SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549










FORM
      10-KSB/A


Amendment
      No. 3










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





For
      the
      fiscal year ended December 31, 2004





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.
                Employerincorporation
                or organization)
            
            Classification
                Code Number)
            
            Identification
                No.)








P.O.
      Box
      1118


Virginia
      City, NV 89440


(775)
      847-5272


(Address,
      including zip code, and telephone number,


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





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


Yes
x
      No o





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





State
      issuer's revenues for the most recent fiscal year: $955,380





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 March 31, 2005:
      $11,756,450





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the last practicable date: 234,567,757 shares of Common Stock, $0.000666
      Par Value, as of March 31, 2005.











Table
          of Contents





TABLE
      OF CONTENTS


PART
                IITEM
                1.
            DESCRIPTION
                OFBUSINESS
            3ITEM
                2.
            DESCRIPTION
                OFPROPERTY
            11ITEM
                3.
            LEGAL
                PROCEEDINGS
            14ITEM
                4.
            SUBMISSION
                OF MATTERS TO VOTE OF SECURITY
                HOLDERS
            18PART
                IIITEM
                5.
            MARKET
                FOR REGISTRANT'S COMMON EQUITY AND RELATED
                STOCKHOLDER MATTERS
            19ITEM
                6.
            MANAGEMENT'S
                DISCUSSION AND ANALYSISOR
                PLAN OF OPERATIONS
            19ITEM
                7.
            FINANCIAL
                STATEMENTS
            24ITEM
                8
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                AND FINANCIAL DISCLOSURE
            24ITEM
                8A.
            CONTROLS
                AND PROCEDURES
            24ITEM
                8B
            OTHER
                INFORMATION
            24PART
                IIIITEM
                9.
            DIRECTORS
                AND EXECUTIVE OFFICERS OF THE
                REGISTRANT
            25ITEM
                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, “Business - Risk Factors.”*








-2-
 Table
          of Contents





**PART
      I**




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




***Overview***




We
      are a
      North American natural resource company, focused on gold and other precious
      metals. We are in the exploration stage, and our exploration program includes
      conducting test mining at our Billie the Kid / Lucerne property in northern
      Nevada. Our objective is to achieve growth and profitability through exploration
      at our current properties and acquisitions of projects that we believe we can
      bring into production within a short period of time.




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


**Name**
            
            **Location**
            
            **Type**Billie
                the Kid/Lucerne
            
            Storey
                and Lyon County, Nevada
            
            Gold
                and silver - open pit test miningComo
            
            Lyon
                County, Nevada
            
            Gold
                and silver claimsGold
                Canyon
            
            Lyon
                County, Nevada
            
            Placer
                gold claimsSpring
                Valley
            
            Lyon
                County, Nevada
            
            Placer
                gold claimsBig
                Mike
            
            Pershing
                County, Nevada
            
            Lode
                and Placer copper claimsAlberta
            
            Alberta,
                Canada
            
            Non-energy
                mineral rights, including iron




Our
      Billy
      the Kid/Lucerne claims, which we call our Plum exploration project, are 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 projects
      are located in Lyon County, Nevada, and our Big Mike Copper project is located
      about two hours east of Reno in Winnemucca, Nevada.




Our
      Plum
      exploration activities include open pit gold and silver test mining. We have
      not
      yet established any proven or probable reserves meeting the requirements of
      SEC
      Industry Guide 7. Therefore, all of our activities are considered test mining
      and exploratory in nature. Test mining 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 recover our investment and operating costs.




We
      originally became a mineral company through an acquisition in June 2003. That
      acquisition, which had an effectuation date of March 2003, provided us with
      a
      number of Nevada-based placer claims, including the Gold Canyon and Spring
      Valley claims, and 17 unpatented lode claims called the Big Mike Copper
      property. In November 2003, we acquired the Plum Mine facility as well as water
      rights that are usable at Plum Mine and the Gold Canyon and Spring Valley placer
      claims. In a separate transaction, we obtained mineral permits in Alberta,
      Canada in May 2004.




***Employees***




We
      have
      18 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 project evaluation, due
      diligence, and acquisition initiatives. We also use subcontractors in our test
      mining operations, which involve approximately 20 people, including a test
      mining and screening foreman.




***Principal
      Markets***





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





-3-
 Table
          of Contents




***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.




***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)




Lisa
      S.
      Boksenbaum has been Secretary of our company since April 2005 and the General
      Counsel of our company since October 2003. Ms. Boksenbaum was a member of CBG
      Law Group, PLLC in Bellevue, Washington from December 1998 until September
      2003.




***2004
      Financing Events and Restructuring***




In
      2004,
      we offered securities in a private placement transaction completed 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 offering’s close, we failed to meet
      certain requirements of the offering regarding filing an effective registration
      statement with the Securities and Exchange Commission. Under the terms of the
      March 2004 subscription agreement, failure to have an effective registration
      statement by the required date resulted in liquidated damages in the amount
      of
      2% of the principal investment amount (i.e., $200,000) for each 30-day period
      until the registration statement was declared effective. We accrued
      approximately $1.1 million in liquidated damages through November 30, 2004
      associated with our failure to cause our registration statement to be effective.




-4-
 Table
          of Contents




During
      the SEC review process of the registration statement we filed in connection
      with
      the March Offering, we learned that our founder and former Chief Executive
      Officer may have misrepresented the value of certain mineral properties that
      his
      company sold to us in a June 2003 transaction. Our discussions with the SEC
      led
      to our decision to restate our annual and quarterly SEC filings to reflect
      our
      reevaluation of the value of those mineral properties. This reevaluation led
      to
      an investigation into the activities of our founder. On November 9, 2004, we
      filed a lawsuit in Maricopa County (Arizona) Superior Court against Stephen
      B.
      Parent and four other defendants, together with their spouses, and Ecovery,
      Inc.
      (See - Legal Proceedings). In essence, the complaint alleges that Stephen Parent
      misrepresented the value of certain placer mining claims that his company,
      Ecovery, sold to us in 2003 in exchange for approximately 99,000,000 shares
      of
      our stock; that Ecovery no longer had good title to the mining claims when
      they
      were sold to us; that Mr. Parent and the other named defendants conspired
      to defraud us out of approximately 24,000,000 shares of our stock; and that
      Mr.
      Parent misappropriated more than $300,000 in company funds.




The
      allegations made in our lawsuit raised questions about the representations
      that
      our founder made during the March 2004 Offering. The delay in effectiveness
      of
      our registration statement combined with the allegations raised in the lawsuit
      caused concern among the investors in the March 2004 Offering. We worked with
      the investors to address their concerns in a manner that would not force us
      to
      pay a large cash penalty or face a lawsuit, both of which would be detrimental
      to our shareholders. In consideration for restructuring the original
      transaction, the investors agreed to grant us a release for any
      misrepresentations that may have been made, allowed us to capitalize the accrued
      liquidated damages, and provided us with an additional 90 days to cause the
      registration statement to become effective, thereby avoiding potential
      liquidated damages of $600,000 if the registration statement were to be filed
      before December 30, 2004.




As
      a
      result, and effective November 30, 2004, we restructured the private
      placement transaction. In connection with the restructuring, we exchanged the
      21,739,129 shares of common stock and the 21,739,129 warrants to purchase shares
      of common stock issued to the investors in the March Offering for 8% convertible
      notes in the aggregate principal amount of approximately $11.1 million
      and
      four-year warrants to purchase 27,750,000 shares of common stock at an exercise
      price of $0.20 per share, subject to anti-dilution adjustments. The principal
      amount of the convertible notes consists 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. The restructured
      subscription agreement also permitted the convertible note holders to convert
      their notes into common stock at a discounted conversion rate if they delivered
      their notices of conversion within 20 trading days of the November 30, 2004
      restructuring closing date.




On
      or
      about December 9, 2004, Mr. Parent and fellow directors Jerrie W. Gasch and
      Purnendu K. Rana Medhi purportedly seized control of our company. They attempted
      to remove the remaining seven members of our board and announced their intention
      not to honor the restructured subscription agreement of November 30, 2004,
      which
      both Mr. Medhi and Mr. Gasch had approved. On December 21, 2004, Mr. Parent
      caused our pending registration statement to be withdrawn from SEC
      consideration, resulting in further delays to the registration process and
      additional liquidated damages. Mr. Parent remained in control of our corporate
      office until February 16, 2005 (See - Legal Proceedings). During his period
      of
      purported control of our company, Mr. Parent refused to honor our obligations
      under either the March 2004 subscription agreement or the restructured November
      2004 subscription agreement.




On
      December 20, 2004, we received notice from holders of approximately $3.8 million
      of convertible notes payable of their intention to convert into shares of our
      common stock. As a result, we recorded the issuance of 33,817,594 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. As discussed above, our former Chief Executive
      Officer did not deliver the stock certificates within the required period,
      resulting in material financial damages to our company.




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




-5-
 Table
          of Contents




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.




Our
      November 2004 subscription agreement required us to file a registration
      statement with the Securities and Exchange Commission no later than December
      30,
      2004 and to cause the registration statement to be declared effective no later
      than February 14, 2005. As discussed above, our former Chief Executive Officer
      withdrew our pending registration statement and did not submit a new
      registration statement during the period of his purported control of our
      company. His failure to submit the registration statement to the SEC by December
      30, 2004 triggered liquidated damages to accrue under the November 2004
      subscription agreement. Pursuant to the terms of the Subscription Agreement,
      the
      damages may be paid in cash or in unrestricted common stock. If paid in stock,
      we are required to pay 200% of the cash penalty. Because we do not have the
      cash
      or free-trading stock to pay the liquidated damages, we reached a settlement
      agreement with the investors to pay the liquidated damages in restricted common
      stock valued at $0.03 per share. The total liquidated damages accrued between
      December 30, 2004 and April 27, 2005 was approximately $ 1,776,000. Pursuant
      to
      this settlement agreement, we issued approximately 59 million shares of
      restricted common stock in April 2005.




During
      the first quarter of 2005, we incurred approximately $1.9 million of liquidated
      damages and other expenses related to our former Chief Executive Officer’s
      decision to withdraw the SEC registration statement and his failure to deliver
      common shares pursuant to the November 2004 restructuring agreement. We filed
      the SB-2 registration statement in April of 2005 and have delivered the shares.
      We are now in the process of trying to have the registration statement declared
      effective by the SEC. Until the registration statement is declared effective,
      we
      continue to incur liquidated damages under the November 30, 2004 Subscription
      Agreement (See Recent Financing Events and Restructuring for additional
      information). Pursuant to the terms of the Subscription Agreement, the damages
      may be paid in cash or in unrestricted common stock. If paid in stock, we are
      required to pay 200% of the cash penalty. Because we do not have the cash or
      stock which was issued in a registered transaction to pay the liquidated
      damages, we have reached a settlement agreement with the investors to pay the
      $1.2 million in liquidated damages in restricted common stock valued at $0.03
      per share. We accrued $1.0 million in the second quarter of 2005 to reflect
      this
      obligation. Pursuant to this settlement agreement, we will be issuing
      approximately 40 million shares of restricted common stock in the third quarter
      of 2005.




***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.







-6-
 Table
          of Contents





***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 technical training and mining
      experience.***




Our
      corporate officers lack technical training and experience in operating a mine.
      With no direct training or experience in these areas, our corporate officers
      may
      not be fully aware of many 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.




***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.




-7-
 Table
          of Contents




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




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




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




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




***Since
      our business consists of exploring for or acquiring gold prospects, 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.







-8-
 Table
          of Contents





***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.




***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.




-9-
 Table
          of Contents




***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,
      and John Cook, Chairman of the Board, are important to our success. If either
      of
      them become unable or unwilling to continue in their present positions, 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 administrative personnel. Our inability
      to hire and retain additional qualified employees could have a negative impact
      on our chances of success.




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




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




***Outstanding
      convertible securities and warrants may result in substantial
      dilution.***




At
      March
      31, 2005, we had outstanding 234,567,757 shares of common stock. In addition,
      we
      had outstanding convertible notes and various common stock purchase warrants.
      At
      March 31, 2005, these notes and warrants were convertible into or exercisable
      for a total of approximately 176 million additional shares of our common stock,
      subject to further anti-dilution provisions.




-10-
 Table
          of Contents




***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*




We
      own
      the following mineral exploration projects: Billie the Kid /Lucerne gold and
      silver claims and the Como mineral Claims. The Billie the Kid/Lucerne claims
      are
      located in Storey and Lyon Counties, Nevada. The Billie the Kid/Lucerne
      exploration project 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 has a primary term of eight years,
      with an expiration date of January 1, 2005. The term may be extended 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
      monthly lease payments of $500 until the mineral claims are put into production.
      Once production of minerals begins, we must 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 has a primary
      term of ten years, with an expiration date of September 1, 2009. The term may
      be
      extended 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 must pay monthly lease payments of $250 until the mineral claims
      are put into production. Once production of minerals begins, we must 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.




-11-
 Table
          of Contents




In
      addition to the mineral leases, we hold 20 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 March
      31, 2005, five payments have been made.




*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.




*Description
      of Equipment and other Infrastructure Facilities*




We
      use 50
      ton Caterpillar 773 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,
      screened, and agglomerated in a self-contained portable crushing plant. The
      mineralized material is fed to an apron feeder by a front-end loader. The feeder
      provides a steady feed to a Pioneer jaw crusher. The crushed material is then
      conveyed to a Simplicity triple deck vibrating screen. The oversize material
      from the screen is filtered in closed circuit to a Symons 4-1/4-foot standard
      cone crusher where it is crushed and conveyed to the screen.




Prior
      to
      agglomeration, 10 pounds of Type II Portland Cement is added for every ton
      of
      mineralized material and metered on to the pugmill feed conveyor. All the
      two-inch material from the screen is conveyed to a Davis 1500
      pugmill-agglomerator. We use a load-out hopper to drop a preselected amount
      of
      agglomerated material into the Caterpillar 773 haul trucks, which is then
      transported to and dumped on the test leach pads. A chemical solution is then
      applied to the mineralized material on the test leach pads. Pregnant solution
      is
      accumulated from the leach pad and is then pumped to the Merrill-Crowe recovery
      plant. The precipitate collected in the presses is collected, dried, and smelted
      on the property using an electric furnace to produce gold dore.




