, geologists, lab technicians, and process operators. We use
      consultants with specific skills to assist with various aspects of our
      operation, including project evaluation, due diligence, and acquisition
      initiatives.




***Principal
      Markets***





We
      plan
      to sell our production on world markets at prices established by market forces.
      These prices are not within our control.




***Government
      Regulation***




Mining
      operations and exploration activities are subject to various national, state,
      and local laws and regulations in the United States, which govern prospecting,
      development, mining, production, exports, taxes, labor standards, occupational
      health, waste disposal, protection of the environment, mine safety, hazardous
      substances, and other matters. We have obtained or have pending applications
      for
      those licenses, permits, and other authorizations currently required to conduct
      our exploration and other programs. We believe that we are in compliance in
      all
      material respects with applicable mining, health, safety, and environmental
      statutes and regulations.




4




***Reclamation***




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 surety 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 Plan for Billie the Kid, we posted a surety bond in the amount
      of
      $553,000, of which $377,000 was in the form of a cash deposit and the balance
      was secured from a surety agent.




***Competition***




We
      compete with other mineral exploration and mining companies in connection with
      the acquisition of gold and other mineral properties. There may be competition
      for gold acquisition opportunities, some of which may involve other companies
      having substantially greater financial resources than we do.




***Officers
      of our Company***




Robert
      T.
      Faber, CPA* **** has
      served as President and Chief Executive Officer of our company since September
      2004 and Chief Financial Officer since June 2003. Mr. Faber is an executive
      with
      20 years of diverse senior financial and operational management, business and
      acquisition experience, including 10 years of international experience. Mr.
      Faber was named Chief Executive Officer and President of GoldSpring in September
      2004. Prior to his appointment, he had served as Chief Financial Officer since
      June 2003. Mr. Faber served from 2002 until 2003 as Vice President of United
      Site Services, Inc., a privately held service consolidator in the waste service
      industry. Additionally, Mr. Faber served as an executive with Allied Waste
      Industries from 2001 until 2002, overseeing a $1.2 billion multi-state area
      and
      served as Chief Financial Officer with Frontier Waste Services, LLC from 1999
      until 2001. Prior to Frontier Waste, Mr. Faber spent 17 years with Waste
      Management, Inc., a publicly traded environmental services company, during
      which
      time he served in senior positions both internationally and domestically. Mr.
      Faber’s positions included Director of Finance of Waste Management’s $1.4
      billion multi-country International operations based in London, England and
      Vice
      President and Controller for several $100 million plus multi-state market areas.
      (*Not licensed to practice)





Jim
      Golden has served as the Company’s COO since May 2006. Mr. Golden, who is a
      mining engineer, has over twenty-five years of experience in the mining
      industry, including ten years with Peter Kiewit's mining division, where he
      was
      a district manager. A graduate of Montana Tech, Mr. Golden has owned his own
      consulting firm since 1990, where he has provided consulting services throughout
      the world for over 50 mining companies.




***Financing
      Events and Restructuring***




In
      February 2006, we completed an additional financing transaction, which provided
      us with $250,000 in funding. In consideration for the funding, we issued a
      promissory note with a term of ninety (90) days and an interest rate of sixteen
      percent (16%) per annum. The default interest rate on the note is twenty-two
      percent (22%). The funds were used for working capital and general corporate
      purposes. In March 2006, we completed an additional financing transaction,
      which
      provided us with $150,000 in funding under the same terms and conditions as
      the
      February 2006 financing.




5




***$2,200,000
      Convertible Debenture Financing***





On
      August
      23 - 24, 2006, the Company formally entered into an agreement with several
      investors to loan $1,900,000 to the Company. In March 2007, the Company amended
      the agreement increasing the loan amount to $2,200,000. The notes evidencing
      the
      loan bear interest at the rate of 12% per annum, payable monthly on the first
      of
      each month commencing October 1, 2006, along with 1/24 of the principal amount
      of such notes on each repayment date and were issued between May 18, 2006 -
      August 24, 2006, with the second quarter notes being treated as “bridge debt”
until the loan agreement was formally signed.. The notes are also convertible
      into Common Stock at a 50% discount to market until a registration statement
      registering the Common Stock underlying the notes is effective and at a 15%
      discount to market thereafter. As additional consideration, the investors are
      to
      be issued a total of 20,000,000 warrants to purchase common stock at exercise
      prices based upon the same formulas as 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, one of the lenders has
      agreed to acquire the existing mortgage on the Plum Mine property from the
      Brockbank Trust. As of December 31, 2007, $2,170,000 of the $2,200,000 has
      been
      funded by the investors.





The
      notes
      issued are as follows:





Issued
                date
            
            Face
                amountWinfield
                Debenture Payable
            
            
            5/15/2006
            
            $
            300,000Winfield
                Debenture Payable
            
            
            6/21/2006
            
            
            300,000Winfield
                Debenture Payable
            
            
            8/23/2006
            
            
            300,000Longview
                Debenture Payable
            
            
            8/24/2006
            
            
            300,000Winfield
                Debenture Payable
            
            
            12/12/2006
            
            
            100,000Winfield
                Debenture Payable
            
            
            First Quarter 2007
            
            
            331,120Winfield
                Debenture Payable
            
            
            Second Quarter 2007
            
            
            288,880Longview
                Debenture Payable
            
            
            4/1/07
            
            
            250,000Total
            
            
            
            
            $
            2,170,000





In
      July
      2007, we completed an additional financing transaction, which provided us with
      $300,000 in funding. In consideration for the funding, we issued a promissory
      note with a term of one hundred and twenty (120) days and an interest rate
      of
      sixteen percent (16%) per annum. The default interest rate on the note is
      twenty-two percent (22%). The funds were used for working capital and general
      corporate purposes.





On
      October 9, 2007, we completed a financing transaction, which provided us with
      $137,500 in funding. In consideration for the financing, we issued promissory
      notes with a face value of $200,000, reflecting an original issue discount
      of
      thirty-one and a quarter (31.25%) percent. The term of the notes is one year.
      The note does not bear interest These funds were used for working capital and
      general corporate purposes.





On
      December 11, 2007, the Company formally entered into an agreement with several
      investors to loan $1,000,000 to the Company. In consideration for the financing,
      we issued promissory notes with a face value of $1,200,000, 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,
      2007, $500,000 of the $1,000,000 has been funded by the investors.




The
      aggregate total of 2007 financing transactions was $1,970,000.




6




***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.




***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***




The
      report by the independent auditors on our financial statements indicates that
      our financial statements have been prepared assuming that we will continue
      as a
      going concern. The report 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
      have invested capital in high-risk mineral projects where we have not conducted
      sufficient exploration and engineering studies*** *.*




We
      have
      invested capital in various mineral properties and projects in North America
      where we may not have conducted sufficient exploration and engineering studies
      to minimize the risk of project failure to the extent that is typical in the
      mining industry. Our mineral projects involve high risks because we have not
      invested substantial sums in the characterization of mineralized material,
      geologic analysis, metallurgical testing, mine planning, and economic analysis
      to the same extent that other mining companies might deem reasonable. Standard
      industry practice calls for a mining company to prepare a formal mine plan
      and
      mining schedule and have these documents reviewed by a third party specialist.
      We do not have a formal mine plan that has been reviewed by a third party
      specialist. Because we have not established proven or probable reserves, there
      can be no assurance that we will be able to produce sufficient gold to recover
      our investment and operating costs.




***Our
      corporate officers lack sufficient technical training and mining
      experience.***




Our
      corporate officers lack technical training and experience in operating a mine.
      Although Jim Golden, our COO, is a licensed mining engineer, with substantial
      mining experience we may lack sufficient qualified support personnel to
      effectively manage our mining operation . Without sufficient training or
      experience in all areas, our corporate officers may not be fully aware of all
      of
      the specific requirements related to working within the mining industry. The
      decisions of our corporate officers may not take into account standard
      engineering or managerial approaches that operating mining companies commonly
      use. Consequently, our operations, earnings, and ultimate financial success
      could suffer irreparable harm due to corporate officers’ lack of experience in
      the mining industry.




7




***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 are 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.




***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.




8




***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, the 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.




***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.




9




***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 not anticipate expending sums for additional drilling and
      analysis to establish proven or probable reserves on our properties. We drill
      in
      connection with our mineral exploration activities and not with the purpose
      of
      establishing proven and probable reserves. Therefore, our activity must be
      called exploration or test mining. 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 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.




10


***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.




***Our
      business depends on a limited number of key personnel, the loss of whom could
      negatively affect us.*******




Robert
      Faber, Chief Executive Officer, President and acting-Chief Financial Officer
      is
      important to our success. If he becomes unable or unwilling to continue in
      his
      present position, our business and financial results could be materially
      negatively affected.




***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.




11




***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
      December 31, 2007, we had outstanding 2,743,508,248 shares of common stock.
      In
      addition, we had outstanding convertible notes and various common stock purchase
      warrants. At December 31, 2007, these notes and warrants were convertible into
      or exercisable for a total of approximately 1.164 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.




**Item
      2.**  **Description
      of Property**




***Plum
      (Billie the Kid/Lucerne)***




*Location,
      Access, and Title to the Property*




12




We
      own
      the following mineral exploration projects: The Plum Mine gold and silver
      exploration and test mining project and the Como mineral Claims. The Plum
      project is located in Storey and Lyon Counties, Nevada. The Plum property is
      physically situated roughly three miles south of Virginia City, Nevada. Paved
      state highways from Reno, Carson City, and Virginia City provide access to
      the
      property. The Como mineral Claims are located in Lyon County, Nevada,
      approximately 15 miles east of Carson City, and have not been explored or
      developed by us.




Our
      property rights to the mineral properties consist of several mineral leases,
      unpatented mineral claims, and fee ownership of real property. We have a mineral
      exploration and mining lease agreement with Claire Obester and the Estate of
      Dorothy Obester dated January 1, 1997 covering mineral rights to five patented
      claims located in both Storey and Lyon Counties, including the Billie the Kid
      and Lucerne patented lode claims. The lease remains in effect for as long as
      exploration, development, mining, or processing operations are conducted on
      a
      continuous basis, without a lapse of activity for more than 180 days. We pay
      a
      royalty to the lessor equal to the greater of $500 per month or a royalty
      percentage on the amount received by us on the sale of the mineral products
      less
      the costs incurred for marketing, distribution, processing and sales, commonly
      referred to as a Net Smelter Return. The royalty percentage varies based on
      the
      price of gold: 3% if gold is less than $400 per ounce, 4% if gold is at least
      $400 per ounce but less than $500 per ounce, and 5% if gold is $500 or greater
      per ounce. We are also responsible for payment and filing of annual maintenance
      fees, if any, and taxes for these claims.




We
      have a
      second mineral exploration and mining lease agreement with the Donovan Silver
      Hills, LLC dated September 1, 1999 covering seven patented claims and 13
      unpatented claims located in Storey and Lyon Counties. The lease remains in
      effect for as long as exploration, development, mining, or processing operations
      are conducted on a continuous basis, without a lapse of activity for more than
      180 days. We pay a royalty to the lessor amounting to the greater of $500 per
      month or a royalty percentage of the Net Smelter Returns. The royalty percentage
      varies based on the price of gold: 3% if gold is less than $400 per ounce,
      4% if
      gold is at least $400 per ounce but less than $500 per ounce, and 5% if gold
      is
      $500 or greater per ounce. We are also responsible for payment and filing of
      annual maintenance fees, if any, and taxes for these claims.




In
      addition to the mineral leases, we hold 100 unpatented mineral claims in Storey
      County, hold eight unpatented mineral claims in Lyon County, and own title
      to 40
      acres of land in Storey County. The W. Hughes Brockbank Living Trust has a
      lien
      against and a security interest in these unpatented mineral claims and the
      40
      acres of land pursuant to a Deed of Trust dated October 31, 2003, entered into
      with W. Hughes Brockbank Living Trust. The Deed of Trust was granted to secure
      a
      promissory note, dated October 31, 2003, in the amount of $1 million for the
      balance of the purchase price for the property. The non-interest bearing
      promissory note requires ten quarterly payments of $100,000 each. As of December
      31, 2007, the outstanding balance of the note was $250,000.




*Present
      Condition of Property and Work Performed*




We
      have
      not completed extensive characterization of mineralized material, geologic
      analysis, metallurgical testing, mine planning, or economic analysis on the
      Plum
      mineral assets. We have not established reserves on this property. Therefore,
      any activity we perform on the property is considered exploratory in nature.
      Part of our exploration includes operating a test mine. The purpose of the
      test
      mine is to determine our capital and operating costs, metallurgical recoveries,
      and other mining factors, and demonstrate that we can make a profit over and
      above our capital and operating costs.




13




*Description
      of Equipment and other Infrastructure Facilities*




Up
      until
      the shutdown in mining in February 2007, GoldSpring used a mining contractor
      to
      dig material from the Billie the Kid pit. The contractor used 50 ton Euclid
      haul
      trucks to haul the mineralized materials from the Billie the Kid/Lucerne open
      pit to the crushing and process facility located in the northeast corner of
      the
      property. The mineralized material is crushed, and agglomerated in a
      self-contained portable crushing plant. The mineralized material is fed to
      a
      vibrating plate feeder by a front-end loader. The feeder provides a steady
      feed
      to a Pioneer jaw crusher where material is crushed to -3” minus. Prior to
      agglomeration, 10 pounds of Type II Portland Cement is added for every ton
      of
      mineralized material and metered on to the pug mill feed conveyor which is
      then
      transported to the leach pads. A dilute cyanide solution is then applied to
      the
      mineralized material on the leach pads. Pregnant solution is accumulated from
      the leach pad and is then pumped to the 300 gpm Merrill-Crowe recovery plant.
      The resulting zinc precipitate collected in the presses is dried and smelted
      on
      the property using an electric furnace to produce gold dore.




