COMSTOCK MINING INC.
10-Ks and 10-Qs
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SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
x
ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the
fiscal year ended December 31, 2009
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 registrant as specified in its charter)
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Nevada
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1081
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65-0955118
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(State
or other jurisdiction of
incorporation
or organization)
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(Primary
Standard Industrial
Classification
Code Number)
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(I.R.S.
Employer Identification
No.)
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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)
Securities
Registered pursuant to Section 12(b) of the Act: None
Securities
Registered pursuant to Section 12(g) of the Act: Common Stock, par value
$.000666 per share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes
¨
No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes
¨
No
x
Indicate
by check mark whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes
x
No
¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
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Large
accelerated filer
¨
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Accelerated
filer
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Non-accelerated
filer
¨
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Smaller
reporting company
x
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
¨
No
x
The
aggregate market value of the 3,119,251,058 shares of voting stock held by
non-affiliates of the registrant based on the closing price on the Over the
Counter Bulletin Board on June 30, 2009 was $37,400,000.
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.
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Shares
Outstanding
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Title of Class
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April 9, 2010
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Common
Stock
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3,782,450,927
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DOCUMENTS
INCORPORATED BY REFERENCE
None
TABLE OF
CONTENTS
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PART
I
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ITEM
1
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BUSINESS
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3
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ITEM
1A
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RISK
FACTORS
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5
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ITEM
2
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PROPERTIES
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11
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ITEM
3
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LEGAL
PROCEEDINGS
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38
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ITEM
4
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SUBMISSION
OF MATTERS TO VOTE OF SECURITY HOLDERS
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38
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PART
II
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ITEM
5
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MARKET
FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
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38
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ITEM
7
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MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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39
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ITEM
8
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FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
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F-1
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ITEM
9
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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47
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ITEM
9A(T)
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CONTROLS
AND PROCEDURES
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47
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ITEM
9B
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OTHER
INFORMATION
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48
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PART
III
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ITEM
10
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DIRECTORS
, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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48
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ITEM
11
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EXECUTIVE
COMPENSATION
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51
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ITEM
12
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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54
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ITEM
13
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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56
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ITEM
14
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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56
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PART
IV
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ITEM
15
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EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
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56
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SIGNATURES
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57
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2
Statement
Regarding Forward-Looking Statements
The
statements contained in this report on Form 10-K 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 1A, “Description of Business
- Risk Factors.”
Overview
GoldSpring,
Inc. is a North American precious metals mining company, headquartered in
Nevada, with significant land holdings in the Comstock Gold-Silver District of
Nevada. GoldSpring was incorporated in Florida in 1999 and redomiciled in Nevada
in 2008
.
We have located a deposit of
mineralized material in our Comstock holdings, at the Hartford Complex, and have
secured several of the key mining permits required to resume mining. We
completed the first phase of an exploration drilling program in the first
quarter of 2009, and then analyzed the results to define the extent of the
Hartford Deposit, assess other key exploration targets on our large land package
and push the project toward production. The high-grade nature of the Hartford
deposit and its potentially favorable configuration has potentially positioned
us to become a profitable gold and silver producer in the future.
3
We
operated the Billie the Kid pit as a test mine from 2004 to 2006. 16,175 ounces
of gold and 68,514 ounces of silver were recovered from the mined material,
using our heap leach processing facility in American Flat.
In early
2007, we temporarily closed our test mining operation. This shutdown allowed us
to focus on the geology to gain a comprehensive understanding of the
mineralization at the Hartford complex at our Comstock project. We then
commenced a drilling program in December 2007 to further delineate the
mineralized material and to determine the most effective process for mining
operations. Our goal has been to define and map the geology and to prepare
geologic cross sections to be utilized in mine planning and as a result, to be
able to build a new mine model using geostatistics and extensive drill hole
data. There is also ongoing metallurgic testing to attempt to maximize recovery
of the high grade fraction of the material and to determine optimum size to
continue heap leaching.
The
exploration and developmental drilling program commenced at the Comstock project
in mid December 2007 and continued through February 2009. During this program,
we drilled 182 holes at the Lucerne / Hartford Complex at our Comstock Project.
Once the drilling was complete, a mine model was built to evaluate the economic
viability of the deposit. We wrote an in-house report to classify the
mineralized material, based on the Society of Mining Engineers 2007 guidelines.
Based on those favorable results, we made the decision to complete the necessary
studies and return the mine to production.
We are
actively seeking financing to reopen the mine, further expansion of our Comstock
Lode Project and to meet our working capital needs. If we are unable to secure
such financing, we may be unable to continue as a going concern.
The
following table sets forth certain information regarding our current
projects.
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Name
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Location
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Type
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Comstock
Lode Gold and Silver Properties
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Storey
and Lyon Counties, Nevada
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Gold
and silver lode claims
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Spring
Valley and Gold Canyon (South Comstock)
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Lyon
County, Nevada
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Placer
and lode gold and silver claims
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Como
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Lyon
County, Nevada
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Gold
and silver lode claims
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Big
Mike
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Pershing
County, Nevada
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Copper
lode claims
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Our
Comstock Lode exploration project is located between Carson City and Virginia
City, Nevada, about 30 miles southeast of Reno, in an area known as American
Flat. Our Spring Valley and Gold Canyon claims are located in Lyon County,
Nevada, five miles south of our Comstock Lode project. Our Big Mike Copper
property is located approximately two hours east of Reno near Winnemucca,
Nevada.
