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CORRESP
1
filename1.htm

    Unassociated Document

    March 18,
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 February 26, 2009

                File
      No. 000-32429

      Dear Ms.
Davis:

    We are in receipt of your letter to us,
dated February 26, 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 Letters dated November 21, 2008 and
February 9, 2009.  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

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

    Comment
#1:

    We
note from your response to prior comment number three that the “Other-embedded
derivatives” line item, which you intended to re-title “Discount on convertible
notes payable” “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.”  Based on this explanation and further clarification provided
in response to prior comment number eight, it is unclear to us why the fair
value of the warrants and embedded conversion features were recorded “offset by
an equivalent note discount asset.”  In this regard, the separately
recorded warrant liability and embedded conversion feature liability under EITF
00-19 are measured at fair value, with subsequent changes in fair value reported
in earnings.  To help us better understand your accounting, please
provide us with a sample of a journal voucher entry you recorded upon receipt of
each issuance of a convertible note during 2006.  In addition, please
contact us at your earliest convenience to further discuss your
responses.

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

          www.goldspring.us

    RESPONSE to Comment
#1

    We
apologize for our lack of clarity in our explanations.  As you
requested, we are providing the following sample journal entries to assist
you.

    Issuance:

                                                Cash

                                                $300,000

                                              Secured Notes
      Payable

                                              $300,000

                                              Discount on Convertible
      Notes Payable
                                              $233,957

                                              Derivative
      Liability

                                              $233,957

      Period Amortization of
Discount on Convertible Notes Payable:

                                                        Interest
      Expense

                                                        $10,689

                                                      Discount on Convertible
      Notes Payable

                                                      $10,689

    Period Adjustment to Fair
Value of Derivative Liability:

                                                      Derivative Liability

                                                      $3,226

                                                    Other Income -
      Derivatives

                                                    $3,226

    We
understand that EITF 00-19 paragraph 7 states, “The initial balance sheet
classification of the contracts addressed in this Issue generally is based on
the concept that contracts that require net-cash settlement are assets or
liabilities and contracts that require settlement in shares are equity
instruments.  If the contract provides the company with a choice of
net-cash settlement or settlement in `shares, the Model assumes settlement in
shares.”  Since our contract provides us with the choice of
settlement, the EITF would suggest that the balance sheet classification for our
derivatives should be as an equity settlement.

    However,
we have presented the derivatives as liabilities because, as we tried to explain
in our response to comment #8 on February 9, 2009, we noted that EITF 00-19
paragraph 19 provides that, “since the maximum shares issued are not capped, the
Company may not have enough authorized shares to permit a settlement in shares
and may need to seek board approval for additional authorized
shares.  Accordingly, since the share settlement may not be in the
Company’s control and because of this potential lack of control, we classified
the fair value of the warrants as a liability rather than equity.”

    As a
result of the foregoing, we have presented the accounting for our derivatives as
liabilities as presented in the sample journal entries
above.  However, in order to have a more conforming presentation, we
will modify our reporting of these notes to offset the Secured Notes Payable
with the Discount on Convertible Notes, thereby showing the Secured Notes
Payable net of the associated discount on the liability side of our balance
sheet.

        2

    Comment
#2:

    We further note, with respect to the
'Discount on convertible notes payable' line item, your response to prior
comment number eight, under the heading 'Amortization of Note: Discount.' Please
clarify for us the different components that make up this line item. In this
regard, it appears this line item includes i) the fair value of the warrants and
embedded conversion feature, and ii) the discount attributable to the
convertible notes. Our confusion stems from our understanding that a note
discount represents the difference between the net proceeds, after expense,
received upon issuance of debt and the amount repayable at its maturity. Please
advise.

    RESPONSE to Comment
#2

    Again, we
apologize for our lack of clarity.  Our previous response (Feb 9,
2009) to your comment #8 under the caption “Amortization of Note Discount” was
attempting to explain the ongoing operation of the sample journal entries listed
above in RESPONSE to Comment #1.

    The
sample entry in RESPONSE to Comment #1 above labeled “Issuance” indicates that
the discount originates as a result of the determination of the fair value of
the derivative at issuance.  As previously discussed, because we
determined that the derivative should be reported as a liability, the offset to
recording the fair value of the derivative was recorded as a discount adjustment
to the effective interest rate of the note.  This Note Discount is
then amortized over the life of the note as additional interest
expense.  Please refer to the sample entry in RESPONSE to Comment #1
above labeled “Period Amortization of Discount on Convertible Notes Payable
“.  This unamortized discount is the composition of the balance sheet
item to be labeled “Discounts on Convertible Notes Payable” formerly titled
“Other – embedded derivatives”.  Based on the revised presentation of
Secured Notes Payable net of Discount on Convertible Notes, the Notes will now
accrete up to their face value rather than amortizing the
discount.  There is no impact on the Statement of Operations as both
presentations result in the same additional interest charge regardless of the
balance sheet classification.