Our
      third-party contract mining company owns and provides the haul trucks, front
      end
      shovel, loaders, blade, dozer, hopper, crushers, screen, mobile crane, foot
      roller, water truck, conveyors, and generators. We own the Merrill-Crowe gold
      precipitation plant, the agglomerator, dozers, excavators, water truck, cement
      silo with a screw feeder, and conveyors. The Merrill-Crowe gold precipitation
      plant and the mineral processing equipment are less than a year old. Most of
      the
      other mining equipment we own that is located at the Billie the Kid/Lucerne
      facility is approximately 10 to 12 years old but is good condition. The total
      book value of our equipment associated with the Billie the Kid and the Lucerne
      facilities is approximately $1,000,000.




*Power
      Utilization at the Plum Property:*




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




-12-
 Table
          of Contents




*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. .




Mineralized
                materialTons
            
            Avg.
                Au opt
            
            Waste
                tonsTotal
                Mineralized Material *
            
            
            4,283,000
            
            
            0.056
            
            
            7,922,000





*
            Tonnage
                of mineralized material is undiluted and represents uncut values;
                it does
                not reflect waste dilution during mining or metal value losses in
                processing.




The
      mineralized material inventory established for cut value for $400 without moving
      the road ** that overlies part of the mineralized material is:




·
            1,931,000
                tons of ore @ 0.045 opt with 2,700,000 tons of waste




The
      mineralized material inventory established for cut value for $400 if we move
      the
      road ** that overlies part of the mineralized material is:




·
            3,758,000
                tons of ore @0.047 opt with 5,894,000 tons of
                waste




**
            Note:
                In accordance with our leases and Nevada law, we are permitted to
                reroute
                the road to pursue our mining of the property. We have not yet completed
                a
                feasibility study for rerouting the
                road.




*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.




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




We
      own a
      100% interest in the 25 federal unpatented placer claims located in Lyon County,
      Nevada that comprise the Gold Canyon and Spring Valley projects. The 25
      unpatented placer claims cover approximately 850 acres and are located about
      30
      miles southeast of Reno and four 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. We purchased an RMS-Ross processing plant in late 2003
      for use on these properties. 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.






-13-
 Table
          of Contents




***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
      Project. The Big Mike Copper Project is located approximately 32 miles south
      of
      Winnemuca 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
      Project. 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.




On
      November 1, 2004, we announced the signing of a Memorandum of Understanding
      with
      MBMI Resources, Inc, of Vancouver, Canada, to form a 50-50 joint venture to
      bring the Big Mike Copper Project into operation. As we have not established
      any
      proven or probable reserves on this property, any joint venture work would
      be
      exploratory in nature. The objective of the joint venture is to establish
      commercial copper production using a vat leaching process. The negotiations
      were
      put on hold in December 2004 by the dispute over control of the company. We
      continue to look for a business partner to develop this project. We are still
      in
      discussions with the party who executed the Memorandum of Understanding in
      November 2004.




***Mineral
      Permits Acquired in Alberta, Canada***




In
      May
      2004, the Alberta government granted us mineral permits for all non-energy
      minerals on nearly 800 square miles of Alberta, Canada mining mineral property.
      Sedimentary Oolitic iron bearing material was discovered in 1953 from oil and
      gas drilling on the area of our mineral permits. We are in the process of
      reviewing existing data and conducting a pre-feasibility study on the project.
      This study will include new testwork to follow-up earlier testwork performed
      on
      the property. From 1995 through 1997, a series of tests were performed that
      showed the mineralized material present was amenable to treatment to produce
      enriched iron. We are in the final stages of acquiring the coal rights on this
      property. We are also investigating the possible acquisition of the energy
      minerals, gas and oil on this property.




This
      is
      an early stage project and our activities associated with this mineral area
      are
      exploratory in nature. We have not established any reserves on this property.
      The scope and size of this potential project will require substantial capital,
      time and outside assistance during both the pre- and post-feasibility stages.
      We
      are considering several financial alternatives, including a joint venture,
      to
      develop this project.




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





***The
      State Court Case***




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




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




On
      November 29, 2004, we moved for a temporary restraining order, or TRO,
      prohibiting Mr. Parent and his spouse from selling, transferring, assigning,
      or
      otherwise disposing of up to approximately 123,000,000 shares of our stock
      in
      their possession. After a hearing, at which the Parents appeared through
      counsel, the Honorable Anna M. Baca granted the motion, conditioned on the
      posting of an $8 million bond. We did not post the bond, and the TRO was
      subsequently dissolved.




-14-
 Table
          of Contents




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




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




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




Mr.
      Treminio has since been dismissed from the suit in accordance with the terms
      of
      a prior settlement agreement between Mr Treminio and GoldSpring, Inc..
      Mr. Shaw filed an answer, *in
      pro per* ,
      on
      April 6, 2005, and generally denied the allegations of the complaint. Mr.
      Haswell and Mr. Doyle have filed answers and generally denied the allegations
      of
      the complaint. Ecovery, Inc. has not yet responded to the complaint.




***The
      Federal Court Case***




*Background*




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




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




*The
      Temporary Restraining Order*




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




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




-15-
 Table
          of Contents




*The
      Preliminary Injunction and Notice of Appeal*




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




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




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




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




Therefore,
      on February 28, 2005, our company filed a legal memorandum with the Court
      addressing these issues. In it, we pointed out that applicable federal
      securities laws require us to provide shareholders with current financial
      statements, which will not be available until March 31, 2005, and that Florida
      law and our company’s bylaws require that a record date be fixed in advance
      rather than in the past. On March 14, 2005, the Court held a hearing on these
      issues. After hearing argument of counsel, the Court indicated that it agreed
      with our position.




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




On
      April
      13, 2005, a notice of appeal was filed on behalf of defendants (the Parents,
      the
      Gaschs, and the Medhis) seeking to reverse the Court’s March 17 Order. On April
      21, 2005, the Gaschs moved to dismiss their appeal. On June 10, 2005, the
      defendants (the Parents) filed their opening appellate brief. The plaintiffs
      filed their response brief on August 16, 2005. The defendents’ response brief is
      due on October 3, 2005.




*The
      Investors’ Motion to Intervene*




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




-16-
 Table
          of Contents




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




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




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




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




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




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




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




*The
      “New” Consent Resolutions*




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




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




-17-
 Table
          of Contents




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




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




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





Not
      applicable.




-18-
 Table
          of Contents





**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 the high and low bid prices for our
      common stock since we commenced trading on February 28, 2002.




**Year**
            
            **Quarter**
            
            **High**
            
            **Low**2003
            
            
            First
            
            
            1.05
            
            
            0.062003
            
            
            Second
            
            
            0.16
            
            
            0.012003
            
            
            Third
            
            
            0.49
            
            
            0.052003
            
            
            Fourth
            
            
            0.84
            
            
            0.272004
            
            
            First
            
            
            1.04
            
            
            0.662004
            
            
            Second
            
            
            0.85
            
            
            0.282004
            
            
            Third
            
            
            0.42
            
            
            0.172004
            
            
            Fourth
            
            
            0.22
            
            
            0.10




As
      of
      December 31, 2004, we had over 2,000 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, 2004, we had 171,120,482 shares of
      common stock outstanding. The above quotations reflect the inter-dealer prices
      without retail mark-up, mark-down or commissions and may not represent actual
      transactions.




We
      have
      never paid dividends and do not expect to pay any dividends in the foreseeable
      future.





**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, 2004, as well as our future results.





*Overview*





We
      are a
      North American natural resource company, focused on gold and other precious
      metals. We are in the exploration stage, and our exploration program includes
      conducting test mining at our Billie the Kid / Lucerne property in northern
      Nevada. Our objective is to achieve growth and profitability through exploration
      at our current properties and acquisitions of projects that we believe we can
      bring into production within a short period of time. We currently own mineral
      property rights and conduct our primary exploration and test mining activities
      in Storey County, Nevada, located about 30 miles southeast of Reno, Nevada.
      This
      exploration project consists of the Plum Mine facility. We also own mineral
      permits in Alberta, Canada. We have no active operations in Canada.




The
      year
      2004 presented our company with numerous challenges that impacted our
      performance in the form of financial and operational confusion as well as
      management distraction. A legal dispute over control of our company, a resulting
      series of disruptive management changes, their impact on operations and morale
      and the resulting need for a significant financial restructuring effectively
      slowed our progress toward both growth and profitability.




-19-
 Table
          of Contents




Results
      for 2004 were further impacted by liquidated damages that resulted from our
      inability to have an effective registration statement as required by our
      financing agreements. Compounding this issue were legal and related expenses
      incurred in a dispute over control of our company.




Our
      current management team was reinstated in mid-February 2005 (see Part II, Item
      1
      - Legal Proceedings). One of our top priorities upon regaining control of the
      company was to improve efficiencies and increase test mining production at
      our
      Plum Mine. To this end, we hired a new mine manager, who has significant
      experience in gold mining, primarily in and around the area of our current
      exploration project. We also implemented modifications to our plant and
      equipment during the first half of 2005 to address our past difficulties and
      increasing efficiency. In the spirit of maximizing overall operating performance
      and reducing costs, effective August 1, 2005, the Company has consolidated
      its
      corporate office with the Plum Mine facility. The relocation will reduce costs
      and allow for more effective utilization of our resources, both human and
      capital.




We
      believe that many of the non-operating issues that have plagued our company
      since early-December 2004 are now being resolved. We are now focusing our
      efforts on achieving positive cash flow and increased test mining production
      in
      2005. Our ability to maintain that focus will depend largely upon our
      relationships with a number of our investors that are now note holders as the
      result of our 2004 financial restructuring. Although this debt obligation is
      substantial, we believe that we will be able to reach an arrangement with our
      investors that will allow us to structure the repayments in a manageable
      fashion.




During
      the first quarter of 2005, we incurred approximately $1.9 million of liquidated
      damages and other expenses related to our former Chief Executive Officer’s
      decision to withdraw the SEC registration statement and his failure to deliver
      common shares pursuant to the November 2004 restructuring agreement. We filed
      the SB-2 registration statement in April of 2005 and have delivered the shares.
      We are now in the process of trying to have the registration statement declared
      effective by the SEC. Until the registration statement is declared effective,
      we
      continue to incur liquidated damages under the November 30, 2004 Subscription
      Agreement (See Recent Financing Events and Restructuring for additional
      information). Between April 28, 2005 and July 26, 2005, we incurred
      approximately $600,000 in liquidated damages. Pursuant to the terms of the
      Subscription Agreement, the damages may be paid in cash or in unrestricted
      common stock. If paid in stock, we are required to pay 200% of the cash penalty,
      or approximately $1.2 million. Because we do not have the cash or stock which
      was issued in a registered transaction to pay the liquidated damages, we have
      reached a settlement agreement with the investors to pay the $1.2 million in
      liquidated damages in restricted common stock valued at $0.03 per share. We
      accrued $1.0 million in the second quarter of 2005 to reflect this obligation.
      Pursuant to this settlement agreement, we will be issuing approximately 40
      million shares of restricted common stock in the third quarter of
      2005.




The
      Plum
      Mine exploration project showed material improvements in efficiency and test
      mining production in the second quarter of 2005. The crusher, which has been
      the
      primary source of setbacks in increasing test mining production, received
      substantial mechanical improvements early in the quarter. Due to these
      improvements, we crushed 144,000 tons of mineralized material in the second
      quarter, representing an increase of 141% from the first quarter 2005. We are
      in
      the final stages of taking over the crushing operations. Our third-party
      contractor has discontinued its crushing operations to allow for the set-up
      of
      our crushing equipment. We expect our crushing operations to commence in early
      September 2005. This transition from a third-party crushing operator to an
      in-house operation will bring immediate cost savings and should allow us to
      reach our target of crushing 60,000 tons of material per month. We also made
      significant improvements to the Merrill Crowe processing plant during the second
      quarter. Through a change in pumps and the addition of a second clarifier,
      we
      increased capacity at the plant from 100 gallons per minute to 300 gallons
      per
      minute and we are now operating 24 hours per day, 7 days per week. We will
      continue to focus on improving efficiency at the Plum Mine exploration project
      through the remainder of 2005.




The
      improvements at the Plum Mine have resulted in a steady increase in gold test
      mining production during the second quarter. We produced 353 ounces of gold
      in
      April, 527 ounces in May, 1,126 ounces in June, and we are ramping up to our
      target test mining production of 2,000 ounces of gold per month. Our primary
      objectives in the third quarter of 2005 are to achieve positive cash-flow and
      to
      improve our overall test mine operation. While
      we
      may generate an operating profit above our operating costs in 2005, we may
      not
      recover our total costs of this exploration project.




We
      continue to look for growth opportunities. This process consists of actively
      conducting exploration to identify additional mineralized material. 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-
 Table
          of Contents




We
      also
      seek growth through the acquisition of mining projects which have proven
      in-ground reserves, advanced permitting, and solid exploration potential. We
      seek to acquire proven projects whose business operations and business models
      make those projects economically feasible for a company of our
      size.




In
      line
      with this strategy, on May 4, 2005, we announced that we executed a Letter
      of
      Intent to acquire the leases on three patented mineral claims from Comstock
      Gold, LLC. The Justice, Woodville, and Keystone claims are adjacent to our
      existing operation at the Plum Mine. The Letter of Intent is subject only to
      the
      successful completion of our due diligence and our board’s approval. We expect
      to complete our due diligence prior to September 30, 2005, after which time
      we
      plan to enter into a definitive purchase agreement. The proximity of these
      claims should allow us to explore the property in a cost-effective manner and
      likely increase the efficiency of our overall exploration activities. This
      acquisition is important for our company for a number of other reasons as well.
      First, the claims will expand our mining property by 40 acres, increasing our
      mineralized material inventory. Second, the claims will contribute to the
      enhancement of overall mine extraction and waste disposal efficiencies. Third,
      these claims will enlarge our footprint and have the potential for expanding
      the
      life of our existing Plum Mine exploration project. Finally, the addition of
      these properties will improve our geologic understanding of the entire physical
      area and its trends.