Our
Comstock exploration activities include open pit gold and silver test mining. As
defined by SEC Industry Guide 7, we have not yet established any proven or
probable reserves at our Comstock Lode Project.. Therefore, all of our
activities are considered test mining and exploratory in nature.
We have
completed only initial exploratory activities on our Spring Valley and Gold
Canyon claims. We have not as yet explored or developed our Como claims, or Big
Mike properties. We have not established reserves on any of these properties.
Therefore, there can be no assurance that we will be able to produce sufficient
gold to cover our investment and operating costs, if any gold at
all.
Employees
We have
14 employees, including our executives, managers, administrative staff,
engineers, geologists, lab technicians, and process operators. We use
consultants with specific skills to assist with various aspects of our
operation, including planning, scheduling, project evaluation, due diligence and
acquisition initiatives.
4
Principal
Markets
We plan
to sell our production on world markets at prices established by market forces.
These prices are not within our control.
Government
Regulation
Mining
operations and exploration activities are subject to various national, state,
and local laws and regulations in the United States, which govern prospecting,
development, mining, production, exports, taxes, labor standards, occupational
health, waste disposal, protection of the environment, mine safety, hazardous
substances, and other matters. We have obtained or have pending applications for
those licenses, permits, and other authorizations currently required to conduct
our exploration and other programs. We believe that we are in compliance in all
material respects with applicable mining, health, safety, and environmental
statutes and regulations.
Reclamation
We are
generally required to mitigate long-term environmental impacts by stabilizing,
contouring, sloping, and vegetating 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 our Comstock project, we posted a surety bond in the amount
of $1,106,882, of which $776,768 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.
Financing
Events
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·
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In 2009, we financed operations
through issuance of promissory notes and sales of our common stock, all in
private placement transactions, which provided us with $3,647,500 in net
funding.
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·
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In November 2009, we sold a 0.29%
net smelter royalty on our Obester Property for $260,000 to Precious
Royalties, LLC. These funds were used to offset the purchase of the
Obester Property in December
2009.
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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 will require additional funds to pursue
our business. We may not be able to secure further financing in the future or if
we do, we may not be able to secure financing on favorable terms. 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.
5
If we are not able to obtain
financing, it is unlikely that we will be able to continue as a going
concern
.
If we are
unable to raise additional working capital through outside financing, it is
unlikely that the cash generated from our internal operations will suffice as a
primary source of the liquidity necessary for anticipated working capital
requirements, capital expenditure requirements and interest payments associated
with our lease obligations and indebtedness. There is no assurance that the
Company’s initiatives to improve its liquidity and financial position will be
successful. Accordingly, there is substantial risk that the Company will be
unable to continue as a going concern. In the event of insolvency, liquidation,
reorganization, dissolution or other winding up of the Company, the Company’s
creditors would be entitled to payment in full out of the Company’s assets
before stockholders would be entitled to any payment, and it is unlikely that
the value of such assets would exceed the claims on such assets.
We
have received a qualified report from our independent auditors
Our
independent auditors report on our financial statements indicates that our
recurring losses from operations and working capital deficit raise substantial
doubt about our ability to continue as a going concern
Relative
to our cash flows we have substantial indebtedness.
As of
December 31, 2009, we had current indebtedness of $16.1 million in addition to
$4.9 million of current accrued interest payable. For the fiscal year ended
December 31, 2009, we had a deficit of cash flows from operating activities of
$3.6 million. Our substantial indebtedness, and our ability to incur additional
indebtedness, may further negatively affect our cash flow and our ability to
operate our business and react to changes in the economy or our
industry.
Inability
to raise sufficient funds to increase growth
Our
recent financings have only provided capital to continue existing operations but
not to continue significant exploration and growth. Without the ability to
attract sufficient amounts of capital at any one time, it is unlikely that we
can achieve profitability in the foreseeable future, if ever, or to continue
long term operation of the Company.
We have invested capital in high-risk
mineral projects where we have not conducted sufficient exploration and
engineering studies
.
We have
invested capital and have otherwise been involved in various mineral properties
and projects in Nevada 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 or prudent considering our size. Our
mineral projects involve high risks because we have not invested sufficient 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 due to limited resources.
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.
6
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 is 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. If 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, if any,
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.
There can be no assurance that we will be successful in replacing any reserves
or mineralized material acquired or established in the future.
The
price of gold fluctuates on a regular basis and a downturn in price could
negatively impact our operations and cash flow.
Our
operations are significantly affected by changes in the market price of gold.