Our
      third-party contract mining company owns and provided the haul trucks, front
      end
      shovel, loaders and blade. We own the Merrill-Crowe gold precipitation plant,
      the agglomerator, crushers, screen, water truck, generators, dozers, cement
      silo
      with a screw feeder, and conveyors. The Merrill-Crowe gold precipitation plant
      and the mineral processing equipment are less than four years old. The total
      book value of our equipment associated with the Billie the Kid and the Lucerne
      facilities is approximately $1,500,000.




*Power
      Utilization at the Plum Property:*




We
      completed the installation of the grid power line replacing a Caterpillar 3516
      (1000 kilowatt) diesel generator. The change has reduced our crushing costs
      and
      directly attributed to expanding our permit for tons crushed.




*Geology,
      Structure and Mineralization*




Several
      large low angle brecciated structural zones (faults) dominate the geology of
      the
      Billie the Kid/Lucerne deposit. The thickness of these structural zones ranges
      from 20 to 30 feet. Gold mineralization within the Billie the Kid/Lucerne
      deposit is closely associated with dikes and sills that are composed of Alta
      Andesite, a dark-colored, fine-grained volcanic rock, but these rocks are rarely
      or weakly mineralized. Hartford Rhyolite, a fine-grained volcanic rock, hosts
      approximately 70% to 80% of the gold mineralization and the remaining 20% to
      30%
      is associated with Alta Andesite.




*Mineralized
      Material*




We
      have
      not established any proven or probable reserves that meet the requirements
      of
      SEC Industry Guide 7. Therefore, all of our activities are considered
      exploratory in nature. Part of our exploration includes operating a test mine.
      The purpose of the test mine is to determine our capital and operating costs,
      metallurgical recoveries, and other mining factors, and demonstrate that we
      can
      make a profit over and above our capital and operating cost. These test mining
      activities may provide us with sufficient data to prepare a formal mine plan
      and
      establish reserves.




It
      should
      also be noted that the above-stated tonnage of mineralized material does not
      reflect waste dilution during test mining or metal value losses in processing.
      Nor do the above numbers reflect the drilling and exploration work performed
      in
      2004, 2005 and 2006. We have established procedures to recalculate and update
      our mineral inventory annually, and we plan do so in the first half of 2008.




*Future
      Exploration Potential*




We
      are
      conducting an exploration program to test surface mineral targets as well as
      deep underground bonanza targets by using geological mapping,
      geochemical/geophysical investigations and drilling.




14




***Gold
      Canyon and Spring Valley (Placer Claims)***




We
      own a
      100% interest in the 25 federal unpatented placer claims located in Lyon County,
      Nevada known as the Gold Canyon and Spring Valley claims. The 25 unpatented
      placer claims cover approximately 850 acres and are located about 30 miles
      southeast of Reno and six miles south of Virginia City, Nevada. We have not
      completed any exploration activity on the Gold Canyon or Spring Valley
      properties. The properties are undeveloped and do not contain any open-pit
      or
      underground mines. We have not established any proven or probable reserves
      on
      the mineral claims. All of our activities associated with these properties
      are
      exploratory in nature. The processing plant is stored at our Plum Mining
      property in American Flat, Nevada. We have no plans to begin test mining
      operations on these properties in the near-term.




***The
      “Big Mike” Copper Project***




We
      own a
      100% interest in the 17 unpatented lode claims and one placer claim covering
      a
      total of 310 acres in Pershing County, Nevada that comprise the Big Mike Copper
      property. The Big Mike Copper property is located approximately 32 miles south
      of Winnemucca in Pershing County, Nevada. Access to this site is available
      by
      way of Grass Valley Road, a county maintained paved and gravel road, for 30
      miles and then two miles on a BLM gravel road. The property is situated at
      an
      elevation of 5,000 to 5,500 feet. We have not completed any exploration activity
      or undertaken any geologic, engineering or economic studies on the Big Mike
      Copper property. The property includes an open pit, mineralized material in
      a
      stockpile, and waste dumps. As the site was previously mined, there are also
      roads and graded areas on the property. Two cased water wells with rights to
      two
      cubic feet per second are also present on the property.




At
      the
      end of September 2006, the Company entered into a ten year lease with
      a local company, controlled by a former GoldSpring director, for a 10 year
      lease
      of all of its mining claims for its Big Mike copper mine. The Lease calls for
      a
      $50,000 initial payment, to cover royalty payments due for the first two
      years of the lease term. Additionally, the lessee must pay Goldspring $75,000
      when a production permit is awarded, and $125,000 when commercial mining
      commences. Additionally, the lessee agrees to a work expenditure of $300,000
      for
      environmental and engineering matters in the first thirty-six months of the
      lease. During the term of the lease, Goldspring will also receive a production
      royalty of between 3% and 5% of net returns from copper mining, dependent on
      the
      price of copper.





**Item
      3.**  **Legal
      Proceedings**




***The
      Settlement of the Parent Litigation***




On
      March
      23, 2007, the Company and related parties entered into a global settlement
      with
      Stephen B. Parent, Goldspring’s former CEO and related parties, which brought
      final resolution in the following cases:  (i) GoldSpring,
      Inc. v. Stephen B. Parent, et al. ,
      Case
      No. CV2004-021755, Maricopa County Superior Court (“the State Court Action”);
      and (ii) Robert
      T. Faber, et al. v. Stephen B. Parent, et al. ,
      Case
      No. CV04-2960-PHX-EHC, the United States District Court, District of Arizona
      (“the Federal Court Action”).The settlement agreement contains the following
      terms, among others:





·
            Settlement
                without payment of cash consideration by either side in either
                case·
            Dismissal
                of both the Federal Court Action and the State Court Action with
                prejudice
                (including dismissal by Parent of the pending Federal Court
                appeal)·
            Mutual
                release of liability and covenants not to sue·
            Invalidity
                of Consent Resolutions described in the Federal Court’s April 18, 2006
                Order Granting Preliminary Injunction in the Federal Court Action
                and
                agreement by the Parents and Medhi further to not further contest
                or
                challenge in any way the election of GoldSpring’s current Board of
                Directors or any of the actions taken by GoldSpring’s Board of Directors
                or its officers at any time up to the date of this Agreement, including,
                but not limited to the approval and/or implementation of the November
                30,
                2004 financial restructuring.




15




·
            No
                admission of liability by any party to either the Federal Court Action
                or
                the State Court Action.




*Degerstrom
      Suit*




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





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




Degerstrom
      filed a mechanic's lien against the property of Plum, and at the time of filing
      of the Complaint, filed and recorded a lis pendens against the property of
      Plum
      based upon Degerstrom's claim.





The
      litigation was settled in early December 2007. Under the settlement agreement,
      Under the settlement agreement, GoldSpring paid Degerstrom $250,000 and both
      parties agree to dismiss their claims against the other. The agreement was
      subject to GoldSpring remitting $100,000 by December 11, 2007 and the balance
      of
      $150,000 by January 31, 2008. The Company made both payments in a timely
      manner.




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




None.




**PART
      II**





**Item
      5.**  **Market
      for Common Equity, Related Stockholder Matters and Small Business Issuer
      Purchases of Equity Securities**




PRICE
      RANGE OF COMMON STOCK




Our
      common stock is currently traded on the OTC Bulletin Board under the symbol
      “GSPG:OB”. The following table sets forth, for the periods indicated, the high
      and low inter-dealer closing prices per share of our common stock as reported
      on
      the Over The Counter Bulletin Board, without retail mark-up, mark-down or
      commission and may not represent actual transactions. As of December 31, 2007,
      we had over 5,000 holders of our common stock. That does not include the number
      of beneficial holders whose stock is held in the name of broker-dealers or
      banks. At December 31, 2007, we had 2,743,508,245 shares of common stock
      outstanding.




16




The
      following table sets forth the high and low bid prices for our common stock
      since for the last two years.





**Year**
            
            **Quarter**
            
            **High**
            
            **Low**2005
            
            
            First
            
            
            0.23
            
            
            0.062005
            
            
            Second
            
            
            0.10
            
            
            0.032005
            
            
            Third
            
            
            0.11
            
            
            0.052005
            
            
            Fourth
            
            
            0.06
            
            
            0.022006
            
            
            First
            
            
            .043
            
            
            .0142006
            
            
            Second
            
            
            .02
            
            
            .0092006
            
            
            Third
            
            
            .014
            
            
            .0032006
            
            
            Fourth
            
            
            .012
            
            
            .0032007
            
            
            First
            
            
            .0047
            
            
            .00282007
            
            
            Second
            
            
            .0035
            
            
            .0012007
            
            
            Third
            
            
            .001
            
            
            .00052007
            
            
            Fourth
            
            
            .01538
            
            
            .0005




**EQUITY
      COMPENSATION PLAN INFORMATION**




The
      following table sets forth information with respect to our common stock that
      may
      be issued upon the exercise of stock options under our incentive stock option
      plans as of December 31, 2007





**Plan Category**
            
            **(a)**
              **Number of**
              **Securities toBe**
              **Issued Upon**
              **Exercise of****Outstanding**
              **Options,**
              **Warrants,**
              **and Rights**
            
            **(b)**
              **Weighted-Average**
              **Exercise Price**
              **ofOutstanding**
              **Options,Warrants,**
              **and Rights**
            
            **(c)**
              **Number of**
              **Securities****Remaining**
              **Available for**
              **Future Issuance**
              **Under Equity**
              **Compensation**
              **Plans (Excluding**
              **Securities Reflected**
              **in Column (a))**Equity
                Compensation Plans Approved by Stockholders
            
            
            100,000,000
            
            $
            .00963
            
            
            0Equity
                Compensation Plans Not Approved by Stockholders
            
            
            0
            
            $
            0
            
            
            800,000,000Total
            
            
            100,000,000
            
            $
            .00963
            
            
            0




Pursuant
      to the Employment Agreement, Mr. Golden shall be granted 10,000,000 stock
      options currently and will be eligible for an additional 10,000,000 options
      for
      each addition one hundred thousand ounces of gold reserves up to 90,000,000
      options. Options will vest over 36 months from the date of the grant. All earned
      and vested options have an exercise price of $0.00963





**Dividend
      Policy**





We
      have
      never declared or paid any dividends on our common stock. We do not anticipate
      paying any cash dividends on our common stock in the foreseeable future. We
      currently intend to retain future earnings, if any, to finance operations and
      the expansion of our business. Any future determination to pay cash dividends
      will be at the discretion of the board of directors and will depend upon our
      financial condition, operating results, capital requirements and other factors
      the board of directors deems relevant, including the provisions of any
      applicable credit agreements. We are restricted from declaring dividends under
      the terms of the senior secured convertible debentures.




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





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





The
      following discussion addresses matters we consider important for an
      understanding of our financial condition and results of operations as of and
      for
      the year ended December 31, 2007, as well as our future results.




17




*Overview*





We
      are a
      North American precious metals mining company with an operating gold and silver
      test mine in northern Nevada. Our Company was formed in mid-2003, and we
      acquired the Plum property in November 2003. In our relatively short history,
      we
      secured permits, built an infrastructure and brought the Plum exploration
      project into test mining production. 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 company, looking to build on our success through the acquisition of
      other mineral properties in North America with reserves and exploration
      potential that can be efficiently put into near-term production. Our objectives
      are to increase production; increase reserves through exploration and
      acquisitions; expand our footprint at the Plum Mine; and maximize value for
      our
      shareholders.




We
      started to reap the benefits of the operational improvement program that we
      initiated in 2005, including our first reported net profit for the first quarter
      of 2006. This program began with a complete review of every facet of the
      operation to insure maximum efficiency. We have nearly completed our review
      of
      the various processes and have implemented several changes, which have increased
      efficiencies. Most recently, we have made the decision to take over our mining
      operations, which are currently being performed by an outside contractor.
      Although we had planned to have our mining operation completely in place by
      the
      end of May 2006, delays in financing have dictated that we rely on contract
      mining assistance through the end of November 2006. However, when we do take
      over operations, based on our mine plan and internal calculations and reach
      our
      targeted production numbers, we had expected our production cost to be less
      than
      $400 per ounce but due to shutdown of Plum Mine in February 2007, we have not
      been able to continue production.




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




Due
      to
      the nine month cessation of mining activities, there was little ore to
      produce in the second quarter, and therefore revenues in the second quarter
      were
      markedly lower in the first quarter, when there was still a supply of ore,
      mined
      in the fourth quarter of 2005, to process and sell. A lapse in mining typically
      leads to reduced saleable materials in the next fiscal quarter as the
      mining-processing-sales cycle is approximately 60 - 90 days. The third quarter
      of 2006 marked the recommencement of mining activities. Recent focus has
      included (i) ramping up of mining and processing on a continued basis; (ii)
      stockpiling of ore for processing during inclement weather; and (iii) transition
      preparation for December 1, 2006 takeover of mining operations by the Company’s
      own staff. Furthermore, significant fluid management steps had been taken to
      avoid another shut down of activity as experienced during the first five months
      of 2006. The mine was shut down again in the first quarter of 2007 due to
      insufficient funds to run operations.




In
      the
      first quarter of 2007 three of our four remaining directors resigned to pursue
      other opportunities which leaves the Company with the opportunity to seek a
      new
      Board well experienced in the mining industry.





The
      Company turned a corner during 2007 with the final settlement of the Parent
      litigation and settlement of the Degerstrom litigation which have continued
      financial and human resource drain which all but consumed the Company are
      finally over. Given the end of this litigation, change in Board composition
      and
      continued challenges in capital raising efforts, the Company’s management
      determined that there is a need to reevaluate the Company’s business plan with a
      view toward the best way to maximize shareholder value and protection of our
      secured creditors.




