SecProbe.io

CORRESP
1
filename1.htm

    Unassociated Document

    February
9, 2009

    VIA EDGAR
AND TELEFAX

    (202)
772-9210

    Jill S.
Davis

    Branch
Chief

    United
States Securities and Exchange Commission

    Washington,
D.C. 20549

    Mailstop
7010

              Re:

              Goldspring,
      Inc.

    Form 10-KSBfor Fiscal Year Ended
December 31, 2007, As Amended

    Filed December 10, 2008

    Form 10-Q Fiscal Quarter Ended
September 30, 2008

    Filed November 14, 2008

    Response Letter Dated November 21,
2008

    File No. 000-32429

    Dear Ms.
Davis:

    We are in receipt of your letter to us,
dated January 5, 2009 regarding the Form 10-KSB/A we filed on December 10, 2008
(the “10-KSB/A”), Form 10-Q for Fiscal Quarter Ended September 30 2008 we filed
on November 14, 2008 and our Response Letter dated November 21,
2008.  We thank you for taking the time to review the filing and
providing your comments.  Your input is invaluable to us in our
efforts to fully comply with SEC regulations and also to improve the quality of
our disclosure documents.

    In order to fully respond to your
letter, we have repeated your comments (bolded) below followed by our
responses.

    Form 10-KSB/A-1 for the
Fiscal Year Ended December 31, 2007

    Executive Compensation, page
28

    Stock Options, page
29

    Comment
#1:

    We
note from your response to prior comment number six that you granted stock
options in 2007.  However, you indicate in your response to number
seven that the disclosures under paragraphs 64 and A240 and A241 of FAS 123R
were inapplicable to the Form 10-KSB for the fiscal year ended December 31,
2007.  Please further support your conclusion that such disclosures
were unnecessary given your grant of stock options during 2007.

          GoldSpring,
Inc P.O. Box 1118 ~ Virginia City, NV 89440 ~ T: 775.847.5272 F:
775.847.4762

          www.goldspring.us

    Our
response to prior comment number seven was referring to Mr. Faber’s options
which were not granted until January 2008.  As indicated in our
response to prior comment number six, Mr. Golden was granted options in
2007.  To provide appropriate disclosure concerning Mr. Golden’s
options, we are proposing to add the following footnote to our financial
statements and insert a reference to that footnote in the “Stock Options”
section on page 37

    Stock
Options

    On
December 13, 2007, the Company granted a stock option to Jim Golden, it’s COO,
as stipulated in his Executive Employment Agreement, which became effective on
that same date.   The Agreement carries a three year
term.  Pursuant to the Agreement, Mr. Golden was granted 10,000,000
stock options currently at a strike price of $0.00963, which was equal to the
current market price of its common shares on that date of the
grant.   The options may be exercised up to 10 years provided Mr.
Golden remains our employee, otherwise the agreement requires the stock options
to be exercised or canceled upon separation.

    The
Agreement also provides for the issuance of additional grants of 10,000,000
stock options for each additional 100,000 ounces of gold resources, up to a
maximum of 90,000,000 total additional stock options.  Due to the
uncertainty involved in locating additional gold resources, we have determined
that the additional 90,000,000 stock options are not earned and should not be
included in our financial reporting until such time as the uncertainty is
resolved or the determination of gold resources can be reasonably
estimated.

     We
determined the value of the 10,000,000 stock options granted by utilizing the
Black-Scholes formula.  Our calculations were based on a three year
life (life of the employment agreement), a volatility of 225% and a risk free
interest rate of 3.07%.  Our calculations indicate that the value of
the options granted were immaterial.   At December 31, 2007, the
Company did not have any other options outstanding.

    Evaluation of Disclosure
Controls and Procedures, page 34

    Comment
#2:

    We
note from your disclosure under this heading, which states “Based on the
evaluation and the identification of the significant deficiencies in our
internal control over financial reporting described below, which we do not
believe to be material weakness, our Chief Executive Officer and our Chief
Financial Officer concluded that as of December 31, 2007, our disclosure
controls and procedures were effective.”  Please explain in greater
detail how you were able to determine that your disclosure controls and
procedures were effective as of December 31, 2007 even though you specifically
reference significant deficiencies in your internal control over financial when
including on the effectiveness of your disclosure controls and
procedures.  Please also contact us to discuss.

    We have
reviewed the language in Item 8A (T) and have concluded that the items discussed
were indeed not significant deficiencies, so our internal controls are fully
effective.  Therefore, we revised Item 8A (T) as follows:

    ITEM
8A (T). CONTROLS AND PROCEDURES.

    Evaluation
of Disclosure Controls and Procedures

    As of the
end of the period covered by this Annual Report on Form 10-KSB, management
performed, with the participation of our Chief Executive Officer and Chief
Financial Officer, an evaluation of the effectiveness of our disclosure controls
and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.
Our disclosure controls and procedures are designed to ensure that information
required to be disclosed in the report we file or submit under the Exchange Act
is recorded, processed, summarized, and reported within the time periods
specified in the SEC’s forms, and that such information is accumulated and
communicated to our management including our Chief Executive Officer and our
Chief Financial Officer, to allow timely decisions regarding required
disclosures. Based on the evaluation, our Chief Executive Officer and our Chief
Financial Officer concluded that, as of December 31, 2007, our disclosure
controls and procedures were effective.

        2

    Management's
Annual Report on Internal Control Over Financial Reporting.