Gold prices can fluctuate widely and may be affected by numerous factors, such
as expectations for inflation, levels of interest rates, currency exchange
rates, central bank sales, forward selling or other hedging activities, demand
for precious metals, global or regional political and economic crises and
production costs in major gold-producing regions, such as South Africa and the
former Soviet Union. The aggregate effect of these factors, all of which are
beyond our control, is impossible for us to predict. The demand for and supply
of gold affect gold prices, but not necessarily in the same manner as supply and
demand affect the prices of other commodities. The supply of gold consists of a
combination of new mineral production and existing stocks of bullion and
fabricated gold held by governments, public and private financial institutions,
industrial organizations, and private individuals. As the amount produced in any
single year constitutes a small portion of the total potential supply of gold,
normal variations in current production do not have a significant impact on the
supply of gold or on its price. If gold prices decline substantially, it could
adversely affect the realizable value of our assets and potential future results
of operations and cash flow.
7
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.
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 anticipate expending sums for additional drilling and analysis
which may or may not 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.
8
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 the
United States generally, and Nevada specifically, 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 (BLM) 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 Nevada 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
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 will increase.
Our business depends on a limited
number of key personnel, the loss of whom could negatively affect us.
Each of
our officers and employees is important to our success. If any of them becomes
unable or unwilling to continue in their respective positions and we are unable
to find suitable replacements, our business and financial results could be
materially negatively affected.
If we fail to adequately manage our
growth, we may not be successful in growing our business and becoming
profitable
.
We plan
to expand our business and the number of employees over the next 12 months. In
particular, we intend to hire additional operational personnel. Our inability to
hire and retain additional qualified employees could have a negative impact on
our chances of success.
The issuance of securities by us may
not have complied with or violated federal and state securities laws and, as a
result, the holders of these shares and warrants may have rescission
rights.
Securities
issued by us may not have complied with applicable federal and state securities
laws, the result of which is that the holders of these securities may have
rescission rights that could require us to reacquire the
securities.
Outstanding
convertible securities and warrants may result in substantial
dilution.
At
December 31, 2009 we had outstanding 3, 662,067,844 shares of common stock. In
addition, we had outstanding convertible notes and related interest plus various
common stock purchase warrants. At December 31, 2009, these notes, related
interest and warrants were convertible into or exercisable for a total of
approximately 3.8 billion additional shares of our common stock, subject to
further anti-dilution provisions.
10
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 individually 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. The Financial Industry
Regulatory Authority (FINRA) 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 FINRA 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 FINRA 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.
Comstock
Lode Project
Location,
Access, and Title to the Property
We own or
lease the following mineral exploration projects: The Comstock gold and silver
exploration and test mining project, the Spring Valley and Gold Canyon placers
project, the Como mineral claims, and the Big Mike copper project.
Our
Comstock Lode Project is located in Storey and Lyon Counties, Nevada. The
property is physically situated roughly three (3) miles south of Virginia City,
Nevada. Paved state highways from Reno, Carson City, and Virginia City provide
access to the property.
11
The
Spring Valley and Gold Canyon project (South Comstock) is located in Lyon
County, Nevada, approximately 1.5 miles south of Silver City, Nevada. We have
performed geological reconnaissance and limited sampling on this property.
During 2009, six drill holes were drilled on the property.
The Como
mineral Claims are located in Lyon County, Nevada, approximately 15 miles east
of Carson City. We have performed geological reconnaissance on this property,
but have not drilled or collected any samples.
The Big
Mike copper project is located in Pershing County, Nevada, and has not been
explored or developed by us.
12
13
Comstock
Lode Project
Our
property rights to the mineral estate of the Comstock Lode Project consist of
several mineral leases, numerous unpatented mineral claims, and fee ownership of
real property.
Obester
Property Purchase (2009):
In 2009,
we secured long-term control of eleven patented mining claims in Storey and
Lyons Counties, Nevada, through a purchase agreement from the Obester Group.
This property includes five patented claims in the Lucerne / Billie the Kid
area, representing the focus of our recent drilling program. It also includes
six claims in the Occidental area, which provide a target for future
exploration. The purchase supersedes a mining lease with Claire Obester, dated
January 1, 1997, and a mining lease with Claire Obester, Jim Obester, Alan
Obester, and Julian Smith dated May 1, 2008.
The total
price to be paid to the Obester Group is $1,650,000. A down-payment of $250,000
was accepted, with the balance to be paid in quarterly payments of $250,000 with
an interest rate of 6%. These payments are current as of the date of this
report. The transaction is expected to close through escrow on or before April
15, 2010. Once the transaction is complete, the Obester Group will receive a Net
Smelter Royalty (NSR) of 1% of all future mineral production from the property,
which reduces the our royalty obligation by 80%.
The
purchase of this property was financed, in part, by an agreement to sell a NSR
on the property to Precious Royalties, LLC. Under the agreement, Precious
Royalties can earn up to a 5% NSR for a total price of $4,500,000. The agreement
calls for all funding to be received by March 31, 2010. During 2009, $260,000
has been funded under the agreement, which was used to make the down payment on
the property. As of December 31
st
, 2009,
the Precious Royalties NSR was 0.29%.