In
      detail, this evaluation is covering the following matters:





·
            Expanding
                our footprint in the Comstock Region and other acquisition
                opportunities




18




·
            Further
                exploration in the Comstock Region to accomplish the above, including
                a
                decision to review the geology of the Hartford complex in a more
                detailed
                manner·
            Completion
                of the Plum Mine reserve report·
            Strategic
                acquisitions in other areas of North
                America





Adjustments
      to this analysis have been made over the past few months, all with the goal
      to
      best utilize the Company’s limited financial resources to increase shareholder
      value and to focus on raising additional capital to reinstate operations.





Despite
      the mine shutdown in February 2007, the Company has had activity in ore body
      delineation, metallurgic testing and exploration. Ore body delineation included
      plans to commence developmental drilling in December 2007, with drilling to
      be
      completed in three phases of 100 holes per phase. The goal is to define and
      map
      the ore body and to prepare geologic cross sections to be utilized in mine
      planning and as a result, to be able to build a new mine model using
      geostatistics and extensive drill hole data.





There
      is
      also ongoing exhaustive metallurgic testing to attempt to maximize recovery
      of
      the high grade fraction of the ore and to determine optimum size to continue
      heap leaching. The Company is also assessing if whether a small mill could
      be
      added to increase overall recovery.





The
      exploration drilling program, which is heavily dependent on funds availability,
      commenced in December 2007. The Company is scheduled to continue with the
      exploration drilling program throughout 2008.




Assuming
      sufficient funds are raised in a timely manner, the Company’s goal would be to
      reopen the Mine during the second half of 2008 if it can complete a reserve
      report with a qualified third party and complete a comprehensive mine plan
      and
      schedule, all of which is dependent upon ability to secure sufficient funds
      to
      procure the mining fleet.





In
      conjunction with the business plan reconsideration, the Company has taken steps
      to minimize operations in order to conserve cash flow and has presented a
      temporary Mine Closure Plan to the NDEP, which if approved, would call for
      closure through March 2008, at the latest.




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




·
            Weather
                - As disclosed in this Quarterly Report, excessive rains has caused
                material delays in our ability to operate as high levels of water
                in our
                leaching ponds and flooding have prevented us from being able to
                leach
                materials, a necessary part of the gold production process. Excessive
                snows, which can occur in the area in which the Plum Mine is located,
                would also hamper mining as the Plum Mine is an open pit
                mine.·
            Current
                Political Instability in the Middle East - Commodities such as gold
                tend
                to have widely fluctuating markets, and the current problems in areas
                such
                as Lebanon and Iraq, which are causing much political and economic
                instability internationally, may very well be a contributing factor
                to the
                volatile gold market.




19




There
      are
      also risks involved in the fact that one individual and his affiliates, as
      of
      September 30, 2007, beneficially own in excess of 50% of our voting stock.
      Pursuant to our recent financing agreement, 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 $8,,721,478 at December 31, 2007, 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.




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




Our
      Plum
      Mine, which is located in Storey County, Nevada, went into test mining
      production in late third quarter 2004. We have not established reserves on
      this
      exploration project. Therefore, all of our activities on this property are
      considered test mining or exploratory in nature. One of our top priorities
      in
      2005 was to improve efficiencies and increase test mining production at our
      Plum
      Mine. In March 2005, we initiated a program to improve the operational
      efficiency of our mining operation. As part of this program, we consolidated
      our
      corporate office with the Plum Mine office. We also made improvements to our
      processing plant and took over crushing operations from our third-party
      contractor, reducing costs and increasing our control over the crushing process.
      Our improvement program continued throughout the year. In November 2005, we
      retained licensed mining engineer Jim Golden, who became our COO in 2006, to
      conduct a comprehensive review of all aspects of the Plum Mine operation,
      including the overall mine plan, with the objective of further improving
      efficiency, increasing production, and reducing costs. Furthermore Mine
      Development and Associates of Reno, Nevada is expected to complete a detailed
      mine plan and a reserve report for the Plum Mine by the end of the third quarter
      2007. Recent changes have included revising the mine plan to reflect the current
      higher gold prices; adding various efficiencies in the processing area; and
      re-positioning personnel to maximize overall performance. The mine plan and
      reserve report are the culmination of a twelve-month undertaking by our Company
      and Mine Development & Associates. We believe that these improvements,
      including the updated mine plan, will improve our overall performance at the
      Plum Mine.




Inclement
      weather in northern Nevada in late 2005 and early 2006 presented a challenge
      to
      our Plum Mine operation. The mine received twelve inches of rain between
      mid-December and mid-January, filling our leach ponds nearly to capacity. This
      situation impacted our ability to mine and to process at our normal capacity,
      thus decreasing production. Our team at the mine did an excellent job, in a
      challenging situation, to insure the environmental integrity of our operation.
      The team worked closely with the regulatory authorities throughout this process.
      In mid-January, we ceased mining operations to allow time for our crew to
      stabilize the leach ponds and the processing plant. During this interruption
      from mining, we took steps to implement additional process modifications
      identified through our operational improvement plan.




We
      also
      had planned to continue our exploration program in 2007 if capital resources
      allowed; however, due to insufficient funds, this was delayed until the first
      quarter of 2008. In March 2006, we retained Larry Martin, a registered
      geologist, to oversee our exploration program at the Plum Mine and in the
      Comstock Lode district. Mr. Martin has over twenty-five years of diverse
      geological and exploration experience in the mining industry. He has worked
      for
      several major mining enterprises, including Peter Kiewit, where he served as
      manager of geological services. We have allocated a budget of $500,000 to
      explore and develop our claims at the Plum Mine. We hoped to begin
      exploration in late spring or early summer of 2006 but due to inability to
      obtain a large enough capital investment this exploration is substantially
      delayed into sometime in 2007 (assuming the Company is able to secure adequate
      financing). We intend to target our exploration toward replenishing and
      expanding our mineralized material inventory at our existing mine and toward
      developing new mineral properties. The successful location of additional
      mineralized material on the existing property would allow us to expand the
      size
      and the lifespan of the Plum mining project, exclusive of new property
      acquisitions. It is our belief that we possess an advantage with our status
      as
      likely the only heap leach gold mining permit holder in the area. This permit
      is
      relatively difficult to obtain, and it is one that we can expand to include
      new
      areas in the event we locate and wish to process new deposits.




20






In
      December 2005, we initiated a review of the invoices of our mining contractor.
      Specifically, we sought to reconcile the volume of material for which we were
      billed with the volume of material that was actually mined. We used an outside
      surveyor to conduct a comprehensive analysis of bank cubic yards mined. The
      results of the survey indicated that we had been over-billed by over $500,000.
      We met with the mining contractor in early 2006 to discuss this issue and
      presented our proposed billing adjustment. The mining contractor has contracted
      an engineering firm to perform an independent analysis of the data generated
      from our surveys to determine the accuracy of our calculations. We anticipated
      a
      resolution of this issue by September of 2006 but due to continuing litigation
      this issue is still outstanding.




In
      all
      2006 proved to be another challenging year for the Company although some
      advances were made. In the first half of 2006, weather conditions caused delays
      which prevented any ore processing and mining activity ceased. Additionally,
      the
      Company undertook substantial corrective measures to ensure proper water
      management and continuation of mining activity during future heavy moisture
      periods. Additionally, an aerial survey was completed which confirmed over
      billing by Degerstrom Inc, the former mining contractor. The Company took
      advantage of the “down time” in 2006 to improve the overall operation of the
      mine with solid results in reduced costs and improved efficiencies.





In
      the
      second half of 2006, a new mining contractor was hired, with mining activities
      recommencing in July 2006 and again suspended in early 2007.





On
      a
      positive note is the resolution, without liability to the Company, of the 2-1⁄2
year legal battle with a former director thus stopping the ongoing drain of
      litigation on the human and financial resources of the Company. To date, over
      $1,000,000 was spent on legal fees in that litigation. With the litigation
      settled, all diverted human and financial resources can be refocused on
      readjusting the business plan of the Company with the goal of restarting and
      revamping operations no later than early 2008.




Among
      the
      exploration and business development activities that are in
      process:





·
            Ore
                body delineation·
            Reserve
                definition·
            Completion
                of reserve report·
            Development
                of comprehensive mine plan from exploration results·
            Increase
                of ore reserves·
            Augment
                ability to mine and operate at more efficient levels·
            Intent
                to resume mine operations after completion of the 43101 reserve report
                and
                the comprehensive mine plan.·
            Expansion
                of existing footprint in the Comstock regionExpansion
                of team of experts to study geology and metallurgy, as well as develop
                mine plan, define reserves and complete reserve reportSecure
                funds to commence drilling




21


**Due
      to our current plan to realign our operations, we have not yet been able to
      and
      may not be able to meet any or all of the above goals (as stated for each goal,
      where not completed in 2007).**





Notwithstanding
      the foregoing, November and December 2007 were productive months. The Company
      hired Orbit Garant Drilling to perform exploration and developmental drilling
      at
      the Comstock project, and four holes were drilled by the end of December, with
      third party laboratory testing yielding encouraging ore grades from samples
      tested from the first four holes. The Company also hired two mining engineers
      and a Ph. D. geologist as consultants to its team to further augment its
      expertise in exploration. In order to fund its exploration efforts, the Company
      raised $1,000,000 in capital to finance the commencement in
      drilling.





**Early
      2008 Developments**





The
      Company has drilled a total of 25 holes in its exploratory program through
      March
      2008, with better assay results than the grades yielded during 2005 and 2006
      production. With the appointment of two new directors in 2008 (Rob Faber, the
      Company’s CEO, and Scott Jolcover (a former Company employee with significant
      mining experience in the region), the Company has commenced the task of
      rebuilding its Board, which lost 4 of 5 Directors in early 2007. The Company
      looks to continue expanding its Board during 2008, to include independent
      directors. In early March 2008, the Company appointed a new metallurgical team
      with resources and expertise geared toward efficiency maximization in
      anticipation of recommencement of production, which is scheduled for the second
      quarter of 2008 (subject to expert advice). The Company has secured an
      additional $1,000,000 for further drilling and general corporate
      expenses.




22




***Comparative
      Financial Information***





**TwelveMonthsendedDecember31,
                2007**
            
            **TwelveMonthsendedDecember31,
                2006**
            
            **Difference**Revenue
            
            $
            395,541
            
            $
            1,255,013
            
            $
            (859,472
            )Reclamation,
                Exploration and Test Mining Expenses
            
            
            473,594
            
            
            1,985,611
            
            
            (1,512,017
            )Consulting
                and professional
            
            
            297,531
            
            
            468,951
            
            
            (171,420
            )General
                and administrative
            
            
            535,739
            
            
            573,683
            
            
            (37,944
            )Interest
                Expense
            
            
            2,868,455
            
            
            2,779,420
            
            
            89,035Net
                Loss
            
            $
            (4,416,527
            )
            $
            (4,416,527
            )
            $
            (359,171
            )





We
      sold
      531,ounces of gold at an average price of $744 per ounce during the twelve-month
      period ended December 31, 2007 compared to gold sales of 2,116 ounces at an
      average price of $ 578 per ounce during the same period of 2006. In February
      2007 the Compant shutdown mining operation to focus on the geology and
      exploration drilling. Reclamation, Exploration and Test Mining Expenses were
      $
      1,512,017 less for the year ended December 31, 2007 than for the year ended
      December 31, 2006. This 2007 expense decrease reflects the suspension of mining
      activity in February 2007. Our Company is an Exploration 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
      were expensed.




**QuarterendedDecember31,
                2007**
            
            **QuarterendedDecember31,
                2006**
            
            **Difference**Revenue
            
            $
            44,946
            
            $
            263,908
            
            $
            (218,962
            )Reclamation,
                Exploration and Test Mining Expense
            
            
            (197,356
            )
            
            601,384
            
            
            (798,740
            )Consulting
                and professional
            
            
            116,865
            
            
            63,613
            
            
            (53,252
            )General
                and administrative
            
            
            231,373
            
            
            204,516
            
            
            (53,252
            )Interest
                Expense
            
            
            486,729
            
            
            681,769
            
            
            (195,040
            )Net
                Loss
            
            $
            (644,665
            )
            $
            (1,211,206
            )
            $
            566,541




During
      the fourth quarter of 2007 we sold 74 ounces of gold at an average price of
      $607
      per ounce compared to gold sales of 337 ounces at an average price of $ 545
      per
      ounce during the same period of 2006. Reclamation, Exploration and Test Mining
      Expenses in the fourth quarter of 2006 were $787,740 less than the fourth
      quarter of 2006. This variance reflects reflects the shutdown of mining since
      February 2007. As detailed above, our Company is an Exploration Stage enterprise
      and in accordance with Industry Guide 7 infrastructure expenditures such as
      haul
      roads, leach pads and start-up costs were expensed.




23




At
      December 31, 2007, our Company had approximately $13,552,000 of outstanding
      debt
      bearing an average interest rate of 20% of which $7,398,239 originated from
      our
      November 2004 restructuring of the March 2004 private placement. (See “Recent
      Financing Events and Restructuring,” above) Prior to November 2004, our Company
      had no outstanding interest-bearing debt.




***Liquidity
      and Capital Resources***




We
      recognize that our cash resources are limited. Our continued existence and
      plans
      for future growth depend on our ability to obtain the capital necessary to
      operate, through the generation of revenue or the issuance of additional debt
      or
      equity. In 2007, we raised an aggregate of $1,970,000 through three financing
      transactions. Through March 30, 2008, we received $1,500,000 in additional
      funding. While this additional funding may meet our immediate working capital
      needs, if we are not able to generate sufficient revenues and cash flows or
      obtain additional or alternative funding, we will be unable to continue as
      a
      going concern. We have yet to realize an operating profit at our Company. As
      disclosed in the report of our independent registered public accounting firm
      in
      our financial statements included in this Form 10-KSB for the year ended
      December 31, 2007, our recurring losses and negative cash flow from operations
      raise substantial doubt about our ability to continue as a going concern.