***Comparative
      Financial Information:***





**2004**
            
            **2003**
            
            **Difference**Revenue
            
            $
            955,380
            
            $
            0.0
            
            $
            955,380Exploration
                Expense
            
            $
            6,800,011
            
            $
            387,577
            
            $
            6,412,434Liquidated
                Damages
            
            $
            1,627,308
            
            $
            0.0
            
            $
            1,627,308Net
                Loss
            
            
            ($9,569,535
            )
            
            ($2,601,741
            )
            
            ($6,967,794
            )




In
      November 2003 we acquired The Plum Mining Company and immediately began building
      the infrastructure necessary to begin “test mining”. 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. The majority of our infrastructure work was performed in 2004
      accounting for the $6.4 million variance between 2003 and 2004.




During
      the third quarter 2004 we sold our first shipment of gold from our “test mining”
      operation. During 2004 we sold a total of 2,286 ounces of gold at an average
      price of $419 per ounce.





In
      March
      2004 we completed a private placement which was subject to Non-Registration
      Events Provisions (“Non-Registration Provisions”). The Non-Registration
      Provisions required us to file and cause to become effective a registration
      statement with the Securities and Exchange Commission so that investors may
      sell
      their shares of common stock without restriction. Pursuant to the Subscription
      Agreement, liquidated damages accrue at a rate of percent (2%) of the investment
      amount for each thirty day period or part thereof for not having an effective
      Registration Statement. In November 2004 we capitalized 100% or $1.1 million
      of
      liquidated damages as part of the November 2004 restructuring. Our November
      2004
      subscription agreement also required us to file a registration statement with
      the Securities and Exchange Commission no later than December 30, 2004 and
      to
      cause the registration statement to be declared effective no later than February
      14, 2005. Our former Chief Executive Officer withdrew our pending registration
      statement and did not submit a new registration statement. His failure to submit
      the registration statement to the SEC by December 30, 2004 triggered liquidated
      damages to accrue at a rate of percent (2%) of the principal amount of the
      Debenture for each thirty day period or part thereof for not having an effective
      Registration Statement.




***Restatement
      of Financial Statements***




Upon
      review of the standards for reporting mineral reserves as defined by SEC
      Industry Guide 7 (“Guide 7”), we have concluded that we did not have sufficient
      information to establish the existence of reserves as of December 31, 2004
      and
      that certain costs that we had incurred in the development of our mining
      facility must be expensed as exploration or “test mining” costs. We have
      restated our 2004 financial statements to classify all costs previously
      capitalized (the recovery of which is dependent upon the economical extraction
      of gold from the mineralized material we are currently processing), as test
      mining expenses. These costs, which total approximately $4.5 million net of
      accumulated depreciation, include our asset retirement obligation asset of
      $453,786. In connection with our restatement of our mineral property assets,
      we
      have also reversed depletion taken on our mineral properties totaling $43,256.




-21-
 Table
          of Contents




We
      have
      also restated our shareholders’ equity. 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. In connection with the
      notice we reduced convertible notes payable by $3.8 million and recorded an
      additional 33,817,594 shares (converted at approximately $0.11 per share) at
      December 31, 2004. Upon further consideration, we have determined that since
      the
      shares had not been physically issued prior to year end, the liability and
      stockholders’ equity accounts should not be adjusted until the shares have been
      issued. Accordingly, we restated our convertible note and stock holder equity
      accounts by approximately $3.8 million. The restatement has no affect on net
      loss or cash flows as previously reported.




Pursuant
      to our decision to make the above-referenced restatements, the financial
      statements have been restated and are presented, as restated, within this
      filing.




***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. The region experienced record
      level snowfalls at approximately the same time, continuing through the winter
      of
      2004/2005. While the unusually heavy precipitation did not interfere with the
      overall recovery of mineralized material, it did impact our ability to mine
      and
      crush the mineralized material. As mentioned above, our mining operations
      essentially shut down in January 2005 due to a combination of harsh weather,
      equipment difficulties, and management disruption. Although test mining resumed
      when the current management was reinstated in mid-February 2005, the equipment
      difficulties continued throughout the first quarter. For example, between March
      15, 2005 and April 1, 2005, we had no crusher output due to inoperable
      equipment. We have since taken steps to remedy our equipment challenges,
      including replacing the cone and screen plant on the crusher. Due to these
      improvements, we crushed 144,000 tons of mineralized material in the second
      quarter, representing an increase of 141% from the first quarter 2005.




We
      have
      made several other improvements to our equipment and test mining operations
      during the second quarter of 2005 to increase test mining production and improve
      efficiency. On the test mining side, we have added additional solution lines
      to
      the mineralized material on test leach pad number two, adjusted the amount
      of
      cement used during the agglomeration phase of processing, and added an
      agglomeraid to our mineralized material. We believe these adjustments will
      increase recovery results and minimize problems with the crusher. We have also
      increased test production capacity at our Merrill Crowe processing plant by
      adding a new clarifier, changing the pumps and raising the height of the vacuum
      tower. With these changes, we increased capacity at the plant from 100 gallons
      per minute to 300 gallons per minute and we are now operating 24 hours per
      day,
      7 days per week. We believe the combination of the equipment modifications,
      operational improvements, and management changes made since late-February 2005
      leaves us poised to reach our goals for 2005.




In
      the
      remainder of 2005, we plan to focus the bulk of our efforts on achieving
      additional improvements in both test production and efficiency at our Plum
      Mine
      test mining project. We are continuing to pursue operational improvements
      through enhancements to our existing processes. These enhancements are expected
      to stem from increasing our volume of test production combined with lowering
      the
      cost of our processes. Our objective for operational performance in 2005 is
      to
      establish a stable and predictable level of gold and silver test production
      at
      the Plum Mine resulting in profitability and positive cash flow. While we may
      generate an operating profit above our operating costs in 2005, we may not
      recover our total costs of this exploration project.




***Placer
      Claims, Water Rights, and Mineral Permits***




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




-22-
 Table
          of Contents




The
      Big
      Mike Copper Project is located in Pershing County, Nevada. It covers a total
      of
      310 acres and consists of 17 unpatented lode claims and one placer claim. We
      have not established any proven or probable reserves that meet the requirements
      of SEC Industry Guide 7. We have not completed any exploration activity on
      the
      project. The property includes an open pit, mineralized material in a stockpile
      and waste dumps. We believe the property has exploration potential for primary
      and oxide copper. In November 2004, we entered into a Memorandum of
      Understanding to form a joint venture to begin exploration activities on this
      property. The negotiations were put on hold in December 2004 by the dispute
      over
      control of the company. We continue to look for a business partner to develop
      this project. We are still in discussions with the party who executed the
      Memorandum of Understanding in November 2004.




In
      May
      2004, the Alberta government granted us mineral permits for all non-energy
      minerals on nearly 800 square miles of Alberta, Canada mineral property.
      Sedimentary Oolitic iron bearing material was discovered in 1953 from oil and
      gas drilling on the area of our mineral permits. We are in the process of
      reviewing existing data and conducting a pre-feasibility study on the project.
      The study will include new test work to follow-up earlier test work performed
      on
      the property. From 1995 through 1997, a series of tests were performed that
      showed the mineralized material present was amenable to treatment to produce
      iron pellets and pig iron. We are negotiating the acquisition of the coal rights
      in this area. We are also investigating the possible acquisition of the rights
      to the energy minerals, gas, and oil on this property.




This
      is
      an early stage project and our activities associated with this mineral area
      are
      exploratory in nature. We have not established any reserves on this property.
      The scope and size of this potential project will require substantial capital,
      time and outside assistance during both the pre- and post-feasibility stages.
      We
      are considering several financial alternatives, including a joint venture,
      to
      develop this project.




***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 July 2005, we received $800,000 in financing (See Recent Financing
      Events and Restructuring, below). While this additional funding will 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. As disclosed in the report of our
      independent registered public accounting firm in our financial statements
      provided in this filing, our recurring losses and negative cash flow from
      operations raise substantial doubt about our ability to continue as a going
      concern.




Under
      the
      terms of our November 2004 subscription agreement, we issued 8% convertible
      notes to an investor group. Under the terms of the notes, our first principal
      and interest repayment was scheduled for April 1, 2005. Prior to April 1, 2005,
      knowing that we did not have sufficient cash available to meet these
      obligations, we began negotiations with the major note holders in an effort
      to
      delay repayment of both the principal and interest amounts for a 12-month
      period. Our negotiations with these note holders regarding the repayment delay
      have so far been successful and we have reached a tentative agreement regarding
      the 12-month payment deferral. We remain optimistic that we will reach a
      definitive agreement. However, we are in default on these notes, and in the
      event we are not successful in achieving a payment deferral, we will be unable
      to meet the current note obligations. While failure to reach a resolution would
      likely cause us to seek external funding in order to meet our obligation, it
      is
      possible that we would be unable to secure such funding.




We
      have
      yet to realize an operating profit at our Plum Mine location. However, we
      believe that our Plum Mine operations will become profitable and generate
      positive cash flow during the year 2005. While we may generate an operating
      profit above our operating costs in 2005, we may not recover our total costs
      of
      this exploration project.




We
      expect
      to expand our existing test leach pads, which currently number three, to a
      total
      of either four or five test leach pads during 2005. The cost of this expansion
      will be approximately $600,000. We are also in the process of taking over the
      crushing operations from our third-party contractor. This transition requires
      us
      to acquire and assemble our own crushing equipment, at an approximate cost
      of
      $100,000. These expenditures represent our only major capital expenditures
      currently planned for 2005. We intend to finance our crushing equipment, our
      test leach pad expansion project and any other capital expenditures in 2005
      through the issuance of debt and equity instruments to existing shareholders
      and
      other parties.




-23-
 Table
          of Contents





**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.****Controls
      and Procedures**




Based
      on
      the most recent evaluation, which was completed as of the end of the period
      covered by this Form 10-KSB, we believe our company’s disclosure controls and
      procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e) are
      effective to ensure that information required to be disclosed by us in this
      report is accumulated and communicated to our management, including our
      principal executive officer and principal financial officer, as appropriate,
      to
      allow timely decisions regarding required disclosure. Our executive officers
      have also concluded that our disclosure controls and procedures are also
      effective to give reasonable assurance that the information required to be
      disclosed in our filings is recorded, processed, summarized and reported within
      the time periods specified in the rules and forms of the SEC.




We
      have
      identified conditions as of December 31, 2004 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.




In
      December 2003 our CFO implemented a business expense reimbursement policy which
      he reviewed with all employees who regularly traveled for business including
      the
      Company’s founder, CEO and Chairman. The CFO discussed the policy again with the
      former CEO and Chairman in January 2004 due to his failure to comply with the
      policy. The CEO’s continued failure to properly document business expenses led
      the CFO to discuss the problem with the Company’s Board of Directors, the
      Company’s outside auditor and legal counsel. In April / May 2004 the Company’s
      outside auditor spoke with the CEO regarding his failure to document travel
      and
      entertainment expenses. In August 2004 the Company’s Board of Directors decided
      to take firm measures to resolve this problem with the CEO. These steps led
      to
      the CEO’s resignation on September 3, 2004. The Board then appointed the CFO as
      President and Chief Executive Officer.




In
      response to this deficiency, five independent board members were added and
      an
      audit committee, composed of directors’ independent of the Company’s day-to-day
      management function, was formed to oversee the financial reporting and to review
      and approve executive expense account charges.




As
      our
      former CFO is assuming the duties of the CEO and the Company has presently
      not
      hired another individual to act as CFO, we believe we have 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 acknowledge 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 estimate that the
      annual cost of a qualified individual to act as the Company’s CFO would be
      between $75,000 and $100,000.




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




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




Not
      applicable.




-24-
 Table
          of Contents




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




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




**Name**
            
            **Age**
            
            **Position**John
                F. Cook
            
            65
            
            Chairman
                of the Board of DirectorsRobert
                T. Faber
            
            45
            
            President,
                Chief Executive Officer, and acting- Chief Financial
                OfficerLisa
                S. Boksenbaum
            
            31
            
            Secretary
                and General CounselChristopher
                L. Aguilar
            
            42
            
            DirectorTodd
                S. Brown
            
            49
            
            DirectorLeslie
                Lawrence Cahan (1)
            
            79
            
            DirectorJerrie
                W. Gasch
            
            72
            
            DirectorStanley
                A. Hirschman
            
            58
            
            DirectorStephen
                B. Parent
            
            59
            
            DirectorPhil
                E. Pearce
            
            74
            
            Director





(1)
            Mr.
                Cahan resigned as a Director on July 25, 2005. Mr. Cahan expressed
                no
                disagreements with the Company in tendering his
                resignation.




*John
      F. Cook* has been
      the Chairman of the Board of our company since September 2004. Mr. Cook served
      as President and a director of our company from March 2003 until September
      2004.
      From 1999 until March 2003, Mr. Cook served as a President and a director of
      Ecovery, Inc., a private Nevada corporation that sold its mining assets to
      our
      company in early 2003. For more than eight years, Mr. Cook has owned
      and
      operated Tormin Resources Limited, a privately held company incorporated in
      Ontario, Canada, through which he has provided consulting services to junior
      mining companies, including serving as an officer and/or director to the
      following companies: Anaconda Gold Corporation (1999 to present), formerly
      Anaconda Uranium Corporation, a TSX Venture Exchange company, where he currently
      serves as Chairman and previously served as the President and a director;
      Castlerock Resources (2002 to present), a TSX Venture exchange company with
      mining development interests in Canada, where he serves as Chairman of the
      Board
      of Directors; MBMI Resources Inc. (2002 to the present), another TSX Venture
      exchange company, where he serves as a director; GLR Resources, Inc. (1999
      to
      the present), a TSX company with exploration and development interests in
      Canada, where he serves as a director; and Wolfden Resources, Inc. (1999 to
      the
      present), a TSX company with exploration and development interests in Canada,
      where he serves as a director.




*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.




*Lisa
      S. Boksenbaum* has been
      Secretary of our company since April 2005 and the General Counsel of our company
      since October 2003. Ms. Boksenbaum was a member of CBG Law Group, PLLC in
      Bellevue, Washington from December 1998 until September 2003.