Donovan
Lease:
We have a
mineral exploration and mining lease agreement with the Donovan Silver Hills,
LLC dated September 1, 1999 covering seven patented claims and 13 unpatented
claims located in Storey and Lyon Counties. The lease remains in effect for as
long as exploration, development, mining, or processing operations are conducted
on a continuous basis, without a lapse of activity for more than 180 days. We
pay a royalty to the lessor amounting to the greater of $500 per month or a
royalty percentage of the Net Smelter Returns. The royalty percentage varies
based on the price of gold: 3% if gold is less than $400 per ounce, 4% if gold
is at least $400 per ounce but less than $500 per ounce, and 5% if gold is $500
or greater per ounce. We are also responsible for payment and filing of annual
maintenance fees, if any, and taxes for these claims.
Fred
Garrett Lease:
We
entered into a mineral exploration and mining lease agreement with the Fred
Garrett et al on April 1, 2008, covering one patented claim located in Storey,
Nevada. The lease remains in effect for as long as exploration, development,
mining, or processing operations are conducted on a continuous basis, without a
lapse of activity for more than 180 days. We pay a royalty to the lessor of $250
per month or a 3% Net Smelter Return, which ever is greater. We are also
responsible for payment and filing of annual maintenance fees, if any, and taxes
for these claims.
James
Obester Lease:
We have a
mineral exploration and mining lease agreement with James Obester dated August
1, 2008, covering ten unpatented claims located in Storey County. The lease
remains in effect for as long as exploration, development, mining, or processing
operations are conducted on a continuous basis, without a lapse of activity for
more than 180 days. We pay a royalty to the lessor amounting to $200 per month
for the first two years increasing to $300 a month for the next three years and
then increasing to $500 per month thereafter, in addition to a royalty
percentage of the Net Smelter Returns. The royalty percentage is a 2% NSR when
gold is $900 or less per ounce and 3% NSR when gold is greater than $900 per
ounce. We are also responsible for payment and filing of annual maintenance
fees, if any, and taxes for these claims.
14
DWC
Resources Letter of Intent:
On August
13, 2008, we entered into a binding letter of intent to purchase certain
property owned by DWC Resources, Inc. in Storey County, Nevada. The purchase
price is $7,500,000, but is subject to adjustment pursuant to the results of a
fairness opinion and/or appraisal to be obtained by us. The purchase price will
be paid through issuance of a $7,500,000 convertible promissory note which shall
bear interest at the rate of 9% per year with quarterly interest payments due
throughout the term of the note which is 5 years. The purchased assets include
patented and unpatented lode mining claims owned by DWC Resources, Inc. in the
Comstock Lode district. The letter of intent also provides for the payment of
royalties ranging from 2% - 6% of “net smelter returns” based upon the price of
gold per ounce and a 1% royalty to be paid to the party which sold the subject
property to DWC Resources in 2007. There is also a commitment by us to expend a
minimum of $250,000 per year on exploration for five years. During 2009, we
satisfied this annual obligation.
Sutro
Tunnel Sublease:
Simultaneously
with the DWC Resources Letter of intent, we entered into a binding letter of
intent to sublease the Sutro Tunnel Lease dated January 1, 2008 between Sutro
Tunnel Co. and John Winfield or his nominee. The purchase price for the sublease
is $2,000,000 (which is subject to adjustment upon receipt of a third party
fairness opinion/appraisal) payable pursuant to the issuance of a $2,000,000
convertible promissory note which shall bear interest at the rate of 9%per year
with quarterly interest payments due throughout the term of the note which is 5
years. The letter of intent also provides for the payment of royalties ranging
from 6% - 8% of “net smelter returns” based upon the price of gold per ounce and
a 1% royalty to be paid to Mr. Winfield if Mr. Winfield provides an acceptable
buyer of the Sutro property. We are also required to fulfill lessee’s
obligations under the Sutro Tunnel Lease with regard to payment of royalties and
exploration expenditures. During 2009, we satisfied this
obligation.
Railroad
& Gold Lease:
We
entered into a mineral exploration and mining lease agreement with the Railroad
and Gold, LLC on October 1, 2009 covering nine patented mining claims and
sixteen unpatented mining claims in Storey County. The lease also includes
rights for nine town lots and a rural parcel in American Flats. The lease is for
an initial term of 15 years, but remains in effect for as long as exploration,
development, mining, or processing operations are conducted on a continuous
basis. We made an initial payment of $25,000 for the lease. We will make annual
advance minimum royalty payments, starting with $30,000 on the first
anniversary, and increasing by $5,000 each year. We pay a royalty to the lessor
of a 4% Net Smelter Return, which will be reduced by the sum of previously-paid
advance minimum royalties. We are also responsible for payment and filing of
annual maintenance fees, if any, and taxes for these claims.
GoldSpring
Unpatented Claims:
In
addition to the mineral leases, we hold 179 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. In 2007, Mr.
Winfield’s affiliates, Intergroup Corporation, Santa Fe Financial and Portsmouth
Square, purchased the note from the W. Hughes Brockbank Living Trust. As
of December 31, 2009, the outstanding balance of the note was
$250,000.
15
Table
of all Comstock Lode Project Owned or Controlled Patented Claims:
|
Claim
Number
|
Claim Name
|
Owner/Lessor
|
Position
|
Acres
|
||||
|
800-001-009
|
Green
|
GSPG
(Obester)
|
Fee
|
11.0
|
||||
|
800-001-11
|
Echo
Parcel
|
GSPG
(Obester)
|
Fee
|
7.0
|
||||
|
800-001-12
|
Lucerne
|
GSPG
(Obester)
|
Fee
|
8.0
|
||||
|
800-001-08
|
St.