In
      connection with our acquisition of the Plum Mining Company, LLC, we issued
      a
      promissory note to the seller for $1 million (the balance of the purchase
      price). At December 31, 2007, the outstanding balance on the Note was $250,000.
      We are in default on this Note.




Under
      the
      terms of our November 2004 subscription agreement, we issued 8% convertible
      notes in the aggregate principal amount of $11.1 million to an investor group.
      Under the terms of the notes, our first principal and interest repayment was
      scheduled for April 1, 2005. We are in default on these notes. The default
      interest rate is 15%.




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




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




We
      are
      working with the above-referenced note holders to cure the defaults. The above
      referenced notes have a total value of approximately 11,726,000 at December
      31,
      2006. While failure to reach a resolution would likely cause us to seek external
      funding in order to meet our obligations, there can be no assurance that such
      funding would be available.




24




***$2,200,000
      Convertible Debenture Financing***





On
      August
      23 - 24, 2006, the Company formally entered into an agreement with several
      investors to loan $1,900,000 to the Company. In March 2007, the Company amended
      the agreement increasing the loan amount to $2,200,000. The notes evidencing
      the
      loan bear interest at the rate of 12% per annum, payable monthly on the first
      of
      each month commencing October 1, 2006, along with 1/24 of the principal amount
      of such notes on each repayment date and were issued between May 18, 2006 -
      August 24, 2006, with the second quarter notes being treated as “bridge debt”
until the loan agreement was formally signed.. The notes are also convertible
      into Common Stock at a 50% discount to market until a registration statement
      registering the Common Stock underlying the notes is effective and at a 15%
      discount to market thereafter. As additional consideration, the investors are
      to
      be issued a total of 20,000,000 warrants to purchase common stock at exercise
      prices based upon the same formulas as 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.





The
      notes
      issued are as follows:





Issued date
            
            Face amountWinfield
                Debenture Payable
            
            5/15/2006
            
            $
            300,000Winfield
                Debenture Payable
            
            6/21/2006
            
            
            300,000Winfield
                Debenture Payable
            
            8/23/2006
            
            
            300,000Longview
                Debenture Payable
            
            8/24/2006
            
            
            300,000Winfield
                Debenture Payable
            
            12/12/2006
            
            
            100,000Winfield
                Debenture Payable
            
            FirstQuarter2007
            
            
            331,120Winfield
                Debenture Payable
            
            SecondQuarter2007
            
            
            288,880Longview
                Debenture Payable
            
            4/1/07
            
            
            250,000Total
            
            
            
            $
            2,170,000





In
      July
      2007, we completed an additional financing transaction, which provided us with
      $300,000 in funding. In consideration for the funding, we issued a promissory
      note with a term of one hundred and twenty (120) days and an interest rate
      of
      sixteen percent (16%) per annum. The default interest rate on the note is
      twenty-two percent (18%). The funds were used for working capital and general
      corporate purposes.





On
      October 9, 2007, we completed a financing transaction, which provided us with
      $137,500 in funding. In consideration for the financing, we issued promissory
      notes with a face value of $200,000, reflecting an original issue discount
      of
      thirty-one and a quarter (31.25%) percent. The term of the notes is one. The
      note does not bear interest The funds were used for working capital and general
      corporate purposes.





On
      December 11, 2007, the Company formally entered into an agreement with several
      investors to loan $1,000,000 to the Company. In consideration for the financing,
      we issued promissory notes with a face value of $1,200,000, 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,
      2007, $600,000 of the $1,200,000 has been funded by the investors.




The
      aggregate total of 2007 financing transactions was $1,970,000.




25




Accordingly,
      at December 31, 2007 and December 31, 2006, we classified the following
      convertible debentures as current liabilities as follows:




**Dec.
                31,2007**
            
            **Dec.
                31,2006**Convertible
                Debentures Payable-Investors
            
            $
            1,570,237
            
            $
            2,600,812Convertible
                Debentures Payable- Mandatory Redemption payment
            
            
            5,737,058
            
            
            5,886,059Convertible
                Debentures Payable- Failure to Deliver Shares
            
            
            90,944
            
            
            356,348Convertible
                Notes Payable – 2006
            
            
            2,170,000
            
            
            1,300,000Total
            
            $
            9,568,239
            
            $
            10,143,219





The
      aggregate proceeds from 2007 financing transactions totaled
      $1,970,000.




We
      expect
      to initiate a comprehensive exploration program during 2008 and expand our
      footprint at our Plum mine. We intend to finance our exploration project,
      acquisitions and any other capital expenditures in 2008 through the issuance
      of
      debt or equity instruments to existing shareholders and other parties. There
      can
      be no assurance that such financing will be available.





**Item
      7.**  **Financial
      Statements**




See
      index
      to Financial Statements and Financial Statements Schedules beginning on page
      F-1
      of this Form 10-KSB.




**Item
      8.**  **Changes
      and Disagreements with Accountants on Accounting and Financial
      Disclosure**




Not
      applicable.




**ITEM
      8A(T). CONTROLS AND PROCEDURES.**





Management's
      Annual Report on 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.





Except
      as
      stated below, Management's assessment of the effectiveness of the small business
      issuer's internal control over financial reporting is as of the year ended
      December 31, 2007. We believe that internal control over financial reporting
      is
      effective. We have not identified any, current material weaknesses considering
      the nature and extent of our current operations and any risks or errors in
      financial reporting under current operations.





26




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
      was
      no change in our internal control over financial reporting that occurred during
      the fiscal quarter ended December 31, 2007, that has materially affected, or
      is
      reasonably likely to materially affect, our internal control over financial
      reporting.




We
      have
      identified conditions as of December 31, 2007 that we believe are significant
      deficiencies in internal controls that include: 1) a lack of segregation of
      duties in accounting and financial reporting activities; and 2) the lack of
      a
      sufficient number of qualified accounting personnel. We have taken corrective
      measures to remedy these deficiencies. These measures include our consolidation
      of the corporate office with the office at the Plum Mine operation. This
      consolidation has provided the corporate office with additional accounting
      personnel. We believe that the presence of additional qualified accounting
      personnel will allow us to effectively correct the lack of segregation of duties
      in accounting and financial reporting activities.




Our
      former Chief Financial Officer became our Chief Executive Officer in September
      2004. Our Company has not hired another individual to act as Chief Financial
      Officer. We believe the absence of a full-time Chief Financial Officer or Chief
      Accounting Officer has resulted in a significant deficiency with respect to
      the
      lack of qualified accounting personnel. We have been able to mitigate this
      deficiency by engaging outside consultants to assist the Company in its
      accounting activities, but believe that the only effective long-term solution
      to
      our accounting needs is to hire a qualified CFO. Due to our budgetary
      constraints and the small size of our company we are uncertain as to when we
      will be able to accomplish this.




We
      do not
      believe that these deficiencies constitute material weaknesses because of (i)
      additional accounting support through the office consolidation with Plum Mine
      and (ii) the use of outside consultants.




We
      are
      also in the process of taking additional corrective measures to further remedy
      the deficiencies in future periods.




There
      have been no changes during the quarter ended December 31, 2007 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.




**Item
      8B.**  **Other
      Information**




Not
      applicable.




**Item
      9.****Directors
      and Executive Officers of the Registrant**




The
      following table sets forth certain information regarding our directors and
      officers:




**Name**
            
            **Age**
            
            **Position**William
                J. Nance
            
            64
            
            Director




27




*William
      J. Nance* has been
      a director of our Company since October 2005. Mr. Nance is a Certified
      Public Accountant and private consultant to the real estate and banking
      industries. He is also President of Century Plaza Printers, Inc. Mr. Nance
      is also a Director of Intergroup Corporation, Santa Fe and
      Portsmouth.




Scott
      Jolcover and Robert Faber were elected to the Board of Directors on January
      17,
      2008 to fill vacancies on the board. Mr. Faber has served as the Company’s
      President and Chief Financial Officer since September 2004 and the Chief
      Financial Officer since June 2003. Mr. Jolcover served as General Manager of
      the
      Plum Mine prior to and after it was acquired by GoldSpring in November 2003.
      Since leaving GoldSpring in 2006, Mr. Jolcover has worked as a consultant.
      . Mr.
      Faber has served as the Company’s President and Chief Financial Officer since
      September 2004 and the Chief Financial Officer since June 2003




**Executive
      Officers**




*Robert
      T. Faber* has
      served as President and Chief Executive Officer of our Company since
      September 2004 and Chief Financial Officer since June 2003.
      Mr. Faber served from 2002 until 2003 as Vice President of United Site
      Services, Inc., a privately held service consolidator in the waste service
      industry. Additionally, Mr. Faber served as an executive with Allied Waste
      Industries from 2001 until 2002, overseeing a $1.2 billion multi-state area
      and served as Chief Financial Officer with Frontier Waste Services, LLC from
      1999 until 2001. Prior to joining Frontier Waste, Mr. Faber spent 17 years
      with Waste Management, Inc., a publicly traded environmental services company,
      during which time he served in senior positions both internationally and
      domestically. Mr. Faber’s positions included Director of Finance of Waste
      Management’s $1.4 billion multi-country International operations based in
      London, England and Vice President and Controller for several $100 million
      plus multi-state market areas. Mr. Faber is a certified public
      accountant.(not licensed to practice).




Jim
      Golden has served as the Company’s COO since May 2006. Mr. Golden, who is a
      licensed mining engineer, has over twenty years of experience in the mining
      industry, including ten years with Peter Kiewit's mining division, where he
      was
      a district manager. A graduate of Montana Tech, Mr. Golden has owned his own
      consulting firm since 1990, where he has provided consulting services throughout
      the world for over 50 mining companies.





**Information
      Relating to Corporate Governance and the Board of
      Directors**




Our
      Board
      of Directors has determined, after considering all the relevant facts and
      circumstances, that Mr. William J. Nance is an independent director, as
“independence” is defined by Nasdaq, because they have no relationship with us
      that would interfere with their exercise of independent judgment.




Our
      Board
      of Directors had established three standing committees: an Audit Committee,
      a
      Compensation Committee, and a Nominations and Corporate Governance Committee.
      Due to the fact that Mr. Nance, who is not independent, was the sole Director
      during most of 2007, those Committees have been inactive. Once a full slate
      of
      Directors is appointed, the Company will review and update charters and
      reconstitute its Committees, as practicable.




**Item
      10. Executive Compensation**




The
      following table sets forth, for the periods indicated, the total compensation
      for services provided to us in all capacities by our Chief Executive Officer.
      No
      other executive officer received aggregate compensation exceeding $100,000
      during 2007.




28




**SUMMARY
      COMPENSATION TABLE**




**Annual
                  Compensation(1)**
              
              **Long-Term**
                **Compensation**
                **Awards**
                **Securities**
              
              **All
                  Other****Name
                  and Principal Position**
              
              **Year**
              
              **Salary**
                **($)**
              
              **Bonus**
                **($)**
              
              **Underlying**
                **Options
                  (#)**
              
              **Compensation**
                **($)**
              
              **TOTAL**Robert
                  T. Faber(1)(2)(4)
              
              
              2007
              
              
              180,000
              
              
              0
              
              
              
              
              
              
              
              $
              180,000Robert
                  T. Faber(2)(3)(4)
              
              
              2006
              
              $
              147,500
              
              $
              0
              
              
              0
              
              $
              0
              
              $
              147,500Robert
                  T. Faber, President andChief Executive Officer;
              
              
              2005
              
              $
              120,000
              
              $
              0
              
              
              0
              
              $
              0
              
              $
              120,000Chief
                  Financial Officer
              
              
              2004
              
              $
              115,000
              
              $
              10,000
              
              
              0
              
              $
              0
              
              $
              125,000Jim
                  Golden, COO(3)(4)
              
              
              2007
              
              
              150,000
              
              
              0
              
              
              100,000,000
              
              
              0
              
              $
              150,000Jim
                  Golden, COO (3)(4)
              
              
              2006
              
              $
              150,000
              
              $
              0
              
              
              0
              
              $
              0
              
              $
              150,000









(1)
            Mr.
                Faber has served as President and Chief Executive Officer since September
                2004 and Chief Financial Officer since June
                2003.




(2)
            $90,000
                of Mr. Faber’s 2005 - 2007 salary has not yet been paid. We intend to pay
                this amount in 2008.(3)
            Mr.
                Golden has served as Chief Operating Officer since October 2006.
                Prior to
                October 2006, Mr. Golden served as a consultant to our
                Company(4)
            $90,000
                of Mr. Faber’s 2005 - 2007 salary and $10,000 of Mr. Golden’s 2006 salary
                remains unpaid. Mr. Golden was paid the pending $10,000 in January
                and
                February 2008.




**Stock
      Options**




We
      did
      not grant stock options to directors, officers, or employees in 2006. There
      were
      no shares of common stock underlying unexercised stock options at December
      31,
      2006. This information is summarized hereinbelow.




OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR END FOR 2007





Option Awards
            
            Stock AwardsNameandPrincipalPosition
            
            Number ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable
            
            Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable
            
            Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions (#)
            
            OptionExercisePrice
            
            OptionExpirationDate
            
            NumberofSharesor UnitsofStockThatHaveNotVested
            
            MarketValueofSharesorUnitsofStockThatHaveNotVested
            
            NumberofUnearnedShares orOtherRightsThatHave NotVested
            
            MarketValue orPayoutValue ofUnearnedShares,Units orOtherRightsThatHave NotVestedRobert T. Faber
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Jim
                Golden
            
            
            10,000,000
            
            
            0
            
            
            90,000,000
            
            
            .00963
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -




**Employment
      Agreements**




Effective
      as of November 27, 2006, the Company entered into an Executive Employment
      Agreement with Robert T. Faber, its CEO. The Agreement carries a three year
      term
      from August 15, 2006 and is retroactive to that date. During the term of the
      Agreement, Mr. Faber’s base salary shall be $180,000 per year, with such
      increases as may be determined by the Company’s Compensation Committee, with a
      bonus not to exceed 50% of the base salary then in effect. Also pursuant to
      the
      Agreement, Mr. Faber shall be granted 80,000,000 stock options currently with
      exercise price per the terms of the Company’s 2006 Stock Option and Incentive
      Plan. In the case of a termination not for cause, Mr. Faber shall continue
      to
      receive his full base salary for a period of one year from date of termination
      and upon a sale of the Company, he shall receive a one time lump sum payment
      equal to 100% of his then in effect base salary, with all options vesting
      immediately.





Effective
      as of December 13, 2007, the Company entered into an Executive Employment
      Agreement with Jim Golden, its COO. The Agreement carries a three year term
      from
      December 13, 2007. During the term of the Agreement, Mr. Golden’s base salary
      shall be $150,000 per year, with such increases as may be determined by the
      Company’s Compensation Committee, with a bonus not to exceed 50% of the base
      salary then in effect. Also pursuant to the Agreement, Mr. Golden shall be
      granted 10,000,000 stock options currently and will be eligible for an
      additional 10,000,000 options for each addition one hundred thousand ounces
      of
      gold reserves up to 90,000,000 options. Options will vest over 36 months from
      the date of the grant. All earned and vested options have an exercise price
      of
      $0.00963. Mr. Golden shall continue to receive his full base salary for a period
      of one year from date of termination and upon a sale of the Company, he shall
      receive a one time lump sum payment equal to 100% of his then in effect base
      salary, with all options vesting immediately.




**Compensation
      of Directors**




During
      the fiscal year ended, our Directors were/were not given compensation for
      services rendered as Directors. The following table summarizes any compensation
      given in 2007:





DIRECTOR
      COMPENSATION TABLE


Name
              
              Fees
                Earned
                or
                Paid in
                Cash
              
              Stock
                Awards
              
              Option
                Awards
              
              Non-Equity
                Incentive Plan
                Compensation
              
              Nonqualified
                Deferred
                Compensation
                Earnings
              
              All Other
                Compensation
              
              TotalWilliam
                  Nance
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              --
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              --
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              --
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              --
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -




29





**Item
      11.**  **Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters**




The
      following table sets forth certain information regarding the beneficial
      ownership of our common stock as of December 31, 2007 by (1) each person who
      is
      known by us to be the beneficial owner of more than five percent of our issued
      and outstanding shares of common stock, (2) each of our directors and executive
      officers, and (3) all directors and officers as a group.




**Shares Beneficially**
              **Owned****Name of Beneficial Owner**
            
            **Number(1)**
            
            **Percent(2)****Directors
                and Executive Officers:**Robert
                T. Faber (1) (2) (4)
            
            
            1,990,000
            
            
            0.1
            %Jim
                Golden(1) (2)
            
            
            10,000,000
            
            
            .4
            %William
                Nance
            
            
            0
            
            
            0.0
            %All
                directors and executive officers as a group (four persons)
            
            
            11,990,000
            
            
            0.5
            %**5%
                Shareholders:**John
                V. Winfield(5)
            
            
            1,025,319,501
            
            
            28.3.
            %Merriman
                Curhan Ford(6)
            
            
            343,747,233
            
            
            12.5
            %







(1)
            Includes,
                when applicable, shares owned of record by such person’s minor children
                and spouse and by other related individuals and entities over whose
                shares
                of common stock such person has custody, voting control, or power
                of
                disposition. Also includes shares of common stock that the identified
                person had the right to acquire within 60 days of December 31, 2007
                by the
                exercise of vested stock options.





(2)
            The
                percentages shown include the shares of common stock that the person
                will
                have the right to acquire within 60 days of December 31, 2007. In
                calculating the percentage of ownership, all shares of common stock
                which
                the identified person will have the right to acquire within 60 days
                of
                December 31, 2007 upon the conversion of convertible notes or the
                exercise
                of warrants or stock options are deemed to be outstanding for the
                purpose
                of computing the percentage of shares of common stock owned by such
                person, but are not deemed to be outstanding for the purpose of computing
                the percentage of shares of common stock owned by any other
                person.




(3)
            .Includes
                shares beneficially owned by John W. Winfield, Santa Fe Financial
                Corp.,
                Portsmouth Square, Inc. and InterGroup Corporation. Mr. Winfield’s address
                is 820 Moraga Drive, Los Angeles, California
                90049.




(4)
            Appointed
                as Director on January 17, 2008




30




(5)
            Includes
                shares beneficially owned by John V. Winfield, Santa Fe Financial
                Corp,
                Portsmouth Square, Inc. and Intergroup Corporation. Mr. Winfield’s address
                is 820 Moraga Drive, Los Angeles, California
                90049.





(6)
            Merriman
                Curhan and Ford’s address is 600 California Street, 9thFloor, San Francisco, California
                94108.





**Item
      12.**  **Certain Relationships and Related Transactions**




Not
      applicable.




**Item
      13.**  **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:




Report
                of Independent Registered Public Accounting Firm
            
            
            F
                -
                2Consolidated
                Balance Sheet as of December 31, 2007
            
            
            F
                -
                3Consolidated
                Statements of Operations for the years ended December 31, 2007 and
                2006
            
            
            F
                -
                5Consolidated
                Statements of Changes in Stockholders' Equity for the year ended
                December
                31, 2007 and 2006
            
            
            F
                -
                6Consolidated
                Statements of Cash Flows for the year ended December 31, 2007 and
                2006
            
            
            F
                -
                7Notes
                to Consolidated Financial Statements
            
            
            F-8-26




(2)
            Exhibits
                filed as part of this Report:




Exhibit
              Number
            
            Exhibit3.1
            
            Borrower
                Security Agreement23.1
            
            Consent
                of Jewett, Schwartz Wolfe & Associates31.1
            
            Certification
                of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a),
                promulgated under the Securities Exchange Act of 1934, as
                amended.31.2
            
            Certification
                of 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 200232.2
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002




31




(b)
      Reports filed on Form 8-K during the quarter ended December 31,
      2007:





None.




**Item
      14.**  **Principal
      Accountants Fees and Services**




The
      aggregate fees billed to our company by Jewett Schwartz, for the fiscal years
      ended December 31, 2006 and December 31, 2007, are as follows:




**2006**
            
            **2007**Audit
                fees
            
            $
            37,500
            
            $
            37,500Audit-related
                fees
            
            $
            11,700
            
            $
            15,000Tax
                fees
            
            $
            10,000
            
            $
            10,000All
                other fees
            
            $
            0
            
            $
            0




**Audit
      Committee Pre-Approval Policies**




The
      charter of our Audit Committee provides that the duties and responsibilities
      of
      our Audit Committee include the pre-approval of all audit, audit-related, tax,
      and other services permitted by law or applicable SEC regulations (including
      fee
      and cost ranges) to be performed by our independent auditor. Any pre-approved
      services that will involve fees or costs exceeding pre-approved levels will
      also
      require specific pre-approval by the Audit Committee. Unless otherwise specified
      by the Audit Committee in pre-approving a service, the pre-approval will be
      effective for the 12-month period following pre-approval. The Audit Committee
      will not approve any non-audit services prohibited by applicable SEC regulations
      or any services in connection with a transaction initially recommended by the
      independent auditor, the purpose of which may be tax avoidance and the tax
      treatment of which may not be supported by the Internal Revenue Code and related
      regulations.




To
      the
      extent deemed appropriate, the Audit Committee may delegate pre-approval
      authority to the Chairman of the Audit Committee or any one or more other
      members of the Audit Committee provided that any member of the Audit Committee
      who has exercised any such delegation must report any such pre-approval decision
      to the Audit Committee at its next scheduled meeting. The Audit Committee will
      not delegate to management the pre-approval of services to be performed by
      the
      independent auditor.




Our
      Audit
      Committee requires that our independent auditor, in conjunction with our Chief
      Financial Officer, be responsible for seeking pre-approval for providing
      services to us and that any request for pre-approval must inform the Audit
      Committee about each service to be provided and must provide detail as to the
      particular service to be provided. Our Audit Committee Chair and Audit Committee
      Financial Expert is Bill Nance.




SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) 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.




32




SIGNATURES




In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





Goldspring,
                Inc./s/
                Robert T. FaberRobert
                T. FaberPresident,
                Chairman and Director
              (Principal
                Executive Officer and
              Principal
                Financial Officer)Date:
                April 11, 2008





Pursuant
      to the requirements of Section 12 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.




/s/
                Robert T. FaberRobert
                T. FaberPresident,
                Chairman and Director
              (Principal
                Executive Officer and
              Principal
                Financial and Accounting Officer)Date:
                April 11, 2008




33




**GOLDSPRING,
      INC.**





**CONSOLIDATED
      FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**




**Page**Report
                of Independent Registered Public Accounting Firm
            
            
            F-2Consolidated
                Balance Sheet as of December 31, 2007
            
            
            F-3Con
                Consolidated Statements of Operations for the years ended December
                31,
                2007 and 2006
            
            
            F-5Con
                Consolidated Statements of Changes in Stockholders’ Deficiency for the
                years ended December 31, 2007 and 2006
            
            
            F-6Con
                Consolidated Statements of Changes in Cash Flows for the years ended
                December 31, 2007 and 2006
            
            
            F-7Notes
                to Consolidated Financial Statements
            
            
            F-8-25




F-1




Report
      of
      Independent Registered Public Accounting Firm




To
      the
      board of directors and shareholders of


Goldspring,
      Inc.




We
      have
      audited the accompanying consolidated balance sheet of Goldspring, Inc. as
      of
      December 31, 2007 and the related consolidated statements of operations, changes
      in shareholders’ deficiency and cash flows for the years ended December 31, 2007
      and 2006. These consolidated financial statements are the responsibility of
      the
      Company’s management. Our responsibility is to express an opinion on these
      financial statements based on our audits.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provided a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Goldspring, Inc. as of December
      31,
      2007, and the results of its operations and its cash flows for the years then
      ended 2007 and 2006 in conformity with accounting principles generally accepted
      in the United States.





These
      financial statements have been prepared assuming that the Company will continue
      as a going concern. As discussed in Note 2 to the financial statements, the
      Company has operating and liquidity concerns, has incurred in net losses
      approximating $32,000,000 as of December 31, 2007. 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 loans and additional
      sales of its common stock. There is no assurance that the Company will be
      successful in raising additional capital.





/s/
                Jewett, Schwartz, Wolfe & AssociatesJewett,
                Schwartz, Wolfe & AssociatesHollywood,
                Florida
              April
                11, 2008




F-2





**GOLDSPRING,
      INC.**


**CONSOLIDATED
      BALANCE SHEET**




**December**
              **31, 2007****ASSETS**Current
                Assets:Cash
                and cash equivalents
            
            
            174,996Prepaid
                expenses and other current assets
            
            
            -Deferred
                financing fees, net
            
            
            185,417Total
                Current Assets
            
            
            360,413**PLANT,
                EQUIPMENT, AND MINERAL PROPERTIES**Mineral
                properties
            
            
            1,619,837Plant
                and equipment
            
            
            411,040Total
                property and equipment
            
            
            2,030,877Reclamation
                deposit
            
            
            377,169Other –
                embedded derivatives
            
            
            906,989Total
                Assets
            
            $
            3,675,448





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




F-3




**GOLDSPRING,
      INC.**


**LIABILITIES
      AND STOCKHOLDERS’ DEFICIENCY**




**December 31,**
              **2007****CURRENT
                LIABILITIES**Accounts
                payable
            
            
            305,638Accrued
                expenses
            
            
            683,575Accrued
                liquidated damages
            
            
            1,745,751Accrued
                interest payable
            
            
            3,205,813Lease
                obligations
            
            
            42,459Convertible
                debentures
            
            
            9,568,239Promissory
                notes
            
            
            3,575,000Other
                notes payable & current portion of long-term debt
            
            
            408,800Total
                Current Liabilities
            
            
            19,535,275**LONG-TERM
                DEBT AND OTHER LONG-TERM LIABILITIES**Long-term
                debt obligation, net of current portion
            
            
            11,612Derivative
                liability
            
            
            776,385Long-term
                reclamation liability
            
            
            553,190Total
                long-term debt and other Long-term Liabilities
            
            
            1,341,187Total
                Liabilities
            
            
            20,876,462**STOCKHOLDERS’
                DEFICIT**C
                Common stock, $.000666 par value, 3,9500,000,000 shares authorized,
                and
                2,743,508,248 shares issued and outstanding
            
            
            1,827,177Additional
                paid-in capital
            
            
            12,969,210Accumulated
                deficit - prior years
            
            
            (27,940,045
            )Accumulated
                deficit - current year
            
            
            (4,057,356
            )Total
                Stockholders’ Deficiency
            
            
            (17,201,014
            )Total
                Liabilities and Stockholders’ Deficiency
            
            $
            3,675,448




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




F-4




**GOLDSPRING,
      INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**




**Years
                Ended**
              **December 31,****2007**
            
            **2006**Revenue
                from gold sales, net
            
            $
            395,541
            
            $
            1,255,013Cost
                and expensesCosts
                applicable to sales (exclusive of depreciation and
              amortization
                shown separately below)
            
            
            -
            
            
            -Depreciation
                and amortization
            
            
            277,578
            
            
            288,305Reclamation,
                exploration and test mining expenses
            
            
            473,594
            
            
            1,985,611General
                and administrative
            
            
            535,739
            
            
            573,683Consultants
                and professional fees
            
            
            297,531
            
            
            468,9511,584,442
            
            
            3,316,550Operating
                Loss
            
            
            (1,188,901
            )
            