    Comment
#3:

    We
also note, with regard to the note discount, your response to prior comment
number 12 where you state your belief that suspending the amortization of note
discount and reversing the 2007 amortization of note discount as a result of
failing to make scheduled payments was appropriate "because the impact of these
entries, recorded or not, were; not material to the financial statements." You
further state in your response that '''given the lack of materiality and since
it was both impractical and costly to attempt to anticipate the ultimate outcome
of the negotiations, we concluded that suspension resulted in the fairest
presentation of our financial position-" Please provide us with the amounts you
determined were not material to your financial statements. We may have further
comment.

    RESPONSE to Comment
#3

    Our
original reported balance for “Discount on Convertible Notes Payable” at
December 31, 2007 did not reflect a $378,639 potential adjustment that we deemed
was immaterial for the qualitative reasons previously
discussed.    Although we believe that this amount was not
material, we also believe in maintaining the relevancy of our reported financial
information in addition to improving its overall usability for our
readers.  Accordingly, we propose to resolve this matter in our 2008
10-K to be filed imminently.

        3

    Reclamation Liabilities and
Asset Retirement Obligations, page F-11

    Comment
#4:

    We
have considered your response to prior comment six and note the
following:

    i)
you did not initially record your 2004 asset retirement obligation in accordance
with the initial recognition and measurement provisions of FAS 143. However, you
represent to the initial amount of the asset retirement obligation reported in
2004, which equaled the value of the cash bond provided to the Nevada Division
of Environmental Protection, did not materially differ from the asset retirement
obligation calculated in accordance with FAS 143; and

    ii)
in periods subsequent to initial measurement, you did not recognize
period-to-period changes in the liability for your asset retirement obligation
resulting from (a) the passage of time and (b) revisions to either the timing or
the amount of the original estimate of undiscounted cash flows. However, you
believe there is no material variance between the amount of the asset retirement
obligation as at December 31,2007, totaling $553,1 90, and the amount that you
indicate should have been reported based 'upon initial 2004 calculations,
totaling $606,018. Your assessment is the same for the period ended September
30, 2008.

    Based
solely on the materiality assessments you provide in your response, please
confirm, if true, that you will comply with the subsequent recognition and
measurement provisions of paragraphs 13 through 15 of FAS 143 going forward, to
the extent material to your financial statements, or otherwise
advise.

    RESPONSE to Comment
#4

    We agree
to comply with the subsequent recognition and measurement provisions of
paragraphs 13 through 15 of SFAS 143 going forward.

    Note 13 – Subsequent Events,
pages F-26

    Comment
#5:

    We
note from your response to prior comment number eight that "On February 20,
2008, as a result of the Company completing other financing arrangements, a
"favored nations" clause was triggered in the convertible notes, which modified
the notes conversion feature and effectively established a fixed conversion rate
of $0.01." We further note in your response that the "guidance : provides that
the modified conversion feature be revalued to its fair value and the change
reported as debt extinguishment gain or loss," Based on the modifications as
described and your response to prior comment number four that the
''modification, among other things, establishes a fixed conversion price for the
shares thereby removing the derivative feature," please expand your disclosure
as appropriate to explain whether or not you wil1 continue to report a
conversion feature liability in accordance with EITF 00-19. Please provide us
with a sample of the revised disclosure you intend to include in your 2008
filings surrounding the accounting for the modification of terms of your
convertible notes, including the balance sheet and income statement presentation
surrounding the extinguishment

        4

    RESPONSE to Comment
#5

    In
response to your comment, we propose to revise our note disclosure in our filing
for 2008 to read as follows:

    Convertible
Notes Payable – 2006 & 2007

    The
convertible notes payable as of December 31, 2008 are as follows:

                                              Issued date

                                              Face amount

                                              Winfield
      Debenture Payable

                                              5/15/2006

                                            $
                                            300,000

                                              Winfield
      Debenture Payable

                                              6/21/2006

                                            300,000

                                              Winfield
      Debenture Payable

                                              8/23/2006

                                            300,000

                                              Longview
      Debenture Payable

                                              8/24/2006

                                            300,000

                                              Winfield
      Debenture Payable

                                              12/12/2006

                                            100,000

                                              Winfield/Longview
      Debenture Payable

                                            Q1
      2007

                                            331,120

                                              Winfield/Longview
      Debenture Payable

                                            Q2
      2007

                                            288,880

                                              Winfield/Longview
      Debenture Payable

                                              4/1/2007

                                            250,000

                                              Total

                                            $
                                            2,170,000

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

    On
February 20, 2008, as a result of the Company completing other financing
arrangements, a “favored nations”