*Christopher
      L. Aguilar* has been
      a director of our company since October. Mr. Aguilar has been the General
      Counsel and Chief Compliance Officer of Merriman Curhan Ford & Co., a
      securities brokerage and investment banking subsidiary of MCF Corporation since
      March 2000. During the same period of time, he also served as General Counsel
      and Secretary of MCF Corporation, the publicly traded financial services holding
      company that provides institutional sales and trading, research, investment
      banking, corporate services, and asset management services through its wholly
      owned subsidiaries. From August 1995 to March 2000, Mr. Aguilar was a partner
      at
      Bradley, Curley & Asiano, a law firm located in San Francisco, California.
      Mr. Aguilar is an adjunct professor at the University of California, Hastings
      College of the Law.




-25-
 Table
          of Contents




*Todd
      S. Brown* has been
      a director of our company since October. Mr. Brown has been a senior financial
      executive with Brown Capital Advisors, Inc., an advisory services company
      providing a wide range of services, including strategic planning, transactional
      assistance, due diligence, and financial management. Prior to joining Brown
      Capital Advisors, Mr. Brown was Senior Vice President, Chief Financial
      Officer, and a director of the Phoenix Restaurant Group, Inc. from 1994 to
      1999.
      Mr. Brown previously was employed by an international accounting firm for 14
      years, most recently as a senior manager.




*Leslie
      L. Cahan* has been
      a director of our company since March 2003. Mr. Cahan has been directly involved
      for more than 30 years. Mr. Cahan has served as President and Chief
      Executive Officer of Harlesk Nevada Inc., the former owner of the Gold Canyon
      and Spring Valley claims that were acquired by Ecovery, Inc. and ultimately
      transferred to our company in March 2003. As former owner of the Gold Canyon
      and
      Spring Valley mining claims, Mr. Cahan managed exploration activities on the
      properties, including carrying out geophysical, drilling and trenching
      exploration activities. During this same time period, Mr. Cahan served as
      President and Chief Executive Officer of Harlesk Management Inc., acting as
      a
      resort developer as well as a consultant to luxury resort developers, providing
      concept, marketing and financial assistance. From 1999 to 2003, Mr. Cahan served
      as President and Chief Executive Officer of Corporate Communications Inc.,
      a
      long-distance service provider. Previously, Mr. Cahan owned and operated Western
      Land and Minerals Ltd., which specialized in gas and oil production. He was
      also
      a founding partner of Nanisivic, on Baffin Island, one of the world’s largest
      zinc mines.




*Jerrie
      W. Gasch* has been
      a director of our company since September 2004. Mr. Gasch is a Registered
      Geophysicist and Geologist with over 40 years of experience. Mr. Gasch founded
      Gasch & Associates of Sacramento, California in 1969 and currently serves as
      President of the company, where he remains actively involved in planning field
      strategies and data collection, as well as interpretation and application of
      findings. Under his management, Gasch & Associates has performed over 3,000
      geological and geophysical investigations throughout the continental United
      States, Alaska and Central and South America. Mr. Gasch has managed such diverse
      projects as higher resolution reflection and refraction seismic surveys,
      electromagnetic and ground magnetic surveys, L.P. surveys, ground penetrating
      radar, vibration and blast monitoring surveys for the mineral industry. He
      has
      worked on large gold mining projects such as Homestakes McLaughln Open Pit
      Mine
      in Lake County California, Valdese Creek Placer Mine in Alaska, Yana Coacha
      Mine
      in Peru South America and numerous other gold exploration projects in Nevada,
      Idaho, Arizona, California and Costa Rica S.A. Prior to founding Gasch &
      Associates in 1969, Mr. Gasch worked as a geologist and geophysicist for the
      Department of Water Resources and the California Division of Mines and
      Geology.




*Stanley
      A. Hirschman* has been
      a director of our company since October. Mr. Hirschman has served since 1996
      as
      President of CPointe Associates, Inc., a Plano, Texas executive management
      and
      consulting firm that specializes in solutions for companies with emerging
      technology-based products. He is Chairman of the Board of Bravo Foods
      International, Director of 5G Wireless Communications, an advisor of Redwood
      Grove Capital Management LLC, former Chairman of Mustang Software and former
      director of Imaging Diagnostic Systems, Inc. While at Mustang Software, Mr.
      Hirschman took a hands-on role in the planning and execution of the strategic
      initiative to increase shareholder value resulting in the successful acquisition
      of the company by Quintus Corporation. Mr. Hirschman is a member of the National
      Association of Corporate Directors and the KMPG Audit Committee Roundtable
      training program. Prior to that he held senior management positions with
      Software Etc., T.J. Maxx and Banana Republic. Mr. Hirschman is active in
      community affairs and serves on the Advisory Council of the Salvation Army
      Adult
      Rehabilitation Centers.




*Stephen
      B. Parent* has been
      a director of our company since March 2004. Mr. Parent served as Chairman of
      the
      Board of Directors and Chief Executive Officer of our company from March 2004
      until September 2004. From March 2003 until March 2004, Mr. Parent was our
      Manager for our exploration and test mining operations. Prior to founding our
      company, Mr. Parent worked in the automotive industry for Penske’s United Auto
      Group (UAG) during 2002 and 2003. Mr. Parent served as Chief Executive Officer
      of Ecovery, Inc., a private Nevada corporation from June 1998 to March 2003
      when
      it sold its mining assets to our company. Mr. Parent currently serves as
      President and Chief Executive Officer of Ecovery. Since January 1995, Mr. Parent
      has served as President and Chief Executive Officer of Aztech Environmental
      Industries, Inc. Mr. Parent and his wife filed for Chapter 13 Bankruptcy
      protection on September 26, 2002 and the bankruptcy was fully discharged on
      March 5, 2004.




*Phil
      E. Pearce* has been
      a director of our company since October. Mr. Pearce is an independent business
      consultant with Phil E. Pearce & Associates, and a member of the Board of
      Directors of a number of domestic and internationally headquartered companies.
      Mr. Pearce was Senior Vice President and a director of E.F. Hutton, Chairman
      of
      the Board of Governors of the National Association of Securities Dealers, a
      Governor of the New York Stock Exchange, and a member of the Advisory Council
      to
      the United States Securities and Exchange Commission on the Institutional Study
      of the Stock Markets. Mr. Pearce has been a featured speaker to the European
      Economic Committee in Belgium representing the United States on a symposium
      on
      public disclosures.




-26-
 Table
          of Contents




**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 Messrs. Todd S. Brown, Stanley A. Hirschman and Phil E.
      Pearce are independent directors, as “independence” is defined by Nasdaq,
      because they have no relationship with us that would interfere with their
      exercise of independent judgment. Mr. Faber is an officer of our company; Mr.
      Cook is a consultant to our company; and Mr. Aguilar is an officer of our
      principal investment banking firm. Jerrie Gasch, currently a director of our
      company, is an independent director, and Stephen B. Parent, currently a director
      of our company, is not considered independent since he formerly served as an
      officer.




Our
      Board
      of Directors has established three standing committees: an Audit Committee,
      a
      Compensation Committee, and a Nominations and Corporate Governance Committee.
      A
      majority of the members of our Audit Committee, Compensation Committee, and
      Nominations and Corporate Governance Committee consist of independent directors.




Our
      Board
      of Directors has adopted charters for the Audit, Compensation, and Nominations
      and Corporate Governance Committees describing the authority and
      responsibilities delegated to each committee by the board. Our Board of
      Directors has also adopted Corporate Governance Guidelines, a Code of Conduct,
      and a Code of Ethics for the CEO and Senior Financial Officers. The charters
      of
      our Audit, Compensation, and Nominations and Corporate Governance Committees;
      our Corporate Governance Guidelines, Code of Conduct, and Code of Ethics for
      the
      CEO and Senior Financial Officers, and any amendments or waivers thereto; and
      any other corporate governance materials contemplated by SEC or Nasdaq
      regulations are available in print to any stockholder requesting a copy in
      writing from our corporate secretary at our executive offices set forth in
      this
      filing.




We
      regularly schedule executive sessions at which independent directors meet
      without the presence or participation of management. The presiding director
      of
      such executive session rotates among the Chairs of the Audit Committee,
      Compensation Committee, and the Nominations and Corporate Governance
      Committee.




Interested
      parties may communicate with our Board of Directors or specific members of
      our
      Board of Directors, including our independent directors and the members of
      our
      various board committees, by submitting a letter addressed to the Board of
      Directors of GoldSpring, Inc. c/o any specified individual director or directors
      at the address listed herein. Any such letters are sent to the indicated
      directors.




*The
      Audit Committee*




The
      purpose of the Audit Committee is to oversee the financial and reporting
      processes of our company and the audits of the financial statements of our
      company and to provide assistance to our Board of Directors with respect to
      the
      oversight of the integrity of the financial statements of our company, our
      company’s compliance with legal and regulatory matters, the independent
      auditor’s qualifications and independence, and the performance of our company’s
      independent auditor. The primary responsibilities of the Audit Committee are
      set
      forth in its charter and include various matters with respect to the oversight
      of our company’s accounting and financial reporting process and audits of the
      financial statements of our company on behalf of our Board of Directors. The
      Audit Committee also selects the independent auditor to conduct the annual
      audit
      of the financial statements of our company; reviews the proposed scope of such
      audit; reviews accounting and financial controls of our company with the
      independent auditor and our financial accounting staff; and reviews and approves
      transactions between us and our directors, officers, and their affiliates.




-27-
 Table
          of Contents




The
      Audit
      Committee currently consists of Messrs. Brown, Hirschman, and Pearce, each
      of
      whom is an independent director of our company under Nasdaq rules as well as
      under rules adopted by the SEC pursuant to the Sarbanes-Oxley Act of 2002.
      The
      Board of Directors has determined that Mr. Brown (whose background is detailed
      above) qualifies as an “audit committee financial expert” in accordance with
      applicable rules and regulations of the SEC. Mr. Brown serves as the Chairman
      of
      the Audit Committee.




*The
      Compensation Committee*




The
      purpose of the Compensation Committee includes determining, or recommending
      to
      our Board of Directors for determination, the compensation of the Chief
      Executive Officer and other executive officers of our company and discharging
      the responsibilities of our Board of Directors relating to compensation programs
      of our company. The Compensation Committee currently consists of Messrs. Brown,
      Hirschman, and Pearce, with Mr. Hirschman serving as Chairman.




*The
      Nominations and Corporate Governance Committee*




The
      purposes of the Nominations and Corporate Governance Committee include the
      selection or recommendation to the Board of Directors of nominees to stand
      for
      election as directors at each election of directors, the oversight of the
      selection and composition of committees of the Board of Directors, the oversight
      of the evaluations of the Board of Directors and management, and the development
      and recommendation to the Board of Directors of a set of corporate governance
      principles applicable to our company. The Nominations and Corporate Governance
      Committee currently consists of Messrs. Aguilar, Brown, Hirschman, and Pearce,
      with Mr. Aguilar serving as Chairman.




The
      Nominations and Corporate Governance Committee will consider persons recommended
      by stockholders for inclusion as nominees for election to our Board of Directors
      if the names, biographical data, and qualifications of such persons are
      submitted in writing in a timely manner addressed and delivered to our company’s
      corporate secretary at the address listed herein. The Nominations and Corporate
      Governance Committee identifies and evaluates nominees for our Board of
      Directors, including nominees recommended by stockholders, based on numerous
      factors it considers appropriate, some of which may include strength of
      character, mature judgment, career specialization, relevant technical skills,
      diversity, and the extent to which the nominee would fill a present need on
      our
      Board of Directors. As discussed above, the members of the Nominations and
      Corporate Governance Committee are independent, as that term is defined by
      Nasdaq.




The
      Board
      of Directors held a total of five meetings during the fiscal year ended December
      31, 2004. The Audit Committee met separately at one meeting during the fiscal
      year ended December 31, 2004. The Compensation Committee held a total of one
      meeting during the fiscal year ended December 31, 2004. The Nominations and
      Corporate Governance Committee did not meet during the fiscal year ended
      December 31, 2004. Each of our directors attended at least 75% of the aggregate
      of (1) the total number of meetings of our Board of Directors held during fiscal
      2004, and (2) the total number of meetings held by all committees of our Board
      of Directors on which such person served during fiscal 2004.




**Compensation
      of Directors**




Independent
      directors receive $3,000 a month, and the Chairman of the Audit Committee
      receives $4,000 a month. We also reimburse the members of our Board of Directors
      for actual expenses incurred in attending board meetings.




With
      the
      exception of the consulting services agreement for John F. Cook and employment
      agreement for Robert T. Faber described below, our officers and directors do
      not
      have employment agreements or consulting agreements relating to termination
      of
      employment or change-in-control agreements.




**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 2004.




-28-
 Table
          of Contents




**SUMMARY
      COMPENSATION TABLE**




**Long-Term****Compensation****Awards****Securities**
            
            **All
                Other****Annual
                Compensation(1)**
            
            **Underlying**
            
            **Compensation****Name
                and Principal Position**
            
            **Year**
            
            **Salary
                ($)**
            
            **Bonus
                ($)**
            
            **Options
                (#)(2)**
            
            **($)**Robert
                T. Faber(2)
            
            
            2004
            
            $
            115,000
            
            $
            10,000
            
            
            0
            
            $
            0President
                and Chief Executive Officer; Chief Financial Officer
            
            
            2003
            
            
            33,000
            
            
            0
            
            
            0
            
            
            0







(1)
            Executive
                officers received certain perquisites, the value of which did not
                exceed
                the lesser of $50,000 or 10% of that officer’s salary and bonus during
                fiscal 2004.




(2)
            Mr.
                Faber has served as President and Chief Executive Officer since September
                2004 and Chief Financial Officer since June
                2003.




**Stock
      Options**




We
      did
      not grant stock options to directors, officers, or employees in 2004. There
      were
      no shares of common stock underlying unexercised stock options at December
      31,
      2004.




**Employment
      Agreements**




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




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




We
      had an
      employment agreement with Leslie Cahan extending through August 2005. The
      employment agreement provided for Mr. Cahan to serve as Director of Human
      Resources. The agreement provided for base compensation of $60,000 per year.
      As
      of August 1, 2005 Mr. Cahan is no longer an employee of our Company. Apart
      from
      his employment with the company, Mr. Cahan received $60,000 in consulting fees
      from us in 2004 through his wholly-owned company, Harlesk Nevada.