            (2,061,537
            )Other
                Income (Expense):Liquidated
                damages expense (See Note 11)
            
            
            -
            
            
            -Gain
                on Sale of Fixed Assets
            
            
            -
            
            
            91,953Other
                -Settlement Agreement
            
            
            -
            
            
            85,000Derivative
                Change in Fair Value
            
            
            -
            
            
            247,477Interest
                income
            
            
            -
            
            
            -Interest
                expense
            
            
            (2,868,455
            )
            
            (2,779,420
            )(2,868,455
            )
            
            (2,354,990
            )Net
                Loss:
            
            
            (4,057,356
            )
            
            (4,416,527
            )Net
                loss per common share - basic
            
            
            (0.002
            )
            
            (0.006
            )Basic
                weighted average common shares outstanding
            
            
            1,590,580,692
            
            
            701,486,485





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




F-5




**GOLDSPRING,
      INC.**


**STATEMENT
      OF CHANGES IN STOCKHOLDERS’ DEFICIENCY**


**For
      the Years Ended December 31, 2007 and 2006**





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


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


Par value
              
              Additional
              
              Treasury
                Stock
              
              AccumulatedCommon
                Shares Issued
              
              $.000666
                per share
              
              Paid-in
                Capital
              
              (at
                cost)
              
              Defici**t**
              
              **Total**Balance
                  - December 31, 2005,
              
              
              325,047,122
              
              $
              216,482
              
              $
              5,398,330
              
              
              (67
              )
              $
              (23,524,302
              )
              $
              (17,909,557
              )Retirement
                  of treasury shares
              
              
              (100,000
              )
              
              (67
              )
              
              -
              
              
              67
              
              
              -
              
              
              -Common
                  stock issued for debenture principal
              
              
              433,316,756
              
              
              288,589
              
              
              4,321,082
              
              
              
              
              
              -
              
              
              4,609,671Common
                  stock issued for debenture interest
              
              
              200,529,058
              
              
              133,552
              
              
              1,884,148
              
              
              
              
              
              -
              
              
              2,017,700Other
              
              
              146,004
              
              
              97
              
              
              
              
              
              
              
              
              -
              
              
              97Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,416,527
              )
              
              (4,416,527
              )Balance
                  - December 31, 2006,
              
              $
              958,938,940
              
              $
              638,653
              
              $
              11,603,560
              
              
              -
              
              $
              (27,940,829
              )
              $
              (15,698,616
              )Liquidated
                  damages
              
              
              50,000,000
              
              
              33,300
              
              
              121,047
              
              
              
              
              
              
              
              
              154,347Common
                  stock issued for debenture principal
              
              
              898,776,970
              
              
              598,585
              
              
              846,362
              
              
              
              
              
              -
              
              
              1,444,947Common
                  stock issued for debenture interest
              
              
              835,792,338
              
              
              556,639
              
              
              398,241
              
              
              
              
              
              -
              
              
              954,880Other
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              784
              
              
              784Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,057,356
              )
              
              (4,057,356
              )Balance,
                  December 31, 2007
              
              $
              2,743,508,248
              
              $
              1,827,177
              
              $
              12,969,210
              
              $
              -
              
              $
              (31,997,401
              )
              $
              (17,201,015
              )





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




F-6


**GOLDSPRING,
      INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**Years
                Ended December 31,****2007**
            
            **2006****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (4,057,356
            )
            $
            (4,416,527
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            277,578
            
            
            739,348LiLiquidated
                damages from March 2004 financing and November 2004
                restructuring
            
            
            ―
            
            
            ―Interest
                paid through the issuance of company stock
            
            
            954,877
            
            
            2,017,700Changes
                in operating assets and liabilitiesInventories
            
            
            ―
            
            
            52,000Prepaid
                and other current assets
            
            
            (24,607
            )
            
            2,893Other
                current assets
            
            
            (60,064
            )
            
            (37,500
            )Bank
                overdraft
            
            
            ―
            
            
            15,491Accounts
                payable
            
            
            (214,033
            )
            
            (750,670
            )Accrued
                expenses
            
            
            1,160,389
            
            
            1,046,195Net
                Change - derivative change fair value
            
            
            378,073
            
            
            (247,477
            )Other
            
            
            87,078
            
            
            102,521Net
                cash used in operating activities
            
            
            (1,498,065
            )
            
            (1,476,026
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**:Equipment
                / acquisition deposit
            
            
            ―
            
            
            ―Acquisition
                of plant and equipment
            
            
            20,000
            
            
            10,969Net
                used in investing activities
            
            
            20,000
            
            
            10,969**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Principal
                payments on Note Payable
            
            
            (44,439
            )
            
            (154,308
            )Proceeds
                from the issuance of note payable to related party
            
            
            1,697,500
            
            
            1,592,500Net
                cash provided by financing activities
            
            
            1,653,061
            
            
            1,438,192Net
                increase in cash and cash equivalents
            
            
            174,996
            
            
            (26,865
            )Cash
                and cash equivalents, beginning of year
            
            
            ―
            
            
            26,865Cash
                and cash equivalents, end of year
            
            $
            174,996
            
            $
            ―**Supplemental
                disclosure of non-cash investing and financing
                activities:**Issuance
                of company stock for interest
            
            $
            954,877
            
            $
            2,017,700Issuance
                of company stock for liquidated damages
            
            $
            154,346
            
            $
            ―Conversion
                of debt into company’s common shares
            
            $
            1,444,947
            
            $
            4,609,671




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




F-7


GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006





**Note
      1 — Nature of Business**




We
      were
      incorporated in the state of Florida effective October 19, 1999 under the name
      of Click and Call, Inc. On June 7, 2000, we filed an amendment to our Articles
      of Incorporation changing our name to STARTCALL.COM, INC. On March 10, 2003,
      we
      changed our name to Goldspring, Inc. (“we” “Goldspring,” or the “Company”). The
      primary nature of our business is the exploration and development of mineral
      producing properties.




**Note
      2 — 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 minimal revenues from
      operations in 2007. For the year ended December 31, 2007 the Company incurred
      net loss of $4,057,356. 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 loans and
      additional sales of its common stock. There is no assurance that the Company
      will be successful in raising additional capital.




**Note
      3 — Summary of Significant Accounting Policies**




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. All material inter-company transactions and balances
      have been eliminated in consolidation.




*Cash
      and Cash Equivalents*




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




*Fair
      Value of Financial Instruments*




The
      carrying amounts of cash and cash equivalents, accounts receivable, accounts
      payable, and accrued expenses approximate fair market value because of the
      short
      maturity of those instruments. Furthermore, convertible debenture and other
      notes payable amounts approximate fair value at December 31, 2007 and 2006.




F-8




GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006





**Note
      3 — Summary of Significant Accounting Policies - Continued**




*Credit
      Risk*




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




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




In
      August
      2001, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 144 “Accounting for the Impairment
      or Disposal of Long-Lived Assets,” which supersedes both SFAS No. 121,
“Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
      to
      Be Disposed Of” and the accounting and reporting provisions of Accounting
      Practice Bulletin (“APB”) Opinion No. 30, “Reporting the Results of Operations —
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
      Unusual and Infrequently Occurring Events and Transactions,” for the disposal of
      a segment of a business (as previously defined in that opinion). This statement
      establishes the accounting model for long-lived assets to be disposed of by
      sale
      and applies to all long-lived assets, including discontinued operations. This
      statement requires those long-lived assets be measured at the lower of carrying
      amount or fair value less cost to sell, whether reported in continuing
      operations or discontinued operations.




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 2 and
      3.




*Revenue
      Recognition*




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




*Stock
      Issued For Services*




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




*Deferred
      Financing Charges*




During
      2007 we recorded deferred financing charges associated with the issue of
      promissory notes payable totaling $110,000. We amortize the charges over the
      respective lives of the promissory notes payable as interest expense. During
      the
      year ended December 31, 2007 we recognized $166,939 of interest expense related
      to the amortization of deferred financing fees.





F-9




GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006





**Note
      3 — Summary of Significant Accounting Policies — Continued**




*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 7 years.




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




*Mineral
      Properties*




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




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




We
      review
      the carrying value of our interest in each property on a quarterly basis to
      determine whether an impairment has incurred in accordance with the 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.




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




F-10




GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006




**Note
      3 — Summary of Significant Accounting Policies — Continued**




*Reclamation
      Liabilities and Asset Retirement Obligations*




Minimum
      standards for site reclamation and closure have been established by various
      government agencies that affect certain of our operations. We calculate our
      estimates of reclamation liability based on current laws and regulations and
      the
      expected undiscounted future cash flows to be incurred in reclaiming, restoring,
      and closing our operating mine sites. When we incur reclamation liabilities
      that
      are not be related to asset retirements we recognize the obligations in
      accordance with Statement of Position (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. In our case, the long-lived asset is directly related
      to
      the mining infrastructure costs being expensed by our Company. Since we do
      not
      yet have proven or probable reserves as defined by Industry Guide 7, and in
      accordance with SFAS No. 143 our asset retirement obligation was expensed
      directly to reclamation expense.




*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 years ended
      December 31, 2007 and 2006, 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.





F-11





GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006





**Note
      3 — Summary of Significant Accounting Policies — Continued**




*Recent
      Authoritative Pronouncements*




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




In
      May
      2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154,
      "Accounting Changes and Error Corrections" (SFAS No. 154), which replaces
      Accounting Principles Board (APB) Opinion No. 20, "Accounting Changes," and
      SFAS
      No. 3, "Reporting Accounting Changes in Interim Financial Statements - An
      Amendment of APB Opinion No. 28." SFAS No. 154 provides guidance on the
      accounting for and reporting of accounting changes and error corrections, and
      it
      establishes retrospective application, or the latest practicable date, as the
      required method for reporting a change in accounting principle and the reporting
      of a correction of an error. SFAS No. 154 is effective for accounting changes
      and corrections of errors made in fiscal years beginning after December 15,
      2005. The Company adopted SFAS No. 154 in the first quarter of fiscal year
      2007
      and does not expect it to have a material impact on its consolidated results
      of
      operations and financial condition.





In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
      No. 157). SFAS No. 157 provides guidance for using fair value to measure assets
      and liabilities. SFAS No. 157 addresses the requests from investors for expanded
      disclosure about the extent to which companies measure assets and liabilities
      at
      fair value, the information used to measure fair value and the effect of fair
      value measurements on earnings. SFAS No. 157 applies whenever other standards
      require (or permit) assets or liabilities to be measured at fair value, and
      does
      not expand the use of fair value in any new circumstances. SFAS No. 157 is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007 and will be adopted by the Company in the first quarter of
      fiscal year 2009. The Company is unable at this time to determine the effect
      that its adoption of SFAS No. 157 will have on its consolidated results of
      operations and financial condition.





In
      July
      2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty
      in
      Income Taxes, an interpretation of FASB Statement No. 109" (FIN 48). FIN 48
      clarifies the accounting for uncertainty in income taxes by prescribing the
      recognition threshold a tax position is required to meet before being recognized
      in the financial statements. It also provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition. The cumulative effects, if any, of applying FIN
      48
      will be recorded as an adjustment to retained earnings as of the beginning
      of
      the period of adoption. FIN 48 is effective for fiscal years beginning after
      December 15, 2006, and the Company is required to adopt it in the first quarter
      of fiscal year 2008. The Company is currently evaluating the effect that the
      adoption of FIN 48 will have on its consolidated results of operations and
      financial condition and is not currently in a position to determine such
      effects, if any.




F-12





GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006





**Note
      3 — Summary of Significant Accounting Policies — Continued**




*Recent
      Authoritative Pronouncements-Continued*




In
      September 2006, the Security and Exchange Commission (SEC) issued SAB No. 108,
      "Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements" (SAB 108). SAB No. 108
      provides guidance on the consideration of the effects of prior year
      misstatements in quantifying current year misstatements for the purpose of
      a
      materiality assessment. SAB No. 108 establishes an approach that requires
      quantification of financial statement errors based on the effects of each on
      a
      company's balance sheet and statement of operations and the related financial
      statement disclosures. Early application of the guidance in SAB 108 is
      encouraged in any report for an interim period of the first fiscal year ending
      after November 15, 2006, and will be adopted by the Company in the first quarter
      of fiscal year 2007. The Company does not expect the adoption of SAB No. 108
      to
      have a material impact on its consolidated results of operations and financial
      condition.





FSP
      SFAS
      123(R)-5 was issued on October 10, 2006. The FSP provides that instruments
      that
      were originally issued as employee compensation and then modified, and that
      modification is made to the terms of the instrument solely to reflect an equity
      restructuring that occurs when the holders are no longer employees, then no
      change in the recognition or the measurement (due to a change in classification)
      of those instruments will result if both of the following conditions are met:
      (a). There is no increase in fair value of the award (or the ratio of intrinsic
      value to the exercise price of the award is preserved, that is, the holder
      is
      made whole), or the antidilution provision is not added to the terms of the
      award in contemplation of an equity restructuring; and (b). All holders of
      the
      same class of equity instruments (for example, stock options) are treated in
      the
      same manner. The provisions in this FSP shall be applied in the first reporting
      period beginning after the date the FSP is posted to the FASB website. The
      Company does not expect the adoption of FSP SFAS 123(R)-5 to have a material
      impact on its consolidated results of operations and financial condition.





