SEC Company Response from Comstock Inc. (LODE) (CIK 0001120970) (LODE) — Mar 27, 2009
Comstock Inc. (LODE) (CIK 0001120970)
Date: March 27, 2009 · CIK: 0001120970 · Accession: 0001144204-09-016596
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-32429
Referenced dates: February 26, 2009
Letter
VIA EDGAR AND TELEFAX United States Securities and Exchange Commission Form 10-Q Fiscal Quarter Ended September 30, 2008 Filed November 14, 2008 Response Letter Dated February 26, File No. 000-32429
Dear Ms. Davis:
Pursuant to your request, find below draft disclosure for your review and comment for the following items: 1.) Restatement of 2007 Consolidated Financial Statements 2.). ITEM 9A(T). CONTROLS AND PROCEDURES, and 3.) Share Based Compensation. In addition, find below our response to our conversation regarding Item 4.02(a). Once again, we thank you for taking time out of your busy schedule yesterday to assist us in improving our financial reporting. 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.
1. RESTATEMENT OF 2007 CONSOLIDATED FINANCIAL STATEMENTS
After further review, we have decided to expense $378,639 included in the balance for “Other – embedded derivatives” at December 31, 2007. Although we believe this amount to be immaterial based on our interpretation of SAB 99, we are making the adjustment to maintain the relevance of our reported financial information and to improving its overall usability for our readers. In addition, the balance after the restatement of $528,350 in “Other – embedded derivatives” has been classified as an adjustment to “Convertible Notes” for comparative reasons.
The effect of the restatement on results of operations and financial position as of and for the year ended December 31, 2007 are as follows:
As previously
reported
Restated
Total revenue
$ 395,541
$ 395,541
Loss from Operations
(1,188,901 )
(1,188,901 )
Interest expense
(2,868,455 )
(3,247,094 )
Net Income
(4,057,356 )
(4,435,995 )
Other – embedded derivative
$ 906,989
$ -
Total assets
3,675,448
2,768,459
Convertible debt
9,568,239
9,039,889
Total Liabilities
20,876462
20,348,112
Stockholders’ equity
(17,201,014 )
(17,579,653 )
2. ITEM 9A(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-K, 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 and the identification of the significant deficiencies in our internal control over financial reporting described below, which we do not believe to be material weaknesses, our Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31, 2007, our disclosure controls and procedures were effective.
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, 2008. 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, 2008. 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, 2008, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
There have been no changes during the quarter ended December 31, 2008 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.
3. SHARE BASED COMPENSATION
Effective 2006, the Company adopted a stock option and incentive plan (“2006 Plan”), which provided for a maximum of 800,000,000 shares of common stock to be issued. Under the plan, stock options generally vest over three and expire in ten years from the date of the grant. Options are granted to employees and non-employee directors at exercise prices equal to the fair market value at the date of the grant.
As of January 01, 2008, Goldspring Inc had 3,378,948,371 outstanding common shares and 10,000,000 outstanding Standard Employee Options and Warrants to acquire company shares, of which 10,000,000 of these derivatives were vested and exercisable. During the period ended December 31, 2008, 10,000,000 of these derivatives were exercised. Standard Employee Options and Warrants outstanding at December 31, 2008 were 182,000,000. No Standard Employee Options and Warrants expired during the period ended December 31, 2008. Outstanding common shares totaled 3,380,948,371 at December 31, 2008.
The Company recognizes stock based compensation expense over the requisite service period of the individual grant, which generally equals the vesting period. The plan entitles the holder to shares of common stock when the award vests. Awards generally vest ratably over three years. The fair value of the award is based upon the market price of the underlying common stock as of the date of the grant and is amortized over the applicable vesting period using the straight-line method. The Company uses newly issued shares of common stock to satisfy option exercises and stock awards.
The fair value of each grant was estimated at the date of the grant using the Black-Scholes option pricing model. Black-Scholes utilizes assumptions related to volatility, the risk free interest rate, the dividend yield (which is assumed to be zero, as the Company has not paid, nor anticipates paying any, cash dividends and employee exercise behavior. Expected volatilities utilized in the model are based mainly on the historical volatility of the Company’s stock price and other factors.
The following is a summary of the assumptions used and the weighted average grant-date fair value of the stock options granted during the fiscal years ended December 31, 2008 and 2007.
Expected volatility
199%
206%
Expected term (years)
5.14
5.70
Risk free rate
3.09%
3.67%
Dividend Yield
0.0%
0.0%
Weighted average grant date fair value
$0.01
$0.01
Compensation expense for stock options is recognized using the fair value when the stock options are granted and is amortized over the options' vesting period. During the 12 month ended December 31, 2008, $2,305,102 was recognized as compensation expense in the consolidated statements of loss with a corresponding increase in contributed surplus. As at December 31, 2008, 182,000,000 stock options were exercisable and the weighted average years to expiration were 9.3 years.