-29-
 Table
          of Contents





**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 March 31, 2005 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.




**Name
              of Beneficial Owner**
            
            **Shares
                Beneficially****Owned****Number(1)**
            
            **Percent(2)****Directors
                and Executive Officers(3):**John
                F. Cook
            
            
            6,750,000
            
            
            2.9
            %Robert
                T. Faber
            
            
            1,990,000
            
            
            0.8
            %Lisa
                S. Boksenbaum
            
            
            10,000
            
            
            0.0
            %Christopher
                L. Aguilar
            
            
            157,775
            
            
            0.1
            %Todd
                S. Brown
            
            
            ―
            
            
            0.0
            %Leslie
                L. Cahan
            
            
            9,000,000
            
            
            3.8
            %Jerrie
                W. Gasch
            
            
            330,000
            
            
            0.1
            %Stanley
                A. Hirschman
            
            
            ―
            
            
            0.0
            %Stephen
                B. Parent
            
            
            45,962,750
            
            
            19.6
            %Phil
                E. Pearce
            
            
            ―
            
            
            0.0
            %All
                directors and executive officersas
                a group (ten persons)
            
            
            64,200,526
            
            
            27.4
            %**5%
                Shareholders:**John
                W. Winfield(4)
            
            
            87,694,050
            
            
            34.56
            %Longview
                Equity Fund and Longview International Equity Fund (5)
            
            
            28,354,549
            
            
            11.24
            %Capital
                Ventures International (7)
            
            
            18,903,020
            
            
            7.46
            %Gamma
                Opportunity Capital (8)
            
            
            14,177,273
            
            
            5.70
            %Longview
                Fund, L.P. (9)
            
            
            14,177,273
            
            
            5.70
            %





(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 May 1, 2005 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 May 1, 2005. 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
                May 1,
                2005 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)
            With
                the exception of Messrs. Gasch and Parent, the directors and officers
                can
                be reached at our company’s offices at 8585 East Hartford Drive, Suite
                400, Scottsdale, Arizona 85225. Mr. Gasch’s address is 3174 Luyung Drive,
                #2, Rancho Cordova, CA 95742, and Mr. Parent’s address is 16706 N.
                109thWay, Scottsdale, AZ 85255.




(4)
            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.




(5)
            The
                address for Longview is c/o Redwood Grove Capital Management, 600
                Montgomery Street, 44thFloor, San Francisco, California
                94111.




(6)
            The
                address for Jubliee Investment Trust and Pearl Corporate Finance
                Limited
                is One Great Cumberland Place, London W1H
                7AL.




(7)
            The
                address for Capital Ventures International is c/o Heights Capital
                Management, 101 California St., Suite 3250, San Francisco, CA
                94111.




(8)
            The
                address for Gamma Opportunity Capital is 600 Montgomery Street,
                44thFloor, San Francisco, California
                94111.




(9)
            The
                address for Longview Fund, L.P. is c/o Viking Asset Management, LLC,
                600
                Montgomery Street, 44thFloor, San Francisco, California
                94111.







-30-
 Table
          of Contents




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




John
      F.
      Cook, the Chairman of our Board of Directors, has a consulting agreement with
      us. We pay Mr. Cook for his professional mining consulting services
      at a
      rate of $500 per day.




We
      were a
      party to a Consulting Agreement with Purnendu K. Rana Medhi from October 1,
      2003
      through September 30, 2004. The agreement required Mr. Medhi to perform such
      services as we may reasonably request, including resource evaluation, analysis
      of mining methods, metallurgical process, and project planning. We paid Mr.
      Medhi $46,125 during fiscal 2004 and issued 50,000 shares of our common stock
      to
      him.




**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, 2004
            F
                -
                3Consolidated
                Statements of Operations
              for
                the years ended December 31, 2004 and 2003
            F
                -
                5Consolidated
                Statements of Changes in Stockholders' Equity
              for
                the year ended December 31, 2004 and 2003
            F
                -
                6Consolidated
                Statements of Cash Flows
              for
                the year ended December 31, 2004 and 2003
            F
                -
                7Notes
                to Consolidated Financial Statements
            F-9-21




(2)
            Exhibits
                filed as part of this Report:




ExhibitNumber
            
            Exhibit3.1
            
            Certificate
                of Incorporation of the Registrant, including all amendments to date
                (1)3.2
            
            Amended
                and Restated Bylaws of the Registrant (1)10.5(a)
            
            Subscription
                Agreement dated as of March 23, 2004 by and among the Registrant
                and the
                subscriber parties thereto (1)10.5(b)
            
            Subscription
                Agreement dated as of November 30, 2004 by and among the Registrant
                and
                the subscriber parties thereto (2)10.6
            
            Form
                of Convertible Note, dated as of November 30, 2004 issued by the
                Registrant to the subscribers (2)10.7(a)
            
            Common
                Stock Purchase Warrant A dated as of March 23, 2004 issued by the
                Registrant to the subscribers (1)10.7(b)
            
            Common
                Stock Purchase Warrant (Green Shoe) dated as of March 23, 2004 issued
                by
                the Registrant to the subscribers (1)10.7(c)
            
            Form
                of Class B Common Stock Purchase Warrant, dated as of November 30,
                2004
                issued by the Registrant to the subscribers (2)10.8(a)
            
            Funds
                Escrow Agreement, dated as of March 23, 2004 among the Registrant,
                the
                subscriber parties thereto, and the escrow agent (1)10.8(b)
            
            Funds
                Escrow Agreement, dated as of November 30, 2004 among the Registrant,
                the
                subscriber parties thereto, and the escrow agent (2)21.1
            
            List
                of Subsidiaries (1)23.1
            
            Consent
                of Jewett, Schwartz & 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





(1)
            Incorporated
                by Reference to Registration Statement on Form S-1 (Registration
                333-114697)




(2)
            Incorporated
                by Reference to Registrant’s Current Report on Form 8-K dated December 6,
                2004, as filed on December 8, 2004.




-31-
 Table
          of Contents




(b)
              Reports
                  filed on Form 8-K during the quarter ended December 31,
                  2004:




(1)
            A
                Report on Form 8-K was filed with the Securities and Exchange Commission
                on October 6, 2004 relating to the election of four new
                directors.




(2)
            A
                Report on Form 8-K was filed with the Securities and Exchange Commission
                on December 8, 2004 relating to the restructuring of securities issued
                in
                our March 2004 private placement
                transaction.




(3)
            A
                Report on Form 8-K was filed with the Securities and Exchange Commission
                on December 14, 2004 relating to the removal of seven directors pursuant
                to a purported shareholders’ consent
                resolution.




(4)
            A
                Report on Form 8-K was filed with the Securities and Exchange Commission
                on December 21, 2004 relating to the termination of negotiations
                with Bema
                Gold Corporation for our acquisition of the Yarnell Mining
                Company.




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




The
      aggregate fees billed to our company by Jewett Schwartz, for the fiscal years
      ended December 31, 2003 and December 31, 2004, are as follows:




**2003**
            
            **2004**Audit
                fees
            
            $
            56,000
            
            $
            28,500Audit-related
                fees
            
            
            0
            
            
            0Tax
                fees
            
            
            0
            
            
            0All
                other fees
            
            
            1,400
            
            
            ―


**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.






-32-
 Table
          of Contents




**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.




**GOLDSPRING,
                INC.**Date: September
                21, 2005
              By:
              /s/ Robert
                T. FaberRobert
                  T. Faber
                President and Chief Executive
                  Officer


**Signature**
                
                **Capacity**
                
                **Date**/s/
                    John F. Cook
                
                Chairman
                    of the Board
                
                September
                    21, 2005John
                    F. Cook/s/
                    Robert T. Faber
                
                President,
                    Chief Executive Officer (Principal Executive Officer),
                
                September
                    21, 2005Robert
                    T. Faber
                
                Chief
                  Financial
                  Officer (Principal Accounting and FinancialOfficer),
                  and
                  Director/s/
                
                Director
                
                __________,
                    2005Stephen
                    B. Parent/s/
                    Christopher L. Aguilar
                
                Director
                
                September
                    21, 2005Christopher
                    L. Aguilar/s/
                    Todd S. Brow
                
                Director
                
                September
                    21, 2005Todd
                    S. Brown/s/
                    Stanley A. Hirschman
                
                Director
                
                September
                    21, 2005Stanley
                    A. Hirschman/s/
                    Phil E. Pearce
                
                Director
                
                September
                    21, 2005Phil
                    E. Pearce/s/
                    Jerrie Gasch
                
                Director
                
                September
                    21, 2005Jerrie
                    Gasch








-33-
 Table
          of Contents




**GOLDSPRING,
      INC.**




**INDEX
      TO FINANCIAL STATEMENTS**




**Page**


Report
                of Independent Registered Public Accounting
                Firm
            F-2Consolidated
                Balance Sheet as of December 31,
                2004
            F-3Consolidated
                Statements of Operations for
                the years ended December 31, 2004 and 2003
            F-5Consolidated
                Statements of Changes in
                Stockholders’ Deficiency for the years ended December 31, 2004 and
                2003
            F-6Consolidated
                Statements of Cash Flows for the years
                ended December 31, 2004 and 2003
            F-7Notes
                to Consolidated Financial
                Statements
            F-8-24








F-1
 Table
          of Contents





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, 2004 and the related consolidated statements of operations, changes
      in shareholders’ deficiency and cash flows for the years ended December 31, 2004
      and 2003. 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,
      2004, and the results of its operations and its cash flows for the years then
      ended 2004 and 2003 in conformity with accounting principles generally accepted
      in the United States.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As more fully described in Note 1 to the
      financial statements, the Company has incurred recurring operating losses and
      has a working capital deficit at December 31, 2004. The Company is working
      on
      various alternatives to improve the Company’s financial resources which are also
      described in Note 1. Absent the successful completion of one of these
      alternatives, the Company’s operating results will increasingly become
      uncertain. These conditions raise substantial doubt about the Company’s ability
      to continue as a going concern; however, the financial statements do not include
      any adjustments to reflect the possible future effects on the recoverability
      and
      classification of assets or the amounts and classification of liabilities that
      may result from the outcome of this uncertainty.





The
      financial statements as of and for the year ended December 31, 2004 have been
      restated to account for certain costs incurred in the development of the mining
      facility previously capitalized to exploration or test mining costs and
      shareholders’ equity have been restated to reinstate the convertible notes
      payable all further described in Note 1 to the financial
      statements.





The
      financial statements as of and for the year ended December 31, 2003 have been
      restated to account for the acquisition of the mineral interests acquired from
      Ecovery, Inc. as a reverse merger pursuant to the Plan of Reorganization, the
      cancellation of preferred stock, and the full reservation of deferred tax assets
      further described in Note 1 to the financial statements.





/a/
      Jewett, Schwartz & Associates


Jewett,
      Schwartz, & Associates





Hollywood,
      Florida


March
      31,
      2005 except as to


Note
      1 as
      to which the date is August 29, 2005







F-2
 Table
          of Contents





**GOLDSPRING,
      INC.**


**CONSOLIDATED****BALANCE
      SHEETS**




**December
                31, 2004**
            
            **December
                31, 2003**(As
                Restated)
            
            (As
                Restated)**ASSETS**Current
                Assets:Cash
                and cash equivalents
            
            $
            1,951,802
            
            $
            364,138Prepaid
                expenses and other current assets
            
            
            149,795
            
            
            440,155Inventories
            
            
            288,688
            
            
            --Total
                Current Assets
            
            
            2,390,285
            
            
            804,293**PLANT,
                EQUIPMENT, AND MINERAL PROPERTIES**Mineral
                properties
            
            
            1,334,837
            
            
            1,334,837Plant
                and Equipment
            
            
            1,159,780
            
            
            614,793Total
                Property and Equipment
            
            
            2,494,617
            
            
            1,949,360**OTHER
                ASSETS**Reclamation
                deposit
            
            
            377,169
            
            
            145,000Equipment
                purchase deposit
            
            
            110,000
            
            
            100,000Total
                Other Assets
            
            
            487,169
            
            
            245,000Total
                Assets
            
            $
            5,372,071
            
            $
            2,998,923


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








F-3
 Table
          of Contents


**GOLDSPRING,
      INC.**


**LIABILITIES
      AND STOCKHOLDERS’
      DEFICIENCY**




**December
                31, 2004**
            
            **December
                31, 2003**(As
                Restated)
            
            (As
                Restated)**CURRENT
                LIABILITIES**Accounts
                Payable
            
            $
            589,799
            
            $
            108,952Accrued
                Expenses
            
            
            792,884
            
            
            49,322Short-Term
                Lease Obligations
            
            
            34,517
            
            
            --Current
                portion of long-term debt
            
            
            11,521,776
            
            
            400,000Total
                Current Liabilities
            
            
            12,938,976
            
            
            558,274**LONG-TERM
                DEBT AND OTHER LONG-TERM LIABILITIES**Long-term
                debt, net of current portion
            
            
            243,858
            
            
            600,000Long-term
                lease obligation, net of current portion
            
            
            119,152
            
            
            --Long-term
                reclamation liability
            
            
            553,190
            
            
            --Total
                Long-Term debt and other Long-term Liabilities
            
            
            916,200
            
            
            600,000Total
                Liabilities
            
            $
            13,855,176
            
            $
            1,158,274**COMMITMENTS
                AND CONTINGENCIES (NOTE 8)****STOCKHOLDERS’
                DEFICIT**Common
                stock, $.000666 par value, 500,000,000 shares authorized,
              171,120,482
                shares issued and outstanding
            
            
            113,966
            
            
            114,970Treasury
                Stock
            
            
            (67
            )
            
            --Additional
                paid-in capital
            
            
            3,574,272
            
            
            4,327,420Accumulated
                deficit - Prior years
            
            
            (2,601,741
            )
            
            --Accumulated
                deficit - Current year
            
            
            (9,569,535
            )
            
            (2,601,741
            )Total
                Stockholders’ Deficiency
            
            
            (8,483,105
            )
            