In
      February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments, and Amendment of FASB No. 133 and 140” (SFAS No. 155),
      which establishes the accounting for certain derivatives embedded in other
      instruments. It simplifies accounting for certain hybrid financial instruments
      by permitting fair value remeasurement for any hybrid instrument that contains
      an embedded derivative, that otherwise would require bifurcation under SFAS
      No.
      133, as well as eliminating a restriction on the passive derivative instruments
      that a qualifying special-purpose entity (“SPE”) may hold under SFAS No. 140.
      This statement allows a public entity to irrevocably elect to initially, and
      subsequently, measure a hybrid instrument that would be required to be separated
      into a host contract and derivative in its entirety at fair value (with changes
      in fair value recognized in earnings) so long as that instrument is not
      designated as a hedging instrument pursuant to the statement. SFAS No. 140
      previously prohibited a qualifying special-purpose beneficial interest, other
      than another derivative financial instrument. The statement is effective for
      fiscal years beginning after September 15, 2006, with early adoption permitted
      as of the beginning of an entity’s fiscal year. Management believes the adoption
      of this statement will have no immediate impact on the Company’s financial
      condition or results of operations.




In
      February 2007, the FASB issued Statement No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities, including an amendment of FASB
      Statement No. 115" (FAS 159). FAS 159 permits companies to choose to measure
      many financial instruments and certain other items at fair value and establishes
      presentation and disclosure requirements designed to facilitate comparisons
      between companies that choose different measurement attributes for similar
      types
      of assets and liabilities. The provisions of FAS 159 become effective as of
      the
      beginning of our 2009 fiscal year. We are currently evaluating the impact that
      FAS 159 will have on our financial statements.





F-13





GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006





**Note
      4 — Mineral Properties**




At
      December 31, 2007 and 2006, our mineral properties consisted of the
      following:




**MINERAL
                PROPERTIES**:
            
            **2007**
            
            **2006**Placer
                Gold Properties
            
            $
            100,000
            
            $
            100,000Big
                Mike Copper Property
            
            
            69,138
            
            
            69,138Plum
                Gold Properties
            
            
            1,360,699
            
            
            1,360,699Water
                rights
            
            
            90,000
            
            
            90,000Balance
            
            $
            1,619,837
            
            $
            1,619,837




*Placer
      Gold Properties and Big Mike Copper Property*




In
      June
      2003, we acquired GoldSpring, LLC (the Placer Gold properties) and Ecovat Copper
      Nevada, LLC (the Big Mike Copper property). Total consideration paid for the
      Placer Gold mineral properties and Big Mike Copper property was $100,000 cash
      and the issuance of 90,000,000 shares of common stock to Ecovery’s 128
      shareholders, valued at $119,138 (Ecovery’s book value for the Big Mike Copper
      property), respectively.




We
      are
      required to pay a 2% net smelter royalty for gold production at the Placer
      Gold
      properties once the $4,650,000 20% net proceeds contingent production royalty
      obligation has been satisfied.




In
      September 2006, we entered into a ten year lease with a local company,
      controlled by a former GoldSpring director, for 17 unpatended lode claims and
      one placer claim covering a total of 310 arces in Pershing County Nevada that
      comprise our Big Mike Copper property. The lease included an initial $50,000
      payment to cover royalty payments due for the first two years. Additionally,
      the
      lessee must pay Goldspring $75,000 when a production permit is awarded, and
      $125,000 when commercial mining commences. Additionally, the lessee agrees
      to a
      work expenditure of $300,000 for environmental and engineering matters in the
      first thirty-six months of the lease During the term of the lease, Goldspring
      will also receive a production royalty of between 3% and 5% of net returns
      from
      copper mining, dependent on the price of copper.




*Plum
      Gold Properties*




We
      acquired the Plum Mining Company, LLC (“Plum LLC”) in November of 2003 for a
      total of $1,400,000, consisting of a cash payment of $200,000, 549,177
      restricted common shares valued at $200,000, and a non-interest bearing
      promissory note payable (See Note 5) for $1,000,000. The Plum LLC’s primary
      assets were the Plum Gold Properties.





F-14





GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006




**Note
      4 — Mineral Properties -Continued**




*Plum
      Gold Properties-Continued*




We
      are
      required to pay royalties to the two lessors of our Billie the Kid/Lucerne
      project, totaling the greater of $1,000 per month or a percentage of the Net
      Smelter Returns. The percentage varies based on the price of gold: 3% if gold
      is
      less than $400 per ounce, 4% if gold is in the $400’s per ounce, and 5% if gold
      is $500 or greater per ounce.




**Note
      5 — Plant, Property and Equipment**




At
      December 31, 2007 and 2006, plant, property and equipment consisted of the
      following (See Note 1):




**2007**
            
            **2006**Plant,
                property and equipment at Plum Mine location
            
            $
            1,473,340
            
            $
            1,543,340Equipment,
                corporate
            
            
            -
            
            
            18,195Less
                accumulated depreciation
            
            
            (1,062,300
            )
            
            (803,393
            )Balance
            
            $
            411,040
            
            $
            758,142





Included
      in plant, property and equipment at our Plum Mine location at December 31,
      2007,
      is equipment under capital lease of $156,292. Future minimum lease payments
      for
      the related obligation under capital lease are $42,459 for 2008 and $0 for
      2009.
      We recorded depreciation expense on equipment under capital lease totaling
      $31,258 during the year ended December 31, 2007.




**Note
      6 — Reclamation Liability**




The
      Nevada Revised Statutes and regulations promulgated by the Nevada State
      Environmental Commission and Division of Environmental Protection require a
      surety bond to be posted for mining projects to assure that a site is left
      safe,
      stable, and capable of providing for a productive post-mining land use. Pursuant
      to the approved Reclamation Plan for Billie the Kid, we posted a surety bond
      in
      the amount of $553,190, of which $377,000 was in the form of a cash deposit
      and
      the balance was secured from a surety agent.





We
      have
      accrued a long-term liability of $553,190 as of December 31, 2007, with regard
      to our obligations to reclaim our Plum Mine facility based on our reclamation
      plan submitted and approved by the Nevada State Environmental Commission and
      Division of Environmental Protection. Costs of future expenditures for
      environmental remediation are not discounted to their present value unless
      subject to a contractually obligated fixed payment schedule. 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.




F-15





GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006




**Note
      7 — Notes Payable — Mineral Property Purchases**




We
      have a
      non-interest bearing note payable to the Brockbank Trust 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 December 31, 2007 we still had a $250,000
      note
      balance due to the Brockbank Trust.




During
      2005 we purchased certain mining claims that were near or contiguous to our
      Plum
      Gold Property (See Note 4). In connection with the purchase we issued a note
      payable of $160,000. The note was payable in quarterly installments of $16,000
      and is payable in its entirety on or before June 2008. We have not been making
      schedule payments on this note due to some unresolved issues with the title
      on
      the property. Since we are in technical default on this loan, the entire
      outstanding balance has been recorded as short-term notes payable. At December
      31, 2007 the note balance was $147,200.




At
      December 31, 2007 and 2006, our balance owing on mineral property notes payable
      was as follows:




**2007**
            
            **2006**Balance
            
            $
            397,200
            
            $
            397,200Less
                current portion
            
            
            397,200
            
            
            397,200Non-current
                portion
            
            $
            -
            
            $
            -




**Note
      8 —Convertible Debentures and Notes Payable**




*Convertible
      Debentures-Investors*




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




As
      a
      result, and effective November 30, 2004, we restructured the private
      placement transaction and entered into a new subscription agreement. In
      connection with the restructuring, we exchanged 8% convertible notes in the
      aggregate principal amount of approximately $11.1 million and four-year
      warrants to purchase approximately 27.8 million shares of common stock at
      an exercise price of $0.20 per share, subject to anti-dilution adjustments,
      for
      21,739,129 shares of common stock and 21,739,129 warrants to purchase shares
      of
      common stock issued in the March Offering. The principal amount of the
      convertible notes consist of the original $10.0 million investment plus
      approximately $1.1 million of accrued penalties associated with the delay
      in effectiveness of our registration statement covering the resale of the shares
      of common stock held by the investors. (See Notes 11).





F-16





GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006





**Note
      8 —Convertible Debentures and Notes Payable - Continued**




The
      8%
      convertible notes mature in November 2006. We must make monthly payments of
      102% of 1/20 th of the
      initial principal amount, together with accrued interest. We have the option
      to
      repay such amounts in shares of our common stock at a conversion rate equal
      to
      85% of the average of the five lowest closing bid prices of our common stock
      during the 20 trading days preceding each payment date. We may prepay the
      outstanding principal amount by paying the holders of the notes 115% of the
      then-outstanding principal amount. Each holder of notes may convert the notes
      into shares of common stock at an initial conversion price of $0.20 per share,
      which is subject to anti-dilution adjustments. During the first 20 days
      following the closing date, the conversion price may be reduced to a price
      equal
      to 70% of the average of the five lowest closing prices of our common stock
      during the 20 trading days preceding the closing date.




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




*Convertible
      Debentures-Mandatory Redemption Payment*




The
      failure to deliver the shares by the Delivery Date resulted in liquidated
      damages of 1% of the note principal amount being converted per business day
      after the Delivery Date. We did not deliver the share certificates within the
      period required in the subscription agreement and as a result, in March of
      2005,
      John V. Winfield, a major shareholder and note holder elected to demand payment
      of approximately $6.9 million pursuant to the mandatory redemption payment
      provisions of the subscription agreement and forfeit his right to receive the
      shares in favor of the payment.




On
      March
      31, 2005, we entered into a Settlement Agreement (“Settlement”) with the Mr.
      Winfield and agreed to convert the mandatory redemption payment into six
      Convertible Debentures (“the Debentures”). Accordingly, we accrued a liability
      for approximately $6.9 million and reduced our paid-in-capital account for
      approximately $3.5 million. 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. The
      debentures are subject to the following terms:




F-17





GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006





**Note
      8 —Convertible Debentures and Notes Payable - Continued**




*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.




*Mandatory
      Registration Rights*




The
      terms
      of the Debenture agreement require that we must file with the Securities and
      Exchange Commission on a Form SB-2 registration statement, or such other form
      that we are eligible to use, to register the Conversion Shares, together with
      any other shares of Common stock issuable hereunder for resale and distribution
      under the 1933 and cause to be filed not later than April 30, 2005 and declared
      effective not later than June 30, 2005. If we fail to make effective a
      registration statement we are subject to liquidated damages, an amount equal
      to
      two percent (2%) for each thirty (30) days or part thereof, thereafter of the
      principal amount of the Debenture remaining unconverted and purchase price
      of
      Conversion Shares issued upon conversion of the Debenture owned of record by
      the
      holder. The Company must pay the liquidated damages in cash or an
      amount ****** equal
      to
      two hundred percent of such cash liquidated damages if paid in additional shares
      of registered un-legended free ****** trading
      shares of common stock. As of December 31, 2006 we had failed to make any
      monthly payments on the debentures and are in default.




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





F-18




GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006








**Note
      8 —Convertible Debentures and Notes Payable - Continued**




**2,200,000
      Convertible Debenture Financing**





On
      August
      23 and 24, 2006, the Company formally entered into an agreement with several
      investors to loan $1,900,000 to the Company. In March 2007, the Company amended
      the agreement increasing the loan amount to $2,200,000. The notes evidencing
      the
      loan bear interest at the rate of 12% per annum, payable monthly on the first
      of
      each month commencing October 1, 2006, along with 1/24 of the principal amount
      of such notes on each repayment date and were issued between May 18, 2006 -
      August 24, 2006, with the second quarter notes being treated as “bridge debt”
until the loan agreement was formally signed.. The notes are also convertible
      into Common Stock at a 50% discount to market until a registration statement
      registering the Common Stock underlying the notes is effective and at a 15%
      discount to market thereafter. As additional consideration, the investors are
      to
      be issued a total of 20,000,000 warrants to purchase common stock at exercise
      prices based upon the same formulas as 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, $1,300,000 of the $2,200,000 has been funded by the investors.




The
      notes
      issued as of December 31, 2007are as follows:





Issued date
            
            Face amountWindfield
                Debenture Payable
            
            
            5/15/2006
            
            $
            300,000Windfield
                Debenture Payable
            
            
            6/21/2006
            
            
            300,000Windfield
                Debenture Payable
            
            
            8/23/2006
            
            
            300,000Longview
                Debenture Payable
            
            
            8/24/2006
            
            
            300,000Windfield
                Debenture Payable
            
            
            12/12/2006
            
            
            100,000Windfield
                Debenture Payable
            
            
            Q1
                2007
            
            
            -Windfield
                Debenture Payable
            
            
            Q2
                2007
            
            
            -Windfield
                Debenture Payable
            
            
            4/1/07
            
            
            250,000Total
            
            
            
            
            $
            1,350,000




Accordingly,
      at December 31, 2006 and 2005, we classified the following convertible
      debentures as current liabilities as follows:




**2007**
            
            **2006**Convertible
                Debentures Payable-Investors
            
            $
            1,570,237
            
            $
            2,600,812Convertible
                Debentures Payable- Mandatory Redemption payment
            
            
            5,737,058
            
            
            5,886,059Convertible
                Debentures Payable- Failure to Deliver Shares
            
            
            90,944
            
            
            356,348Convertible
                Notes Payable - 2006
            
            
            2,170,000
            
            
            1,300,000Total
            
            $
            9,568,239
            
            
            10,143,219




F-19




GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006





**Note
      9 —Promissory Notes Payable**




*Promissory
      Notes Payable—July Financing*




In
      July
      of 2005, we borrowed $1.2 million from companies controlled by John V. Winfield,
      a major shareholder. Proceeds from the notes were reduced by a 33.3% original
      issue discount and other origination fees. Net proceeds received by the Company
      from the borrowing were $740,000. The notes accrue interest at 15% per annum
      and
      are payable in monthly installments of principal and interest over a 24 month
      period with the remaining entire balance of unpaid principal and interest due
      on
      July 15, 2007.