Louis Parcels
|
GSPG
(Obester)
|
Fee
|
7.0
|
||||
|
800-002-71
|
Billie
the Kid
|
GSPG
(Obester)
|
Fee
|
18.0
|
||||
|
800-001-010
|
North
Occidental
|
GSPG
(Obester)
|
Fee
|
7.2
|
||||
|
800-001-025
|
East
North Occidental
|
GSPG
(Obester)
|
Fee
|
12.2
|
||||
|
800-001-021
|
Dean
Parcel
|
GSPG
(Obester)
|
Fee
|
11.0
|
||||
|
800-001-024
|
South
Occidental
|
GSPG
(Obester)
|
Fee
|
20.6
|
||||
|
800-001-068
|
Occidental
|
GSPG
(Obester)
|
Fee
|
7.8
|
||||
|
800-001-026
|
Edwards
|
GSPG
(Obester)
|
Fee
|
17.8
|
||||
|
USS
84
|
Tarto
Lode
|
Donovan
|
Lease
|
1.0
|
||||
|
USS
86
|
Hartford
|
Donovan
|
Lease
|
14.0
|
||||
|
USS
1723
|
Succor
Lode
|
Donovan
|
Lease
|
6.0
|
||||
|
USS
3760
|
Olympia
|
Donovan
|
Lease
|
6.0
|
||||
|
USS
4728
|
Hardluck
|
Donovan
|
Lease
|
6.0
|
||||
|
USS
4728
|
Friendship
|
Donovan
|
Lease
|
7.0
|
||||
|
USS
4728
|
Brown
Lode
|
Donovan
|
Lease
|
8.0
|
||||
|
USS
125
|
Niagra
|
Donovan
/ DWC
|
Lease
|
3.0
|
||||
|
USS
1066
|
S.
Comstock
|
Donovan
/ DWC
|
Lease
|
12.0
|
||||
|
38822
|
Bells
Hill
|
DWC
|
Lease
|
4.0
|
||||
|
33721
|
Black
Bird
|
DWC
|
Lease
|
11.0
|
||||
|
2438
|
Chonta
Lode
|
DWC
|
Lease
|
6.4
|
||||
|
6916
|
Cliffhouse
|
DWC
|
Lease
|
16.9
|
||||
|
3704
|
Corey
Jay Boer
|
DWC
|
Lease
|
7.4
|
||||
|
33733
|
East
Alamo Ledge
|
DWC
|
Lease
|
11.9
|
||||
|
USS 49A/B
|
Front
Lode A/B
|
DWC
|
Lease
|
10.4
|
||||
|
38822
|
German
|
DWC
|
Lease
|
3.6
|
||||
|
16755
|
Holman
|
DWC
|
Lease
|
8.8
|
||||
|
69
|
Justice
|
DWC
|
Lease
|
19.2
|
||||
|
785
|
Keystone
Comstock
|
DWC
|
Lease
|
12.1
|
||||
|
1436
|
Memphis
|
DWC
|
Lease
|
14.1
|
||||
|
39507
|
Overland
|
DWC
|
Lease
|
0.5
|
||||
|
38822
|
Sebastopol
|
DWC
|
Lease
|
0.8
|
||||
|
33722
|
South
Alamo
|
DWC
|
Lease
|
9.4
|
||||
|
39507
|
Wedge
|
DWC
|
Lease
|
1.2
|
||||
|
16696
|
White
Lode
|
DWC
|
Lease
|
11.8
|
||||
|
353
|
Woodville
|
DWC
|
Lease
|
5.2
|
||||
|
USS
114
|
Pride
of Washoe
|
Garrett
|
Lease
|
25.3
|
||||
|
USS
61
|
Chollar
Potosi (below Sutro)
|
RR
& Gold
|
Lease
|
35.2
|
||||
|
USS
178
|
Culver
|
RR
& Gold
|
Lease
|
13.8
|
||||
|
USS
142/179
|
Culver
Addition
|
RR
& Gold
|
Lease
|
10.6
|
16
|
Claim
Number
|
Claim Name
|
Owner/Lessor
|
Position
|
Acres
|
||||
|
USS
357
|
Frankel
|
RR
& Gold
|
Lease
|
5.5
|
||||
|
USS
126/107
|
Gibbs
|
RR
& Gold
|
Lease
|
10.4
|
||||
|
USS
39
|
Knickerbocker
(N half)
|
RR
& Gold
|
Lease
|
5.4
|
||||
|
USS
215
|
Rock
Island
|
RR
& Gold
|
Lease
|
20.3
|
||||
|
USS
63
|
Savage
(below Sutro)
|
RR
& Gold
|
Lease
|
19.4
|
||||
|
USS
64
|
Gould
& Curry
|
RR
&Gold / Sutro
|
Lease
|
25.3
|
||||
|
142
|
Alpha
|
Sutro
|
Lease
|
8.6
|
||||
|
USS
65
|
Alta
(Woodville)
|
Sutro
|
Lease
|
24.7
|
||||
|
128
|
Bacon
(USS 58)
|
Sutro
|
Lease
|
1.5
|
||||
|
129
|
Bacon
(USS 59)
|
Sutro
|
Lease
|
0.6
|
||||
|
Belcher
|
Sutro
|
Lease
|
||||||
|
130
|
Burke
& Hamilton
|
Sutro
|
Lease
|
1.3
|
||||
|
2611
|
Capitol
|
Sutro
|
Lease
|
9.2
|
||||
|
131
|
Challenge
|
Sutro
|
Lease
|
1.5
|
||||
|
1254
|
Comstock
Lode (Bullion)
|
Sutro
|
Lease
|
27.3
|
||||
|
68
|
Confidence
|
Sutro
|
Lease
|
4.0
|
||||
|
9920
|
Crown
Point
|
Sutro
|
Lease
|
3.3
|
||||
|
149
|
Empire
North
|
Sutro
|
Lease
|
1.8
|
||||
|
150
|
Empire
South
|
Sutro
|
Lease
|
0.7
|
||||
|
216
|
Exchequer
|
Sutro
|
Lease
|
10.0
|
||||
|
353
|
Granville
(Lady Washington)
|
Sutro
|
Lease
|
5.9
|
||||
|
USS
146
|
Grosh
|
Sutro
|
Lease
|
7.4
|
||||
|
USS
147
|
Grosh
|
Sutro
|
Lease
|
5.3
|
||||
|
3161
|
Grosh
Consolidated Mining
|
Sutro
|
Lease
|
15.5
|
||||
|
9919
|
Imperial
|
Sutro
|
Lease
|
2.6
|
||||
|
125
|
Joseph
Trench
|
Sutro
|
Lease
|
0.7
|
||||
|
USS
84
|
Julia
|
Sutro
|
Lease
|
9.1
|
||||
|
9921
|
Kentuck
|
Sutro
|
Lease
|
0.9
|
||||
|
9922
|
Kentuck
MG.
|
Sutro
|
Lease
|
2.7
|
||||
|
643
|
La
Cata
|
Sutro
|
Lease
|
13.8
|
||||
|
644
|
Sara
Ann
|
Sutro
|
Lease
|
13.8
|
||||
|
Seg.
Belcher
|
Sutro
|
Lease
|
||||||
|
USS
90
|
Ward
|
Sutro
|
Lease
|
7.1
|
||||
|
143
|
Wm
Sharon
|
Sutro
|
Lease
|
0.9
|
||||
|
9918
|
Yellow
Jacket
|
Sutro
|
Lease
|
7.7
|
17
Table
of all Comstock Lode Project Owned or Controlled Unpatented Claims:
|
Serial #
|
Claim
Name
|
Location
Date
|
Owner /
Lessor
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC416049
|
Big
Mike
|
04/07/1987
|
Donovan
|
Lode
|
Lease
|
BLM
|
20.0
|
|||||||
|
NMC416048
|
Cliff
House Fraction
|
04/07/1987