            1,840,649Total
                Liabilities and Stockholders’ Deficiency
            
            $
            5,372,071
            
            $
            2,998,923


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







F-4
 Table
          of Contents


**GOLDSPRING,
      INC.**


**CONSOLIDATED****STATEMENTS
      OF OPERATIONS**




**Years
                      Ended**
                    **December
                      31,**
                    **(As
                      Restated)****2004**
              
              **2003**Revenue
                  from gold sales, net
              
              $
              955,380
              
              $
              ―Cost
                  and ExpensesCosts
                  applicable to sales (exclusive of depreciation andamortization
                  shown separately below)
              
              
              --
              
              
              ―Depreciation
                  and amortization
              
              
              219,834
              
              
              1,118Reclamation,
                  Exploration and Test Mining Expenses
              
              
              6,800,011
              
              
              387,557General
                  and Administrative
              
              
              1,430,596
              
              
              2,214,957Other
              
              
              659,931
              
              
              ―9,110,372
              
              
              2,603,632Other
                  Income (Expense):Gain
                  on derivative investments, net
              
              
              238,620
              
              
              ―Liquidated
                  damages expense (See Note 11)
              
              
              (1,627,308
              )
              
              ―Interest
                  income
              
              
              40,142
              
              
              ―Interest
                  expense
              
              
              (65,997
              )
              
              1,891(1,414,543
              )
              
              1,891Net
                  Loss:
              
              
              (9,569,535
              )
              
              (2,601,741
              )Net
                  loss per common share - basic
              
              $
              (0.051
              )
              $
              (0.019
              )Basic
                  weighted average common shares outstanding
              
              
              186,800,478
              
              
              135,138,181


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





F-5
 Table
          of Contents


**GOLDSPRING,
      INC.**


**STATEMENT
      OF CHANGES IN STOCKHOLDERS’
      DEFICIENCY**


**For
      the Years Ended December 31, 2004 and 2003**





**(Common
      Stock Par value, $.000666 per share; 500,000,000 shares
      authorized)**





Common
                Stock
            
            
            
            GOLDSPRING,
                INC. f/k/a VISATOR, INC.
              STATEMENT
                OF CHANGES IN SHAREHOLDERS’ DEFICIENCY500,000,000
                shares
              authorizedShares
                Issued
            
            Shares
                Issued - Forward Stock Split
            
            Total
                Shares Issued After Forward Stock Split
            
            Par
                value $.000666 per share
            
            Common
                Stock Subscribed
            
            Stock
                Subscrip-tions Receivable
            
            Treasury
                Stock Subscrip-tions Payable
            
            Additional
              Paid-in
              Capital
            
            Treasury
                Stock
              (at
                cost)
            
            Accumulated
                Defici**t**
            
            **Total**Balance,
                December 31, 2002
            
            
            83,699,081
            
            
            
            
            
            
            
            $
            55,745
            
            
            52,947
            
            
            (52,947
            )
            $
            20,000
            
            $
            2,510,427
            
            
            (20,000
            )
            
            (2,614,051
            )
            
            (47,879
            )Retirement
                of common stock prior to stock split
            
            
            (79,500,000
            )
            
            
            
            
            
            
            
            (52,947
            )
            
            (52,947
            )
            
            52,947
            
            
            (20,000
            )
            
            52,947
            
            
            20,000Balance
                after retirement of stock
            
            
            4,199,081
            
            
            
            
            
            
            
            
            2,798
            
            
            
            
            
            
            
            
            
            
            
            2,563,374
            
            
            
            
            
            (2,614,051
            )
            
            (47,879
            )Stock
                Dividend Opening Balance Shares
            
            
            4,199,081
            
            
            419,908
            
            
            4,618,989
            
            
            277
            
            
            
            
            
            
            
            
            
            
            
            (277
            )Quasi-reorganization
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,614,051
            )
            
            
            
            
            2,614,051Common
                stock issued to Ecovery for acquisition of mining
                interests
            
            
            90,000,000
            
            
            9,000,000
            
            
            99,000,000
            
            
            65,934
            
            
            
            
            
            
            
            
            
            
            
            53,204
            
            
            
            
            
            
            
            
            119,138Common
                stock issued for consulting services in March 2003
            
            
            24,000,000
            
            
            2,400,000
            
            
            26,400,000
            
            
            17,582
            
            
            
            
            
            
            
            
            
            
            
            2,062,418
            
            
            
            
            
            
            
            
            2,080,000Common
                stock issued for consulting services in August 2003
            
            
            289,000
            
            
            28,900
            
            
            317,900
            
            
            212
            
            
            
            
            
            
            
            
            
            
            
            39,918
            
            
            
            
            
            
            
            
            40,130Common
                stock retired
            
            
            (11,735
            )
            
            (1,154
            )
            
            (12,889
            )
            
            (8
            )
            
            
            
            
            
            
            
            
            
            
            1
            
            
            
            
            
            
            
            
            (7
            )Common
                stock issued for equipment deposit
            
            
            800,000
            
            
            80,000
            
            
            880,000
            
            
            586
            
            
            
            
            
            
            
            
            
            
            
            99,414
            
            
            
            
            
            
            
            
            100,000Issuance
                of common stock - private placement
            
            
            1,000,000
            
            
            100,000
            
            
            1,100,000
            
            
            733
            
            
            
            
            
            
            
            
            
            
            
            124,267
            
            
            
            
            
            
            
            
            125,000Issuance
                of common stock to Jubilee Investment Trust
            
            
            36,000,000
            
            
            3,600,000
            
            
            39,600,000
            
            
            26,374
            
            
            
            
            
            
            
            
            
            
            
            1,758,634
            
            
            
            
            
            
            
            
            1,785,008Common
                stock issued for acquisition of water rights, plant, equipment and
                mineral
                interests
            
            
            723,149
            
            
            
            
            
            723,149
            
            
            482
            
            
            
            
            
            
            
            
            
            
            
            240,518
            
            
            
            
            
            
            
            
            241,000Consulting
                fees incurredNet
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,601,741
            )
            
            (2,601,741
            )Balance
                - December 31, 2003, Restated
            
            
            161,198,576
            
            
            15,627,654
            
            
            172,627,149
            
            
            114,970
            
            
            --
            
            
            --
            
            
            --
            
            
            4,327,420
            
            
            --
            
            
            (2,601,741
            )
            
            1,840,649Issuance
                of common stock for cash, net of issuance costs
            
            
            
            
            
            
            
            
            22,182,462
            
            
            14,773
            
            
            
            
            
            
            
            
            
            
            
            9,414,008
            
            
            
            
            
            
            
            
            9,428,781Common
                stock issued for consulting services
            
            
            
            
            
            
            
            
            50,000
            
            
            33
            
            
            
            
            
            
            
            
            
            
            
            41,967
            
            
            
            
            
            
            
            
            42,000Repurchase
                and retirement of common stock
            
            
            
            
            
            
            
            
            (2,000,000
            )
            
            (1,332
            )
            
            
            
            
            
            
            
            
            
            
            (148,668
            )
            
            
            
            
            
            
            
            (150,000
            )Stock
                buyback and return to treasury
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (74,933
            )
            
            (67
            )
            
            
            
            
            (75,000
            )November
                Restructuring
            
            
            
            
            
            
            
            
            (21,739,129
            )
            
            (14,478
            )
            
            
            
            
            
            
            
            
            
            
            (9,985,522
            )
            
            
            
            
            
            
            
            (10,000,000
            )Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (9,569,535
            )
            
            (9,569,535
            )Balance,
                December 31, 2004
            
            
            
            
            
            
            
            
            171,120,482
            
            
            113,966
            
            $
            ―
            
            $
            ―
            
            $
            ―
            
            $
            3,574,272
            
            
            (67
            )
            $
            (12,171,276
            )
            $
            (8,483,105
            )


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





F-6
 Table
          of Contents


**GOLDSPRING,
      INC.**


**CONSOLIDATED****STATEMENTS
      OF CASH FLOWS**





**Years
                  Ended December 31,****2004**
              
              **2003****(As
                  Restated)****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              
              (9,569,535
              )
              
              (2,601,741
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              219,834
              
              
              1,118Liquidated
                  damages from March 2004 financing and November 2004
                  restructuring
              
              
              1,627,308Consulting
                  services provided in exchange for common stock
              
              
              42,000
              
              
              2,120,130(Increase)
                  decrease in operating assets:Inventories
              
              
              (239,439
              )
              
              ―Prepaid
                  and other current assets
              
              
              290,360
              
              
              (440,155
              )Other
                  current assets
              
              
              ―
              
              
              ―Increase
                  (decrease) in operating liabilities:Accounts
                  payable
              
              
              480,847
              
              
              108,952Accrued
                  expenses
              
              
              216,902
              
              
              ―Reclamation
                  liability
              
              
              553,190
              
              
              ―Other
              
              
              (13,934
              )Total
                  Adjustments to Reconcile Net Loss Used in Operating Activities
              
              
              3,127,819
              
              
              1,790,045Net
                  cash used in operating activities
              
              
              (6,441,716
              )
              
              (811,696
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**:Reclamation
                  bond deposit
              
              
              (232,169
              )
              
              (145,000
              )Equipment
                  deposit
              
              
              (10,000
              )
              
              ―Acquisition
                  of plant and equipment
              
              
              (532,232
              )
              
              (1,589,492
              )Net
                  used in investing activities
              
              
              (774,401
              )
              
              (1,734,492
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Net
                  proceeds from the issuance of common stock
              
              
              9,428,781
              
              
              1,910,008Principal
                  payments on Note Payable
              
              
              (400,000
              )
              
              ―Purchase
                  and cancellation of Company’s Common Stock
              
              
              (150,000
              )
              
              ―Purchase
                  of Company’s Common Stock and returned to treasury
              
              
              (75,000
              )
              
              ―Proceeds
                  from the issuance of note payable to related party
              
              
              ―
              
              
              1,000,000Net
                  cash provided by financing activities
              
              
              8,803,781
              
              
              2,910,008Net
                  increase in cash and cash equivalents
              
              
              1,587,664
              
              
              363,820Cash
                  and cash equivalents, beginning of year
              
              
              364,138
              
              
              318Cash
                  and cash equivalents, end of year
              
              
              1,951,802
              
              
              364,138Supplemental
                  disclosures of non-cash investing and financing
                  activities:Issuance
                  of common stock for the acquisitions of GoldSpring, LLC. and Ecovat,
                  LLC
              
              
              ―
              
              
              119,138360,137Issuance
                  of common stock for the acquisition of The Plum Mining
                  Company
              
              
              
              
              
              200,000Issuance
                  of common stock for an equipment deposit
              
              
              ―
              
              
              100,000100,000Issuance
                  of common stock for acquisition of water rights
              
              
              
              
              
              41,000Purchase
                  of assets under capital leases
              
              
              168,202
              
              
              ―Purchase
                  of assets by long-term debt
              
              
              63,269
              
              
              ―Convertible
                  notes issued in connection with November Restructuring
              
              
              11,100,649
 *The
      accompanying notes are an integral part of these financial
      statements.*







F-7
 Table
          of Contents


GOLDSPRING,
      INC.


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


Years
      Ended December 31, 2004 and 2003





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




Summarized
      below are the significant accounting policies of GoldSpring, Inc.
      (“we,”“GoldSpring,” or the “Company”)




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. Prior to December 31, 2002, we reported
      according to the criteria of a Development Stage Enterprise and presented our
      financial statements in accordance with Statements of Financial Accounting
      Standards (“SFAS”) Number 7, Accounting and Reporting by Development Stage
      Enterprises. However, we do not believe we now qualify for the criteria of
      reporting in the development stage and do not report as such.




Currently
      the primary nature of our business is the exploration and development of mineral
      producing properties.




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




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




Unless
      otherwise indicated, amounts provided in these notes to the financial statements
      pertain to continuing operations.




*Restatement
      of Financial Statements*




Our
      2004
      financial statements have been restated as follows:




Upon
      review of the standards for reporting mineral reserves as defined by SEC
      Industry Guide 7 (“Guide 7”), we have concluded that we did not have sufficient
      information to establish the existence of reserves as of December 31, 2004
      and
      that certain costs that we had incurred in the development of our mining
      facility must be expensed as exploration or “test mining” costs. We have
      restated our 2004 financial statements to classify all costs previously
      capitalized (the recovery of which is dependent upon the economical extraction
      of gold from the mineralized material we are currently processing), as test
      mining expenses. These costs, which total approximately $4.5 million net of
      accumulated depreciation, include our asset retirement obligation asset of
      $453,786. In connection with our restatement of our mineral property assets,
      we
      have also reversed depletion taken on our mineral properties totaling $43,256.




The
                  effect of the restatements on the December 31, 2004 consolidated
                  statement
                  of operations is as follows
  As
                  Previously
              
              Effect
                  of
              
              AsReported
              
              Restatement
              
              RestatedMineral
                  Properties
              
              $
              1,729,885
              
              
              ($395,048
              )
              $
              1,334,837Plant,
                  Property and Equipment
              
              $
              5,171,863
              
              $
              (4,012,083
              )
              $
              1,159,780ARO/Reclamation
                  Liability
              
              $
              470,803
              
              $
              82,387
              
              $
              553,190Net
                  Loss
              
              
              ($5,080,016
              )
              
              ($4,489,519
              )
              
              ($9,569,535
              )Net
                  Loss per share
              
              
              ($0.3
              )
              
              ($0.02
              )
              
              ($0.05
              )






F-8
 Table
          of Contents




GOLDSPRING,
      INC.


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


Years
      Ended December 31, 2004 and 2003






·
            We
                have also restated our shareholders’ equity. 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.
                In
                connection with the notice we reduced convertible notes payable by
                $3.8
                million and recorded an additional 33,817,594 shares (converted at
                approximately $0.11 per share) at December 31, 2004. Upon further
                consideration, we have concluded that since the shares had not been
                physically issued prior to year end the liability and stockholders’ equity
                accounts should not be adjusted until the shares have been issued.
                Accordingly, we restated our convertible note and stock holder equity
                accounts by approximately $3.8 million. The restatement has no affect
                on
                net loss or cash flows as previously
                reported.