The
      notes
      are collateralized by substantially all of the Company’s assets subject to the
      security interest of the Brockbank Trust (See Note 7). As of December 31, 2006
      we had failed to make any monthly payments on the notes and are in
      default.




*Promissory
      Notes Payable—September Financing*




In
      September of 2005, we borrowed $300,000 from Longview Fund L.P., a major
      shareholder. Proceeds from the notes were reduced by a 33.3% original issue
      discount and other origination fees. Net proceeds received by the Company from
      the borrowing were $165,500.The notes accrue interest at 15% per annum and
      are
      payable in monthly installments of principal and interest over a 24 month period
      with the remaining entire balance of unpaid principal and interest due on July
      15, 2007. The notes are collateralized by substantially all of the Company’s
      assets subject to the security interest of the Brockbank Trust (See Note 7)
      and
      the Winfield convertible debentures of March 2005.




The
      notes
      share a security interest with the Winfield notes issued in July 2004. As of
      December 31, 2006 we had failed to make any monthly payments on the notes and
      are in default.




*Promissory
      Notes Payable: December 2005 through March 2006 Financing*




In
      December of 2005, we borrowed $375,000 from Longview Fund L.P., a major
      shareholder and $200,000 from MCF Corporation. The notes accrue interest at
      16%
      per annum, are uncollateralized and are payable including accrued interest
      on or
      before March 15, 2006. The Longview notes were amended extending the term of
      the
      loans to June 2007.




In
      February 2006, we completed a financing transaction, which provided us with
      $250,000 in funding. In consideration for the funding, we issued a promissory
      note with a term of ninety (90) days and an interest rate of sixteen percent
      (16%) per annum. The default interest rate on the note is twenty-two percent
      (22%). The funds were used for working capital and general corporate purposes.
      In March 2006, we completed an additional financing transaction, which provided
      us with $150,000 in funding under the same terms and conditions as the February
      2006 financing. In December 2006 the term on the note was extend until June
      2007.





In
      July
      2007, we completed an additional financing transaction, which provided us with
      $300,000 in funding. In consideration for the funding, we issued a promissory
      note with a term of one hundred and twenty (120) days and an interest rate
      of
      sixteen percent (16%) per annum. The default interest rate on the note is
      twenty-two percent (18%). The funds were used for working capital and general
      corporate purposes.




F-20




GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006




**Note
      9 —Promissory Notes Payable continued**





On
      October 9, 2005, we completed a financing transaction, which provided us with
      $137,500 in funding. In consideration for the financing, we issued promissory
      notes with a face value of $200,000, reflecting an original issue discount
      of
      thirty-one and a quarter (31.25%) percent. The term of the notes is one. The
      note does not bear interest The funds were used for working capital and general
      corporate purposes.





On
      December 11, 2007, the Company formally entered into an agreement with several
      investors to loan $1,000,000 to the Company. In consideration for the financing,
      we issued promissory notes with a face value of $1,200,000, 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,
      2007, $600,000 of the $1,200,000 has been funded by the investors.




The
      aggregate total of 2007 financing transactions was $1,970,000.





Accordingly,
      at December 31, 2007 and 2006 we classified the following notes payable as
      current liabilities as follows:




**2007**
            
            **2006**Promissory
                Notes Payable-July 2005 Financing
            
            $
            1,200,000
            
            $
            1,200,000Promissory
                Notes Payable-September 2005 Financing
            
            
            300,000
            
            
            300,000Promissory
                Notes Payable-December 2005 Financing
            
            
            575,000
            
            
            575,000Promissory
                Notes Payable-February 2006 Financing
            
            
            250,000
            
            
            250,000Promissory
                Notes Payable-March 2006 Financing
            
            
            150,000
            
            
            150,000Promissory
                Notes Payable-July 2007 Financing
            
            
            300,000
            
            
            -Promissory
                Notes Payable-October 2007 Financing
            
            
            200,000
            
            
            -Promissory
                Notes Payable-December 2007 Financing
            
            
            600,000
            
            
            -Total
            
            $
            3,575,000
            
            $
            2,475,000




**Note
      10 —Other Long-term Debt**




*Notes
      Payable- Plum Mine*




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




*Notes
      Payable- Seller Note*




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




F-21




GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006




**Note
      10 —Other Long-term Debt continuted**





*Notes
      Payable- Equipment Financing*




During
      2004, we purchased certain equipment and financed our purchases through GMAC
      and
      Ford Motor Company credit agencies. Aggregated principal and interest due
      pursuant to the financings is due monthly in equal installments of $1,054,
      at an
      averaged interest rate of 7.2%. The equipment purchased is pledged as collateral
      for the debt. At December 31, 2007 and 2006, we had the following amounts due
      under the financings as follows:




**2007**
            
            **2006**Long-term
                Debt-Current Plum Mine
            
            $
            250,000
            
            $
            250,000Long-term
                Debt-Current Seller Note
            
            
            147,200
            
            
            147,200Other
                Long-term Debt-Current
            
            
            11,600
            
            
            9,758Total
            
            $
            408,800
            
            $
            406,958





**2007**
            
            **2006**Long-term
                Debt-non current Plum Mine
            
            $
            -
            
            $
            -Long-term
                Debt-non current Seller Note
            
            
            -
            
            
            -Other
                Long-term Debt -Non-current
            
            
            11,612
            
            
            23,336Total
            
            $
            11,612
            
            $
            23,336




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




2008
            
            $
            11,4412009
            
            $
            10,9772010
            
            $
            -2011
                and thereafter
            
            $
            -Total
            
            $
            22,418




*Convertible
      Notes Payable-Failure to Deliver Shares*




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




F-22




GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006





**Note
      10 —Other Long-term Debt - Continued**





*Conversion
      Rights*




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




*Borrower’s
      Repayment Election* .





The
      monthly amount due on a repayment date shall be paid by the Company at its
      election (i) in cash at the rate of 102% of such monthly amount otherwise due
      on
      such repayment date within three (3) business days of the applicable repayment
      date, or (ii) with registered, freely transferable common stock at an applied
      conversion rate equal to eighty-five percent (85%) of the average of the five
      (5) lowest closing bid prices of the common stock as reported by Bloomberg
      L.P.
      for the twenty (20) trading days preceding such repayment date.




On
      April
      1, 2005, we failed to make our first payment on the convertible debentures
      and
      were in default of the terms of the convertible notes. At December 31, 2007
      and
      2006 we classified the following notes payable as current liabilities as
      follows:




**2006**
            
            **2005**Convertible
                Notes Payable
            
            $
            9,568,239
            
            $
            10,143,219Promissory
                notes
            
            
            3,575,000
            
            
            2,475,000Total
            
            $
            13,143,239
            
            $
            12,618,219




**Note
      11 — Income Taxes**




The
      provision (benefit) for income taxes from continued operations for the years
      ended December 31, 2007 and 2006consist of the following:





2007
            
            2006Current:Federal
            
            $
            -
            
            
            -Deferred:Federal
            
            
            (1,500,000
            )
            
            (1,500,000
            )Increase
                in valuation allowance
            
            
            1,500,000
            
            
            1,500,000Benefit
                for income taxes, net
            
            $
            -
            
            
            -




F-23




GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006





**Note
      11 — Income Taxes**  **continued**




The
      difference between income tax expense computed by applying the federal statutory
      corporate tax rate and actual income tax expense is as follows:





December
              31,2007 and
              2006Statutory
                federal income tax rate
            
            
            35.0
            %Increase
                in valuation allowance
            
            
            (35.0
            )%Effective
                tax rate
            
            
            -
            %





Deferred
      income taxes result from temporary differences in the recognition of income
      and
      expenses for the financial reporting purposes and for tax purposes. The tax
      effect of these temporary differences representing deferred tax asset and
      liabilities result principally from the following:





December
              31,2007Net
                operating loss carry-forwards
            
            $
            (6,900,000
            )





At
      December 31, 2006 the Company has a net operating loss carry-forward of
      approximately $27.9 millions that begin to expire in 2024 available to offset
      future taxable income, may be subject to certain limitations under section
      382
      of the Internal Revenue Code of 1986, as amended, and other limitations under
      state tax laws.




**Note
      12 — Stockholders’ Equity**




*Common
      Stock issued for Convertible Debenture Principal and Interest*




During
      2007 the Company issued 898,776,970, 835,792,338 and 200,529,058 shares of
      its
      unrestricted common stock in connection with the conversion of $1,444,947,
      $954,880 and $154,347 of debenture principal, interest and liquidated damages,
      respectively.




*March
      2004 Offering*




We
      completed a private placement of securities transaction during March 2004.
      In connection with the offering, we received gross proceeds of $10 million
      from
      a group of accredited institutional and individual investors through the
      issuance of 21,739,129 shares of unregistered restricted common stock at a
      price
      of $0.46 per share. The investors also received two forms of warrants in this
      transaction. The Green Shoe Warrants allowed the investor group to purchase
      an
      additional 10,869,575 shares of common stock under the same terms and conditions
      at a price of $0.46 per share. The Green Shoe Warrants are exercisable for
      a
      period of 180 days from the effective date of the registration
      statement.




F-24




GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006




**Note
      12 — Stockholders’ Equity continued**




The
      series A warrants allow the investor group to purchase 10,869,575 shares of
      common stock at an exercise price of $0.86 per share and are exercisable during
      the four-year period ending March 2008. Subsequent to the completion of the
      offering, we failed to meet certain provisions of the offering that required
      us
      to provide for an effective registration statement with the Securities and
      Exchange Commission.




As
      a
      result, and effective November 30, 2004, we restructured our
      $10.0 million private placement transaction. In connection with the
      restructuring, we exchanged 8% convertible notes in the aggregate principal
      amount of approximately $11.1 million and four-year warrants to purchase
      approximately 27,800,000 shares of common stock at an exercise price of $0.20
      per share subject to anti-dilution adjustments for 21,739,129 shares of common
      stock and 21,739,129 warrants to purchase shares of common stock issued in
      the
      March Offering. The principal amount of the convertible notes consist of the
      original $10.0 million investment plus approximately $1.1 million of
      accrued penalties associated with the delay in effectiveness of our registration
      statement covering the resale of the shares of common stock held by the
      investors. (See Note 6).




We
      exchanged the securities in reliance upon the exemptions provided by
      (a) Section 3(a)(9) of the Securities Act of 1933, as amended (the
“Securities Act”) as securities exchanged by the issuer with its existing
      security holders exclusively where no commission or other remuneration is paid
      or given directly or indirectly for soliciting such exchange; and
      (b) Section 4(2) of the Securities Act as a transaction by an issuer
      not involving a public offering.




*Stock
      Purchase Warrants*




In
      connection with our November 30, 2004 restructuring agreement, we agreed to
      issue (detachable) 50 Class B Stock Purchase Warrants (“the Warrants”) for each
      one-hundred shares that the convertible notes could be converted into, assuming
      they were converted immediately after closing of the restructuring agreement.
      The Warrants are exercisable at $0.20 within four years of their issue date
      and
      are subject to registration rights. We estimated the fair value of the warrants
      at the time of issuance as nil and have not reflected any discount on the
      convertible notes relating to them.




*Common
      Stock Retired to Treasury*




During
      2006, 100,000 common shares of treasury stock were retired.




*Common
      Stock issued for Liquidated Damages*




During
      April of 2005 we issued 59,203,484 shares of our common stock to investors
      in
      connection with satisfying liquidated damages totaling $1,776,104 related to
      a
      registration statement filed to register shares of our common stock issued
      in
      our March private placement. In addition, during November 2005 we issued an
      additional 35,103,534 shares of our common stock to investors in connection
      with
      satisfying liquidated damages totaling $1,053,106 pursuant to the terms and
      conditions of the November 30, 2004 Subscription Agreement (See Note
      9).




F-25





GOLDSPRING,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      years ended December 31, 2007 and 2006




**Note
      12 — Stockholders’ Equity - Continued**





*Common
      Stock issued for Mining Properties*




During
      2005 we acquired mining claims near or contiguous to our Plum Mining Property
      in
      exchange for a cash payment of $10,000, a note payable of $100,000 and 3,000,000
      restricted shares of our common stock valued at $150,000. We valued the shares
      based upon our estimate of their market value at the time of
      issuance.




During
      October of 2005 the Company issued 444,444 shares of its restricted common
      stock
      to an individual as consideration for the purchase of an entity controlled
      by
      the individual owning property near our Plum Mining property. If we are unable
      to consummate the transaction the shares will be retained the individual. We
      valued the shares at $20,000 based on our estimate of the common stock’s fair
      value at the time of issuance.




Note
      13 -
      Subsequent Events





On
      January 17, 2008, the Company’s Board of Directors elected Robert T. Faber and
      Scott Jolcover as directors of the Company to fill vacancies on the Board.
      Mr.
      Faber has served as the Company’s President and Chief Executive Officer since
      September 2004 and Chief Financial Officer since June 2003. Mr. Jolcover served
      as Manager of the Plum Mine prior to and after it was acquired by GoldSpring
      in
      November 2003. Since leaving GoldSpring in 2006, Mr. Jolcover has worked as
      a
      consultant. There was no arrangement or understanding pursuant to which
      Mr. Faber and Mr. Jolcover were elected as directors, and there are no
      related party transactions between Mr. Faber or Mr. Jolcover and the
      Company.





Pursuant
      to the terms of various financing instruments between Goldspring and some of
      its
      lenders have certain “favored nations” rights to either receive shares or have
      certain note conversion exercise prices reduced so that the overall equity
      issuance pricing is reduced to the same price as paid by any subsequent
      purchasers of equity and/or convertible note.  On February 20, 2008,
      Goldspring sold 50,000,000 shares of its Common Stock at $0.01 per share
      purchase price.  In lieu of triggering any and all “favored nations”
rights, the lenders have agreed to accept $.01 per share as the new maximum
      conversion price all convertible notes owned by them.





F-26