|
Donovan
|
Lode
|
Lease
|
BLM
|
4.0
|
|||||||
|
NMC416043
|
Echo
St. Louis Fraction
|
04/07/1987
|
Donovan
|
Lode
|
Lease
|
BLM
|
0.3
|
|||||||
|
NMC416041
|
Green
St. Louis Fraction
|
03/04/1987
|
Donovan
|
Lode
|
Lease
|
BLM
|
7.0
|
|||||||
|
NMC676492
|
Hartford
Lucerne Fraction
|
04/07/1987
|
Donovan
|
Lode
|
Lease
|
BLM
|
0.9
|
|||||||
|
NMC416040
|
Hartford
South Extension
|
04/07/1987
|
Donovan
|
Lode
|
Lease
|
BLM
|
3.0
|
|||||||
|
NMC416042
|
Hartford
St. Louis Fraction
|
04/07/1987
|
Donovan
|
Lode
|
Lease
|
BLM
|
6.5
|
|||||||
|
NMC416044
|
Justice
Lucerne Fraction
|
04/07/1987
|
Donovan
|
Lode
|
Lease
|
BLM
|
1.7
|
|||||||
|
NMC416046
|
Justice
Woodville Fraction
|
04/07/1987
|
Donovan
|
Lode
|
Lease
|
BLM
|
3.1
|
|||||||
|
NMC416047
|
New
Deal Fraction
|
04/07/1987
|
Donovan
|
Lode
|
Lease
|
BLM
|
12.0
|
|||||||
|
NMC416045
|
South
Comstock St. Louis
|
04/07/1987
|
Donovan
|
Lode
|
Lease
|
BLM
|
1.0
|
|||||||
|
NMC416033
|
Vindicator
#8
|
04/06/1987
|
Donovan
|
Lode
|
Lease
|
BLM
|
20.7
|
|||||||
|
NMC705983
|
Cook
& Grey
|
11/09/1953
|
DWC
|
Lode
|
Fee
|
BLM
|
1.8
|
|||||||
|
NMC116359
|
Cumberland
#2
|
08/19/1901
|
DWC
|
Lode
|
Fee
|
BLM
|
5.4
|
|||||||
|
NMC116360
|
Cumberland
#3
|
06/21/1902
|
DWC
|
Lode
|
Fee
|
BLM
|
1.0
|
|||||||
|
NMC116369
|
Cumberland
Frac
|
09/28/1931
|
DWC
|
Lode
|
Fee
|
BLM
|
1.5
|
|||||||
|
NMC116356
|
Flora
Temple
|
09/17/1957
|
DWC
|
Lode
|
Fee
|
BLM
|
0.2
|
|||||||
|
NMC705982
|
New
Flora Temple
|
08/09/1994
|
DWC
|
Lode
|
Fee
|
BLM
|
5.1
|
|||||||
|
NMC116358
|
Overland
|
4/30/1875
|
DWC
|
Lode
|
Fee
|
BLM
|
2.7
|
|||||||
|
NMC116362
|
Overlap
|
10/01/1921
|
DWC
|
Lode
|
Fee
|
BLM
|
8.5
|
|||||||
|
NMC116363
|
Overlap
#1
|
10/01/1921
|
DWC
|
Lode
|
Fee
|
BLM
|
1.3
|
|||||||
|
NMC555211
|
Overlap
#3
|
04/24/1989
|
DWC
|
Lode
|
Fee
|
BLM
|
5.9
|
|||||||
|
NMC116351
|
Windy
Fraction
|
11/09/1953
|
DWC
|
Lode
|
Fee
|
BLM
|
0.3
|
|||||||
|
NMC705983
|
Woodville
Extension
|
08/10/1994
|
DWC
|
Lode
|
Fee
|
BLM
|
10.3
|
|||||||
|
NMC275502
|
Alta
#5
|
07/22/1983
|
J.
Obester
|
Lode
|
Lease
|
BLM
|
20.7
|
18
|
Serial #
|
Claim
Name
|
Location
Date
|
Owner /
Lessor
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC275503
|
Alta
#6
|
07/22/1983
|
J.
Obester
|
Lode
|
Lease
|
BLM
|
20.7
|
|||||||
|
NMC275504
|
Alta
#7
|
07/22/1983
|
J.
Obester
|
Lode
|
Lease
|
BLM
|
20.7
|
|||||||
|
NMC275505
|
Alta
#8
|
07/22/1983
|
J.
Obester
|
Lode
|
Lease
|
BLM
|
12.7
|
|||||||
|
NMC275506
|
Alta
#9
|
07/22/1983
|
J.
Obester
|
Lode
|
Lease
|
BLM
|
20.7
|
|||||||
|
NMC275507
|
Alta
#10
|
07/22/1983
|
J.
Obester
|
Lode
|
Lease
|
BLM
|
20.7
|
|||||||
|
NMC276609
|
Alta
#12
|
07/22/1983
|
J.
Obester
|
Lode
|
Lease
|
BLM
|
12.1
|
|||||||
|
NMC300858
|
Brunswick
#1
|
12/24/1983
|
J.
Obester
|
Lode
|
Lease
|
BLM
|
20.7
|
|||||||
|
NMC300859
|
Brunswick
#2
|
12/24/1983
|
J.
Obester
|
Lode
|
Lease
|
BLM
|
20.7
|
|||||||
|
NMC300860
|
Brunswick
#4
|
12/24/1983
|
J.
Obester
|
Lode
|
Lease
|
BLM
|
20.7
|
|||||||
|
NMC705397
|
Alto
No. 9
|
09/23/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
10.7
|
|||||||
|
NMC705392
|
Angels
East Annex
|
07/22/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
7.4
|
|||||||
|
NMC705390
|
Angels
No. 1
|
07/21/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
14.6
|
|||||||
|
NMC705391
|
Angels
No. 2
|
09/22/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
20.7
|
|||||||
|
NMC705395
|
Hawk
|
09/26/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
12.9
|
|||||||
|
NMC705396
|
Hawk
Fraction
|
09/26/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
18.8
|
|||||||
|
NMC705400
|
Iona
|
09/27/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
12.6
|
|||||||
|
NMC705388
|
Latigo
|
09/27/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
18.7
|
|||||||
|
NMC705389
|
Latigo
2
|
09/27/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
22.4
|
|||||||
|
NMC705403
|
Maryland
Fraction
|
09/26/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
20.7
|
|||||||
|
NMC705393
|
Merrilite
|
09/23/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
15.6
|
|||||||
|
NMC705394
|
Merrilite
North Annex
|
07/22/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
15.7
|
|||||||
|
NMC705401
|
Oro
Plato
|
09/27/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
14.4
|
|||||||