Our
      2003
      financial statements have been restated as follows:




·
            In
                June 2003, we acquired the Spring Valley and Gold Canyon Placer claims
                and
                the unpatented copper mineral rights at Big Mike from Ecovery, Inc
                for 90
                million shares of our Company’s common stock and $100,000... We did not
                acquire any real property rights in this transaction. The transaction
                had
                an effective date of March 11, 2003. The transaction between us and
                Ecovery was originally accounted for as a business combination that
                resulted in recording goodwill, an intangible asset, of approximately
                $8.9
                million. After further investigation and consideration, we concluded
                that
                accounting for this transaction as a recapitalization more accurately
                reflects its nature. Three primary factors influenced the accounting
                treatment change for this transaction: (1) the change in control
                of our
                company based on the number of our shares issued to the 128 Ecovery
                shareholders in the transaction; (2) the sole officer and director
                of our
                company resigned effective the date of the transaction; and (3) we
                had no
                operations prior to the transaction. The accounting impact of treating
                this transaction as a recapitalization instead of a business combination
                is an elimination of $8.9 million of goodwill and a reduction of
                Additional Paid-in Capital by the same amount. Furthermore, because
                Ecovery was considered the control group following the close of the
                recapitalization transaction, we have recorded a book value for the
                assets
                we acquired from Ecovery equal to Ecovery’s historical book value.
                Specifically, the Gold Canyon and Spring Valley placer claims are
                carried
                at a value of $100,000, and the Big Mike copper claims are carried
                at a
                value of $119,138.




·
            In
                connection with our review of the accounting treatment of the original
                transaction with Ecovery, we reviewed the issuance of the 46,500
                convertible redeemable preferred shares to the original owner of
                the Gold
                Canyon and Spring Valley placer claims. Specifically, we reevaluated
                our
                accounting for certain convertible, redeemable preferred stock issued
                to
                Harlesk Nevada, a company controlled by Leslie L. Cahan, a director
                of our
                company since 2003. The terms of the sale of the claims to Ecovery,
                Inc.
                had included contingent consideration of up to $4.65 million for
                Harlesk
                Nevada, the seller. The $4.65 million obligation to Harlesk Nevada
                was
                going to be represented by convertible redeemable preferred shares,
                and
                was entirely contingent on the placer claims being put into profitable
                production. Since the substance of the economic arrangement between
                Harlesk Nevada and us was to provide a maximum financial benefit
                of $4.65
                million to Harlesk Nevada by way of a 20% net proceeds royalty contingent
                obligation (subject to a continuing 2% NSR royalty) when and if the
                Gold
                Canyon and Spring Valley properties were put into profitable commercial
                production, we mutually agreed to cancel the preferred stock and
                restate
                the same obligation in a net proceeds royalty agreement between the
                parties. Accordingly the Gold Canyon and Spring Valley assets have
                been
                adjusted to reflect the cancellation of the preferred stock. This
                change
                has been restated to reflect our company’s financial situation. These
                changes in accounting treatment had no effect on our results of
                operations.







F-9
 Table
          of Contents




GOLDSPRING,
      INC. NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 Years
        Ended December 31, 2004 and 2003


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




*Restatement
      of Financial Statements, Continued*




·
            Prior
                to the transaction with Ecovery, we had entered into various contractual
                arrangements to issue common stock as consideration for investor
                relations, business advisory, and related consulting services. We
                issued a
                total of 26,726,932 common shares of common stock valued at $4,123,278
                for
                consulting services during the period from February 2002 through
                March 11,
                2003. The entire amount was originally recorded as an expense in
                2003.
                Subsequent to the preparation of the financial statements, we reviewed
                the
                transaction and determined that $2,043,278 of the expense should
                have been
                recognized in fiscal 2002 to correspond with the 2,726,932 shares
                of
                restricted common stock issued during 2002 and that the remaining
                $2,080,000, relating to the 24,000,000 shares issued during 2003
                should be
                recognized as an expense in 2003. Accordingly, the financial statements
                have been restated to reflect the correct allocation of the consulting
                services expense.




·
            After
                careful consideration and review of negative and positive evidence
                regarding the realization of deferred tax assets, we have determined
                that,
                for the year ended December 31, 2003, it is more likely than not
                that any
                deferred tax asset arising from net operating loss carryforwards
                or
                temporary differences will not be recognized in the near term given
                our
                company’s current stage of evolution. Accordingly, the financial
                statements have been restated to reflect a full reservation of deferred
                tax assets with a corresponding adjustment to income tax benefit
                shown in
                the statement of operations.




The
                  effect of the restatements on the December 31, 2003 consolidated
                  statement
                  of operations is as follows
  As
                  Previously
              
              Effect
                  of
              
              AsReported
              
              Restatement
              
              RestatedConsulting
                  Expense
              
              $
              4,123,278
              
              
              ($2,043,278
              )
              $
              2,080,000Deferred
                  Tax Benefit
              
              $
              940,000
              
              
              ($940,000
              )
              $
              0Net
                  Loss
              
              
              ($3,705,019
              )
              $
              1,103,278
              
              
              ($2,601,741
              )Net
                  Loss per share
              
              
              ($0.027
              )
              $
              0.008
              
              
              ($0.019
              )




*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.







F-10
 Table
          of Contents




GOLDSPRING,
      INC. NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 Years
        Ended December 31, 2004 and 2003


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




*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, notes payable amounts approximate
      fair value at December 31, 2004.




*Credit
      Risk*




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




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




In
      August
      2001, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 144 “Accounting for the Impairment
      or Disposal of Long-Lived Assets,” which supersedes both SFAS No. 121,
“Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
      to
      Be Disposed Of” and the accounting and reporting provisions of Accounting
      Practice Bulletin (“APB”) Opinion No. 30, “Reporting the Results of Operations —
      Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
      Unusual and Infrequently Occurring Events and Transactions,” for the disposal of
      a segment of a business (as previously defined in that opinion).




This
      statement establishes the accounting model for long-lived assets to be disposed
      of by sale and applies to all long-lived assets, including discontinued
      operations. This statement requires those long-lived assets be measured at
      the
      lower of carrying amount or fair value less cost to sell, whether reported
      in
      continuing operations or discontinued operations. Therefore, discontinued
      operations will no longer be measured at net realizable value or include amounts
      for operating losses that have not yet occurred.




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.




*Derivatives*




We
      may
      use derivative financial instruments as part of an overall risk-management
      strategy to hedge our exposure to changing metals prices. We recognize
      derivatives as assets or liabilities based on a fair value measurement. Gains
      or
      losses resulting from changes in the fair value of derivatives in each period
      are accounted for either in current earnings or other comprehensive income
      depending on the use of the derivatives and whether they qualify for hedge
      accounting. The key criterion for hedge accounting is that the hedging
      relationship must be highly effective in achieving offsetting changes in the
      fair value or cash flows of the hedging instruments and the hedged items. At
      December 31, 2004, we had no outstanding derivative instruments.




*Inventories*




We
      state
      inventories at the lower of average cost or net realizable value. At December
      31, 2004, our inventories consisted of $239,944 of doré and bullion in our
      accounts at refineries and $48,744 of supplies and reagents compared to $0
      of
      doré and $0 of supplies at December 31, 2003. We were unable to estimate our
      in-process inventories at December 31, 2004, as our gold production processes
      are still in their inception stage, and we do not yet have sufficient data
      available to accurately calculate in-process inventory. We value inventories
      at
      the lower of full cost of production or net realizable value based on current
      metals prices. We determine net realizable value by estimating value based
      on
      current metals prices, less cost to convert stockpiled and in-process
      inventories to finished products.







F-11
 Table
          of Contents




GOLDSPRING,
      INC. NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 Years
        Ended December 31, 2004 and 2003


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




*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 that usually occurs within 24 days of
      delivery. If we have reason to believe that the final settlement will materially
      affect our recognition of revenue because of a difference between the refiner’s
      assay of precious metals contained in the dore and ours, we establish a reserve
      against the sale.




*Stock
      Issued For Services*




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




*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 Financial
      Accounting Standards Board (FASB) No. 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets.” Where information and conditions suggest
      impairment, we write down these properties to net recoverable amount, based
      on
      estimated future cash flows. Our estimate of gold price, mineralized materials,
      operating capital, and reclamation costs are subject to risks and uncertainties
      affecting the recoverability of our investment in property, plant, and
      equipment. Although we have made our best estimate of these factors based on
      current conditions, it is possible that changes could occur in the near term
      that could adversely affect our estimate of net cash flows expected to be
      generated from our operating properties and the need for possible asset
      impairment write-downs.




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




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




*Reclamation
      Liabilities and Asset Retirement Obligations*




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




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




F-12
 Table
          of Contents




**GOLDSPRING,
      INC.**


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


Years
      Ended December 31, 2004 and 2003






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




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




*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, 2004 and 2003, we had net losses for which the affect of common
      stock equivalents would be anti-dilutive, accordingly only basic loss per share
      is presented.




*Recent
      Authoritative Pronouncements*




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




In
      December 2004, the FASB issued SFAS 153, “Exchanges of Nonmonetary Assets, an
      amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions” (“SFAS
      153”). The amendments made by SFAS 153 are based on the principle that exchanges
      of nonmonetary assets should be based on the fair value of the assets exchanged.
      Further, the amendments eliminate the narrow exception for nonmonetary exchanges
      of similar productive assets and replace it with a general exception for
      exchanges of nonmonetary assets that do not have commercial substance. The
      statement is effective for nonmonetary asset exchanges occurring in fiscal
      periods beginning after June 15, 2005 with earlier adoption permitted. The
      provisions of this statement must be applied prospectively. Our adoption of
      SFAS
      153 is not expected to have a material impact on our results of operations,
      financial position, or cash flows.




*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.




F-13
 Table
          of Contents




**GOLDSPRING,
      INC.** NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 Years
        Ended December 31, 2004 and 2003


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




*Income
      Taxes*




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




**Note
      2 — Mineral Properties**




At
      December 31, 2004 and December 31, 2003, our mineral properties consisted of
      the
      following:




MINERAL
                PROPERTIES:
            
            Dec.
                31, 2004
            
            Dec.
                31, 2003Placer Gold Properties
            
            $
            100,000
            
            
            100,000Big Mike Copper Property
            
            
            119,138
            
            
            119,138Plum Gold Properties (1)
            
            
            1,025,699
            
            
            1,025,699Water rights
            
            
            90,000
            
            
            90,000Less
                Accumulated Depreciation and Amortization
            
            
            --
            
            
            --Balance
                at 12/31/04
            
            $
            1,334,837
            
            
            1,334,837


*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.




*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.




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.




F-14
 Table
          of Contents





GOLDSPRING,
      INC. NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 Years
        Ended December 31, 2004 and 2003







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




At
      December 31, 2004 and December 31, 2003, plant, property and equipment consisted
      of the following (See Note 1):




At
                Dec. 31, 2004
            
            At
                Dec. 31, 2003Plant,
                Property and Equipment at Plum Mine location
            
            $
            1,364,789
            
            $
            611,411Equipment,
                Corporate
            
            
            14,825
            
            
            4,500Less
                Accumulated Depreciation
            
            
            (219,834
            )
            
            (1,118
            )Balance
                at 12/31/04
            
            $
            1,159,780
            
            
            614,793





Included
      in plant, property and equipment at our Plum Mine location at December 31,
      2004,
      is equipment under capital lease of $168,202. Future minimum lease payments
      for
      the related obligation under capital lease are $38,986 for 2005, $32,422 for
      2006 and 2007, and $38,889 for 2008. We recorded depreciation expense on
      equipment under capital lease totaling $17,380 during the year ended December
      31, 2004.




**Note
      4 — 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 $553,000, of which $377,000 was in the form of a cash deposit
      and
      the balance was secured from a surety agent.




At
      December 31, 2003, we were not subject to reclamation or closure liabilities
      and
      therefore had not accrued any amounts related thereto. During the third quarter
      of 2004, we assessed future closure costs at our Plum Mine properties in
      connection with an approved reclamation plan submitted to the Nevada Division
      of
      Environmental Protection. Accordingly, we recognized a reclamation liability
      based upon the undiscounted future cash flows estimated to be incurred in
      fulfilling our reclamation plan’s obligations.




**Note
      5 — Note Payable — Shareholder**




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. At December 31, 2004 and December 31, 2003, our balance owing was
      as
      follows:




Dec.
                31, 2004
            
            Dec.
                31, 2003Balance
            
            $
            600,000
            
            
            -0-Less
                current portion
            
            
            (400,000
            )
            
            -0-Non-current
                portion
            
            $
            200,000
            
            
            -0-







F-15
 Table
          of Contents




**GOLDSPRING,
      INC.**


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


Years
      Ended December 31, 2004 and 2003






**Note
      6 — Convertible Notes Payable**




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 8 and 11).




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. Accordingly, at December 31, 2004 and
      December 31, 2003, we classified the entire amount outstanding as
      follows:




Dec.
                31, 2004
            
            Dec.
                31, 2003Convertible
                Notes Payable-Current
            
            $
            11,100,649
            
            
            -0-Convertible
                Notes Payable-Non-current
            
            
            -0-
            
            
            -0-Total
            
            $
            11,100,649
            
            
            -0-





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. Our
      Consolidated Statements of Changes in Stockholders’ Deficiency for the years
      ended December 31, 2004 and 2003 do not reflect the issuance of the conversion
      shares until 2005.




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,
      one note holder elected to demand payment of $6,854,005 pursuant to the
      mandatory redemption payment provisions of the subscription agreement and
      forfeit his right to receive the shares in favor of the payment. (See Note
      13).




Holders
      wishing to convert approximately $480,000 of convertible notes did not elect
      to
      demand payment pursuant to the mandatory redemption payment provisions of the
      subscription agreement. In March of 2005, we issued approximately 4.2 million
      shares (converted at approximately $0.11 per share) of our common stock to
      these
      converting note holders.




At
      December 31, 2004, we had accrued $304,644 in liquidated damages relating to
      our
      failure to deliver the shares to converting note holders.