A summary of the option activity under the Company’s share base compensation plan for the fiscal years ended December 31, 2008 and 2007 is as follows:
Options
Weighted
Average
Exercise Price
Options
Weighted
Average
Exercise Price
Balance, Beginning of year
10,000,000
$ 0.00963
Granted
182,000,000
$ 0.011
10,000,000
$ 0.00963
Exercised
(10,000,000 )
$ 0.00963
Forfeited
-
Balance, end of year
182,000,000
$ 0.011
10,000,000
$ 0.00963
Exercisable at December 31,
170,000,000
$ 0.0104
10,000,000
$ 0.00963
The following table sets forth stock options outstanding at December 31, 2008.
Total Outstanding Options:
182,000,000
Total "in-the-money" Outstanding Options:
170,000,000
Average Price of Outstanding Options:
$0.0110
Average Price of "in-the-money" Outstanding Options:
$0.0104
Total Vested Options:
170,000,000
Total "in-the-money" Vested Options:
170,000,000
Average Price of Vested Options:
$0.0104
Average Price of "in-the-money" Vested Options:
$0.0104
Total Unvested Options:
12,000,000
Total "in-the-money" UN-Vested Options:
Options Breakdown by Range as at 12/31/2008
Outstanding
Vested
Range
Outstanding Options
Remaining Contractual Life
WA Outstanding Strike Price
Vested Options
Remaining Vested Contractual Life
WA Vested Strike Price
$0.000 to $0.040
182,000,000
9.3819
$0.0110
170,000,000
9.3555
$0.0104
$0.050 to $0.090
0.0000
$0.0000
0.0000
$0.0000
$0.100 to $0.140
0.0000
$0.0000
0.0000
$0.0000
$0.150 to $0.190
0.0000
$0.0000
0.0000
$0.0000
$0.200 to $0.250
0.0000
$0.0000
0.0000
$0.0000
$0.000 to $0.250
182,000,000
9.3819
$0.0110
170,000,000
9.3555
$0.0104
The total options outstanding at December 31, 2008 had a weighted average remaining life of 9.3 years and an average intrinsic value of $618,000 based upon the closing price of the Company’s common stock of March 20, 2009. The total options exercisable at December 31, 2008 had a weighted average remaining life of 9.3 years and an average intrinsic value of $618,000 based upon the closing price of the Company’s common stock of March 20, 2009. The options exercised in 2008 were “cashless options”. Because the Company maintained a full valuation allowance on our
Show Raw Text
CORRESP
1
filename1.htm
Unassociated Document
March 27,
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:
Pursuant to your request, find below
draft disclosure for your review and comment for the following items: 1.)
Restatement of 2007 Consolidated Financial Statements 2.). ITEM 9A(T). CONTROLS
AND PROCEDURES, and 3.) Share Based Compensation. In addition,
find below our response to our conversation regarding Item
4.02(a). Once again, we thank you for taking time out of your busy
schedule yesterday to assist us in improving our financial
reporting. 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.
1. RESTATEMENT
OF 2007 CONSOLIDATED FINANCIAL STATEMENTS
After
further review, we have decided to expense $378,639 included in the balance for
“Other – embedded derivatives” at December 31, 2007. Although we
believe this amount to be immaterial based on our interpretation of SAB 99, we
are making the adjustment to maintain the relevance of our reported financial
information and to improving its overall usability for our
readers. In addition, the balance after the restatement of
$528,350 in “Other – embedded derivatives” has been classified as an adjustment
to “Convertible Notes” for comparative reasons.
The
effect of the restatement on results of operations and financial position as of
and for the year ended December 31, 2007 are as follows:
As
previously
reported
Restated
Total
revenue
$
395,541
$
395,541
Loss
from Operations
(1,188,901
)
(1,188,901
)
Interest
expense
(2,868,455
)
(3,247,094
)
Net
Income
(4,057,356
)
(4,435,995
)
Other
– embedded derivative
$
906,989
$
-
Total
assets
3,675,448
2,768,459
Convertible
debt
9,568,239
9,039,889
Total
Liabilities
20,876462
20,348,112
Stockholders’
equity
(17,201,014
)
(17,579,653
)
2. ITEM
9A(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-K, 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 and the identification of the significant
deficiencies in our internal control over financial reporting described below,
which we do not believe to be material weaknesses, our Chief Executive Officer
and our Chief Financial Officer concluded that, as of December 31, 2007, our
disclosure controls and procedures were effective.
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, 2008. 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, 2008. 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.
2
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, 2008, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.
There
have been no changes during the quarter ended December 31, 2008 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.
3. SHARE
BASED COMPENSATION
Effective
2006, the Company adopted a stock option and incentive plan (“2006 Plan”), which
provided for a maximum of 800,000,000 shares of common stock to be
issued. Under the plan, stock options generally vest over three and
expire in ten years from the date of the grant. Options are granted
to employees and non-employee directors at exercise prices equal to the fair
market value at the date of the grant.