|
NMC705402
|
Owl
|
09/26/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
5.9
|
|||||||
|
NMC705398
|
West
Nick
|
07/21/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
20.7
|
|||||||
|
NMC705399
|
West
Nick No. 1
|
09/26/1994
|
RR
& Gold
|
Lode
|
Lease
|
BLM
|
20.7
|
|||||||
|
NMC821729
|
Comstock
#1
|
10/16/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821730
|
Comstock
#2
|
10/16/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821731
|
Comstock
#3
|
10/16/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
19
|
Serial #
|
Claim
Name
|
Location
Date
|
Owner /
Lessor
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC821735
|
Comstock
#7
|
10/16/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821736
|
Comstock
#8
|
10/16/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821737
|
Comstock
#9
|
10/16/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821739
|
Comstock
#11
|
10/16/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821740
|
Comstock
#12
|
10/16/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.6
|
|||||||
|
NMC821741
|
Comstock
#13
|
12/01/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.6
|
|||||||
|
NMC821742
|
Comstock
#14
|
10/16/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821743
|
Comstock
#15
|
10/16/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821744
|
Comstock
#16
|
10/16/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821745
|
Comstock
#17
|
12/01/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821746
|
Comstock
#18
|
12/01/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
13.8
|
|||||||
|
NMC821492
|
Comstock
#115
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821493
|
Comstock
#116
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821494
|
Comstock
#117
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821495
|
Comstock
#118
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821496
|
Comstock
#119
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821497
|
Comstock
#120
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821498
|
Comstock
#121
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821499
|
Comstock
#122
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821500
|
Comstock
#123
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821501
|
Comstock
#124
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821502
|
Comstock
#125
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821503
|
Comstock
#126
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821504
|
Comstock
#127
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821505
|
Comstock
#128
|
04/08/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
13.8
|
|||||||
|
NMC821506
|
Comstock
#129
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821507
|
Comstock
#130
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821508
|
Comstock
#131
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821509
|
Comstock
#132
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821510
|
Comstock
#133
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
20
|
Serial #
|
Claim
Name
|
Location
Date
|
Owner /
Lessor
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC821511
|
Comstock
#134
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821512
|
Comstock
#135
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821513
|
Comstock
#136
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821514
|
Comstock
#137
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821515
|
Comstock
#138
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821516
|
Comstock
#139
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
14.4
|
|||||||
|
NMC821517
|
Comstock
#140
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
18.3
|
|||||||
|
NMC821518
|
Comstock
#141
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC821519
|
Comstock
#142
|
07/01/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983353
|
Comstock
Lode 100
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
16.0
|
|||||||
|
NMC983354
|
Comstock
Lode 101
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
6.1
|
|||||||
|
NMC983355
|
Comstock
Lode 102
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
5.4
|
|||||||
|
NMC983356
|
Comstock
Lode 103
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