F-16
 Table
          of Contents




**GOLDSPRING,
      INC.** NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 Years
        Ended December 31, 2004 and 2003


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




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, 2004 and December 31, 2003, we had the following
      amounts due under the financings as follows:




Dec.
                31, 2004
            
            Dec.
                31, 2003Other
                Long-term Debt-Current
            
            $
            8,501
            
            
            -0-Other
                Long-term Debt -Non-current
            
            
            43,858
            
            
            -0-Total
            
            $
            52,359
            
            
            -0-





Principal
      payments on other long-term debt for the next five years are as
      follows:


2005
            
            $
            9,3022006
            
            
            9,9642007
            
            
            10,6762008
            
            
            11,4412009
            
            
            10,9762010
                and thereafter
            
            
            0





**Note
      8 — Commitments and Contingencies**




Our
      March
      2004 private placement, as restructured in November 2004, is subject to
      Non-Registration Events Provisions (“Non-Registration Provisions”) for the
      investors’ common stock that may be converted from convertible notes principal
      and interest and the exercise of common stock purchase warrants (see Notes
      7 and
      12). The Non-Registration Provisions generally require us to file and cause
      to
      become effective a registration statement with the Securities and Exchange
      Commission so that investors may sell their shares of common stock without
      restriction. To date, we have not been able to do so. Our November 2004
      subscription agreement required us to file a registration statement with the
      Securities and Exchange Commission no later than December 30, 2004 and to cause
      the registration statement to be declared effective no later than February
      14,
      2005. As discussed above, our former Chief Executive Officer withdrew our
      pending registration statement and did not submit a new registration statement.
      His failure to submit the registration statement to the SEC by December 30,
      2004
      triggered liquidated damages to accrue under the November 2004 subscription
      agreement. Pursuant to the terms of the Subscription Agreement, liquidated
      damages accrue at a rate of percent (2%) of the principal amount of the
      Debenture for each thirty day period or part thereof for not having our
      Registration Statement declared effective. Furthermore, the damages may be
      paid
      in cash or in unrestricted common stock. If paid in stock, we are required
      to
      pay 200% of the cash penalty. Because we do not have the cash or free-trading
      stock to pay the liquidated damages, we reached a settlement agreement with
      the
      investors to pay the liquidated damages in restricted common stock valued at
      $0.03 per share. The total liquidated damages accrued between December 30,
      2004
      and April 27, 2005 was approximately $ 1,776,000. Pursuant to this settlement
      agreement, we issued approximately 59 million shares of restricted common stock
      in April 2005.




During
      the first quarter of 2005, we incurred approximately $1.9 million of liquidated
      damages and other expenses related to our former Chief Executive Officer’s
      decision to withdraw the SEC registration statement and his failure to deliver
      common shares pursuant to the November 2004 restructuring agreement. We filed
      the SB-2 registration statement in April of 2005 and have delivered the shares.
      We are now in the process of trying to get the registration statement declared
      effective by the SEC. Until the registration statement is declared effective,
      we
      continue to incur liquidated damages under the November 30, 2004 Subscription
      Agreement (See Recent Financing Events and Restructuring for additional
      information). Pursuant to the terms of the Subscription Agreement, the damages
      may be paid in cash or in unrestricted common stock. If paid in stock, we are
      required to pay 200% of the cash penalty. Because we do not have the cash or
      free-trading stock to pay the liquidated damages, we have reached a settlement
      agreement with the investors to pay the liquidated damages in restricted common
      stock valued at $0.03 per share. The total liquidated damages accrued between
      April 28, 2005 and July 26, 2005, was approximately $ 1.0 million. Pursuant
      to
      this settlement agreement, we will be issuing approximately 40 million shares
      of
      restricted common stock in the third quarter 2005.




F-17
 Table
          of Contents




**GOLDSPRING,
      INC.**


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


Years
      Ended December 31, 2004 and 2003






We
      recorded liquidated damages and other related expenses due to investors of
      our
      March 2004 offering and subsequent November 30, 2004 restructuring at December
      31, 2003, December 31, 2004, first quarter 2005 and second quarter 2005 as
      follows:




Liquidated
                damages relating to:
            
            2003
            
            2004
            
            Q1
                2005
            
            Q2
                2005March
                30, 2004 Non-Registration Provisions
            
            $
            -0-
            
            
            1,100,651
            
            
            --
            
            
            --November
                30, 2004 Non-Registration Provisions
            
            
            -0-
            
            
            222,013
            
            
            1,776,104
            
            
            985,835Failure
                to timely deliver shares upon notice of converting note
                holders
            
            
            -0-
            
            
            304,644
            
            
            98,529
            
            
            --$
            -0-
            
            
            1,627,308
            
            
            1,874,633
            
            
            985,835


In
      connection with our settlement of liquidated damages, we have agreed to continue
      to pursue registration of securities with our investors and may be subject
      to
      additional liquidated damages if we are unable to file or make effective a
      registration statement in accordance with the terms of the settlement (See
      Note
      13).




**Note
      9 — Income Taxes**




We
      did
      not provide any current or deferred US federal or state income tax provision
      or
      benefit through the years ended December 31, 2004 and 2003, because we have
      experienced operating losses since our inception. We have provided a full
      valuation allowance on the deferred tax asset, consisting primarily of a net
      operating loss, because of the uncertainty regarding its being realizable.
      ..




At
      December 31, 2004 and 2003, we had a net operating loss carry forwards of
      approximately $4.7 million and $9.8 million, respectively. Utilization of our
      net operating losses, which begin to expire in year 2024, 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. Due to the change in the
      nature of our operations and the expected likelihood that the net operating
      loss
      carry forwards may be utilized, we have elected to recognize a deferred tax
      benefit offset by an equal valuation allowance of approximately $3.4 million
      and
      $1.9 million, respectively, for the years ended December 31, 2004 and 2003,
      respectively.




**Note
      10 - Related Party Transactions**




In
      addition to the related party transactions discussed in Notes 1 and 10, we
      had
      the following transactions with related parties:




On
      November 9, 2004, we filed a lawsuit in Maricopa County (Arizona) Superior
      Court
      against Stephen B. Parent, our former CEO and one of our directors. The
      complaint alleges that the director misrepresented the value of certain placer
      mining claims that his company sold to us in 2003 in exchange for approximately
      99,000,000 shares of our stock; that his company no longer had good title to
      the
      claims when they were sold to us; and that the director incurred $307,190 in
      accountable expenses. We have asked, and given the director the opportunity,
      to
      provide appropriate documentation for any portion of the $307,190 that he
      believes to be legitimate business expenses. The $307,190 includes debit card
      withdrawals, credit card charges using the company’s accounts, a retainer to the
      director’s personal attorney and two laptop computers that the director has not
      returned to the company. As of April 14, 2005, we have received documentation
      from the director and are in the process of reviewing the material to evaluate
      whether the documentation is sufficient to support the expenses as legitimate
      business expenses. We are seeking the return of the portion of the funds that
      cannot be documented as legitimate business expenses and a return of the
      approximately 45 million shares of our common stock that the director received
      in 2003 in exchange for the mining claims.




F-18
 Table
          of Contents




**GOLDSPRING,
      INC.**


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


Years
      Ended December 31, 2004 and 2003






As
      of
      December 31, 2004, the outcome of the litigation was uncertain. We have recorded
      a receivable from the director in the amount of $307,190. Due to uncertainties
      regarding collectability, we have fully reserved the amount of $307,190. We
      have
      not adjusted any accrual for a gain contingency regarding the potential return
      of the director’s shares of our common stock.




**Note
      11 - Liquidated Damages**




At
      December 31, 2004, we had recorded liquidated damages expenses due to investors
      of our March 2004 offering and subsequent November 30, 2004 restructuring as
      follows:




Liquidated
                damages relating to:
            
            2004
            
            2003March
                30, 2004 Non-Registration Provisions
            
            $
            1,100,651
            
            
            -0-November
                30, 2004 Non-Registration Provisions
            
            
            222,013
            
            
            -0-Failure
                to timely deliver shares upon notice of converting note
                holders
            
            
            304,644
            
            
            -0-$
            1,627,308
            
            
            -0-





**Note
      12 — Stockholders’ Equity**




*Retirement
      of Common Stock*




Before
      we
      became GoldSpring, Inc., our Company, then known as Startcall, planned on
      operating as an Application Service Provider, or ASP, and offering real-time
      interaction technology as an outsource service. In December 2002 management
      entered into a Stock Purchase Agreement and Share Exchange with Web Intelligence
      Technology ApS and ARN Invest ApS (both Denmark Corporations) in consideration
      for the issuance of 79,500,000 shares of Startcall to ARN. The Company
      subsequently filed a Certificate of Amendment in the State of Florida changing
      its name to Visator, Inc. However, in February 2003 the parties to this
      agreement entered into a termination agreement and mutual release in which
      the
      parties agreed to terminate and deem null and void the Stock Purchase Agreement
      and Share Exchange. Pursuant to this agreement, ARN Invest returned the
      79,500,000 shares of stock in consideration for the payment of $20,000 by the
      Company to Web Intelligence. The Company’s Management, upon termination of this
      agreement, determined that it was in the best interest of the shareholders
      to
      seek other business opportunities for the Company.




*Cancellation
      of Shareholder Debt:*




In
      March
      2003, in consideration for the issuance of 1,198,726 restricted shares of common
      stock, certain shareholders of the Company canceled all of the debt and
      promissory notes and accrued interest owed to them by the Company. At December
      31, 2002, these shares were recorded in stockholders equity as shares issued
      at
      an aggregate amount of $203,897.




*Common
      Stock*




In
      March
      2003, we amended our articles of incorporation, to increase the authorized
      number of shares of common stock to 500,000,000.




*Common
      Stock issued for Consulting Services*




In
      March
      2003, prior to the Ecovery transaction, we entered into three consulting
      agreements under which we issued an aggregate of 24,000,000 shares of common
      stock, with an aggregate offering price of $2,080,000 (fair market value at
      the
      time of the contracts) in exchange for consulting services. Such consulting
      services were expensed during 2003 (See Note 1).




In
      2003,
      we issued 89,000 shares of common stock valued at $.17 per share, with an
      aggregate price of $15,130 for consulting services. Also in 2003, we issued
      200,000 shares of common stock for geological services provided by a director
      of
      our company.




F-19
 Table
          of Contents




**GOLDSPRING,
      INC.**


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


Years
      Ended December 31, 2004 and 2003






*Common
      Stock issued in Connection with Ecovery Transaction*




In
      June
      2003, in connection with the Ecovery transaction, we issued 90,000,000 shares
      of
      common stock, valued at $119,138, to the 128 shareholders of Ecovery, Inc.
      in
      consideration for the acquisition of mining assets owned by Ecovery. This
      valuation represents Ecovery’s book value of the assets acquired, less the
      $100,000 cash paid to Ecovery. In this transaction, we acquired the Gold Canyon
      and Spring Valley gold placer claims in Lyon County, Nevada and the Big Mike
      lode and placer copper claims in Pershing County, Nevada.




*Recapitalization:*




As
      of
      June 30, 2003, the Company had disposed of all of its operating assets and
      was
      in the process of settling all of its outstanding liabilities and seeking a
      merger partner. Accordingly, the Company changed its business focus. In
      connection with our acquisition of assets from Ecovery, Inc. described above,
      we
      restated the balance sheet to reflect a recapitalization and the prior retained
      deficit was eliminated by charging paid-in capital. In effect, this gives the
      balance sheet a “fresh-start.” Beginning July 1, 2003 and continuing forward, we
      have credited net income and charged net losses to retained
      earnings.




*Forward
      Stock Split*




In
      September 2003, the Board of Directors approved a 10-for-11 forward split of
      our
      outstanding common stock. As a result of the stock split on September 15, 2003,
      15,627,654 shares were issued, resulting in an increase of our outstanding
      share
      balance as of September 15, 2003 from 156,276,346 shares of common stock to
      171,904,000 shares of common stock.




*Common
      Stock issued for Plant, Equipment and Mineral Interests*




In
      2003,
      we issued 800,000 shares of our common stock valued at $.125 per share for
      a
      deposit on equipment to be purchased. We issued an additional 90,000,000 shares
      in connection with the Ecovery transaction and another 1,500,000 shares for
      the
      acquisition of the Plum Mining Company, LLC and the associated water
      rights.




*Common
      Stock issued for Cash*




In
      September 2003, we issued 36,000,000 shares of common stock at a price of
      $0.0496 per share, for an aggregate offering of $1,785,008. In addition, we
      issued 1,000,000 of our shares of common stock for $0.125 per share or
      $125,000.




*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. 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
      have
      agreed to file a registration statement to cover the resale of shares of common
      stock issuable upon conversion of the notes and issuable upon exercise of the
      warrants.




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.






F-20
 Table
          of Contents




GOLDSPRING,
      INC.


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


Years
      Ended December 31, 2004 and 2003






*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 Issued to Related Party for Services*




During
      2004, we issued 50,000 shares of our restricted common stock to a director
      in
      exchange for services. The value of the common stock issued approximated the
      expense of the services we recognized.




*Common
      Stock Issued for Cash*




During
      2004, we issued 22,182,462 shares of our common stock for cash totaling
      $9,428,781, net of direct issuance costs.




*Common
      Stock Purchased*




During
      2004, we purchased 2,000,000 shares of our common stock for $150,000 and
      cancelled the shares.




*Common
      Stock Retired to Treasury*




During
      2004, we purchased 100,000 shares of our common stock for $75,000 and returned
      them to the treasury.




**Note
      13 - Subsequent Events**




**Settlement
      of Mandatory Redemption Payment Payable**




During
      December 2004, we received notice from a holder of approximately
      $3.8 million of convertible notes of their intention to convert into
      shares
      of our common stock. We did not issue or deliver the common stock within the
      period required in the subscription agreement and as a result, one note holder
      elected to demand payment pursuant to the mandatory redemption payment
      provisions of the subscription agreement. On March 31, 2005, we entered into
      a
      Settlement Agreement (“Settlement”) with the holder of the $6,854,005 liability
      and agreed to convert the liability into six Convertible Debentures (“the
      Debentures”). The Debentures are subject to various covenants and conditions,
      including, but not limited to anti-dilution rights and protective rights.




*Secured
      Convertible Debentures*




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:




*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.






F-21
 Table
          of Contents




GOLDSPRING,
      INC.


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


Years
      Ended December 31, 2004 and 2003






*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 a shareholder (See
      Note 5) 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.







F-22