As of
January 01, 2008, Goldspring Inc had 3,378,948,371 outstanding common shares and
10,000,000 outstanding Standard Employee Options and Warrants to acquire company
shares, of which 10,000,000 of these derivatives were vested and exercisable.
During the period ended December 31, 2008, 10,000,000 of these derivatives were
exercised. Standard Employee Options and Warrants outstanding at December 31,
2008 were 182,000,000. No Standard Employee Options and Warrants expired during
the period ended December 31, 2008. Outstanding common shares totaled
3,380,948,371 at December 31, 2008.
The
Company recognizes stock based compensation expense over the requisite service
period of the individual grant, which generally equals the vesting
period. The plan entitles the holder to shares of common stock when
the award vests. Awards generally vest ratably over three
years. The fair value of the award is based upon the market price of
the underlying common stock as of the date of the grant and is amortized over
the applicable vesting period using the straight-line method. The
Company uses newly issued shares of common stock to satisfy option exercises and
stock awards.
The fair
value of each grant was estimated at the date of the grant using the
Black-Scholes option pricing model. Black-Scholes utilizes
assumptions related to volatility, the risk free interest rate, the dividend
yield (which is assumed to be zero, as the Company has not paid, nor anticipates
paying any, cash dividends and employee exercise behavior. Expected
volatilities utilized in the model are based mainly on the historical volatility
of the Company’s stock price and other factors.
The
following is a summary of the assumptions used and the weighted average
grant-date fair value of the stock options granted during the fiscal years ended
December 31, 2008 and 2007.
2008
2007
Expected
volatility
199%
206%
Expected
term (years)
5.14
5.70
Risk
free rate
3.09%
3.67%
Dividend
Yield
0.0%
0.0%
Weighted
average grant date fair value
$0.01
$0.01
Compensation
expense for stock options is recognized using the fair value when the stock
options are granted and is amortized over the options' vesting period. During
the 12 month ended December 31, 2008, $2,305,102 was recognized as compensation
expense in the consolidated statements of loss with a corresponding increase in
contributed surplus. As at December 31, 2008, 182,000,000 stock options were
exercisable and the weighted average years to expiration were 9.3
years.
3
A summary
of the option activity under the Company’s share base compensation plan for the
fiscal years ended December 31, 2008 and 2007 is as follows:
2008
Options
2008
Weighted
Average
Exercise
Price
2007
Options
2007
Weighted
Average
Exercise
Price
Balance,
Beginning of year
10,000,000
$
0.00963
0
Granted
182,000,000
$
0.011
10,000,000
$
0.00963
Exercised
(10,000,000
)
$
0.00963
0
Forfeited
-
0
Balance,
end of year
182,000,000
$
0.011
10,000,000
$
0.00963
Exercisable
at December 31,
170,000,000
$
0.0104
10,000,000
$
0.00963
The
following table sets forth stock options outstanding at December 31,
2008.
Total
Outstanding Options:
182,000,000
Total
"in-the-money" Outstanding Options:
170,000,000
Average
Price of Outstanding Options:
$0.0110
Average
Price of "in-the-money" Outstanding Options:
$0.0104
Total
Vested Options:
170,000,000
Total
"in-the-money" Vested Options:
170,000,000
Average
Price of Vested Options:
$0.0104
Average
Price of "in-the-money" Vested Options:
$0.0104
Total
Unvested Options:
12,000,000
Total
"in-the-money" UN-Vested Options:
0
Options
Breakdown by Range as at 12/31/2008
Outstanding
Vested
Range
Outstanding
Options
Remaining
Contractual Life
WA
Outstanding Strike Price
Vested
Options
Remaining
Vested Contractual Life
WA
Vested Strike Price
$0.000
to $0.040
182,000,000
9.3819
$0.0110
170,000,000
9.3555
$0.0104
$0.050
to $0.090
0
0.0000
$0.0000
0
0.0000
$0.0000
$0.100
to $0.140
0
0.0000
$0.0000
0
0.0000
$0.0000
$0.150
to $0.190
0
0.0000
$0.0000
0
0.0000
$0.0000
$0.200
to $0.250
0
0.0000
$0.0000
0
0.0000
$0.0000
$0.000
to $0.250
182,000,000
9.3819
$0.0110
170,000,000
9.3555
$0.0104
The total
options outstanding at December 31, 2008 had a weighted average remaining life
of 9.3 years and an average intrinsic value of $618,000 based upon the closing
price of the Company’s common stock of March 20, 2009. The total
options exercisable at December 31, 2008 had a weighted average remaining life
of 9.3 years and an average intrinsic value of $618,000 based upon the closing
price of the Company’s common stock of March 20, 2009. The options
exercised in 2008 were “cashless options”. Because the Company
maintained a full valuation allowance on our