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

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

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

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

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

    Management's
assessment of the effectiveness of our internal control over financial reporting
is for the year ended December 31, 2007. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control - Integrated
Framework and Internal
Control over Financial Reporting-Guidance for Smaller Public
Companies.

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

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

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

    We have
identified conditions as of December 31, 2007 that we believe are not material
weaknesses in internal controls that include: 1) a lack of segregation of duties
in accounting and financial reporting activities; and 2) the lack of a
sufficient number of qualified accounting personnel. We have taken corrective
measures to remedy these deficiencies. These measures include our consolidation
of the corporate office with the office at the Plum Mine operation. This
consolidation has provided the corporate office with additional accounting
personnel. We believe that the presence of additional qualified accounting
personnel will allow us to effectively correct the lack of segregation of duties
in accounting and financial reporting activities.

    Our
former Chief Financial Officer became our Chief Executive Officer in September
2004. Our Company has not hired another individual to act as Chief Financial
Officer. We believe the absence of a full-time Chief Financial Officer or Chief
Accounting Officer has resulted in a significant deficiency with respect to the
lack of qualified accounting personnel. We have been able to mitigate this
deficiency by engaging outside consultants to assist the Company in its
accounting activities, but believe that the only effective long-term solution to
our accounting needs is to hire a qualified CFO. Due to our budgetary
constraints and the small size of our company we are uncertain as to when we
will be able to accomplish this. We estimate the annual cost of these remedial
actions which include compensation, fees, additional insurance, board meetings,
travel and record keeping costs to be approximately $60,000.

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

    There
have been no changes during the quarter ended December 31, 2007 in our Company's
internal control over financial reporting identified in connection with the
evaluation required by Exchange Act Rules 13a-15(d) and 15d-15(d) that have
material affected, or are reasonably likely to materially affect, our internal
controls over our financial reporting.

    Consolidated Balance Sheet,
pages F-3 and F-4

    Comment
#3:

    We
note your inclusion of footnote 14 in response to prior comment number
eight.  However, based upon review of footnote 14, it remains unclear
what the line item “Other – embedded derivatives” represents.  In this
regard, you disclose that this balance represents the net debt discount
resulting from the original determination of the fair value of the conversion
feature (embedded derivatives) included in the debt, net of periodic
amortizations of interest expense.”  Please explain to us in greater
detail how you determine the balance of “Other – embedded derivatives,” and
specifically cite the accounting guidance you reference in determining the
appropriate accounting for this line item and the “Derivative liability” line
item.

    In order
to improve the clarity of our balance sheet and footnotes, we will change the
line item description “Other-embedded derivatives” to “Discount on convertible
notes payable”.  Correspondingly, we will modify footnote 14 to read
as follows:

    “Discounts
on convertible notes payable” totaling $906,989 at December 31, 2007 represents
the discount on convertible note proceeds associated with the fair value of the
embedded derivative features consisting of warrants and conversion rights
bifurcated from the host instrument, determined in accordance with the guidance
provided in SFAS 133 and EITF 00-19.

    “Derivative
liability” totaling $776,385 at December 31, 2007 represents the fair value of
the embedded derivative features consisting of warrants and conversion rights
bifurcated from the host instrument, determined in accordance with the guidance
provided in SFAS 133 and EITF 00-19.

        4

    Consolidated Statements of
Operations, pages F-5

    Comment
#4:

    We
have considered your response to prior comment number nine wherein you indicate
you did not report the change in fair value of your derivative assets and
liabilities, as prescribed by FAS 133, because you were in negotiations that you
believed would ultimately change the nature and character of the derivatives you
had recorded on your consolidated balance sheets.  We further note
your conclusion that “to record any changes in fair value in 2007 would not be
meaningful when considering the upcoming changes and when compared to our $17.2
million stockholders’ deficit at December 31, 2007 and our $4.1 million net loss
for the year ended.”  Based on your response, it appears you believe
that to record the change in fair value of your derivative assets and
liabilities would have been immaterial to your financial statements taken as a
whole.  If this is true, please provide a detailed materiality
analysis under SAB 99 your conclusion, or otherwise advise.

    In
assessing the materiality of changes in our derivative assets and liabilities,
in accordance with the guidance offered in SAB 99, we held to the overriding
premise as stated CON 2 that

    “The
omission or misstatement of an item in a financial report is material if, in the
light of surrounding circumstances, the magnitude of the item is such that it is
probable that the judgment of a reasonable person relying on the report would
have been changed or influenced by the inclusion or correction of the
item.”

    Our
assessment of materiality encompasses the following surrounding
circumstances.

    First and
foremost we are a test mine that is engaged in gold exploration.  All
investors in our company, both current and future, are fully aware that their
investment is at risk.  In our view, their decision to invest in our
company is primarily driven by our potential to locate and commercialize a gold
mining operation.  Cash burn and continued access to liquidity may
also be primary concerns, but the impact of a non-cash accounting entries on
reported operations is not.

    Second,
but no less important, is the fact that we have a material uncertainty regarding
our ability to continue as a going concern.  All investors in our
company, both current and future, are fully aware that we have sustained
operating losses and express no assurance that circumstances will change in the
foreseeable future.  We have reported operating losses in 2007 in
excess of $4 million annually and we have an accumulated a deficit to date of
approximately $32 million as of December 31, 2007.

    Thirdly,
the terms and conditions in the instruments that give rise to the embedded
conversion feature originally were modified in 2008.  The
modification, among other things, establishes a fixed conversion price for the
shares thereby removing the derivative feature.  We are currently in
our 2008 aud