2.0
|
|||||||
|
NMC983357
|
Comstock
Lode 104
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
2.2
|
|||||||
|
NMC983358
|
Comstock
Lode 105
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
1.1
|
|||||||
|
NMC983359
|
Comstock
Lode 106
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
8.6
|
|||||||
|
NMC983360
|
Comstock
Lode 107
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
12.7
|
|||||||
|
NMC983361
|
Comstock
Lode 108
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
1.0
|
|||||||
|
NMC983362
|
Comstock
Lode 109
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
2.3
|
|||||||
|
NMC983363
|
Comstock
Lode 110
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
19.2
|
|||||||
|
NMC983364
|
Comstock
Lode 111
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983365
|
Comstock
Lode 112
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
16.6
|
|||||||
|
NMC983366
|
Comstock
Lode 113
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
17.1
|
|||||||
|
NMC983367
|
Comstock
Lode 114
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
1.7
|
|||||||
|
NMC983368
|
Comstock
Lode 115
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
12.2
|
|||||||
|
NMC983369
|
Comstock
Lode 116
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.4
|
|||||||
|
NMC983370
|
Comstock
Lode 117
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.4
|
|||||||
|
NMC983371
|
Comstock
Lode 118
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
21
|
Serial #
|
Claim
Name
|
Location
Date
|
Owner /
Lessor
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC983372
|
Comstock
Lode 119
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983373
|
Comstock
Lode 120
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
1.1
|
|||||||
|
NMC983374
|
Comstock
Lode 121
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
4.1
|
|||||||
|
NMC983375
|
Comstock
Lode 122
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983376
|
Comstock
Lode 123
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
4.6
|
|||||||
|
NMC983377
|
Comstock
Lode 124
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983378
|
Comstock
Lode 125
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
13.5
|
|||||||
|
NMC983379
|
Comstock
Lode 126
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983380
|
Comstock
Lode 127
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983381
|
Comstock
Lode 128
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983382
|
Comstock
Lode 129
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983383
|
Comstock
Lode 130
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983384
|
Comstock
Lode 131
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983385
|
Comstock
Lode 132
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983386
|
Comstock
Lode 133
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983387
|
Comstock
Lode 134
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983388
|
Comstock
Lode 135
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983389
|
Comstock
Lode 136
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983390
|
Comstock
Lode 137
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983391
|
Comstock
Lode 138
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983392
|
Comstock
Lode 139
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983393
|
Comstock
Lode 140
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983394
|
Comstock
Lode 141
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983395
|
Comstock
Lode 142
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983396
|
Comstock
Lode 143
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983397
|
Comstock
Lode 144
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983398
|
Comstock
Lode 145
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
22
|
Serial #
|
Claim
Name
|
Location
Date
|
Owner /
Lessor
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC983399
|
Comstock
Lode 146
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983400
|
Comstock
Lode 147
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983401
|
Comstock
Lode 148
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983402
|
Comstock
Lode 149
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.5
|
|||||||
|
NMC983403
|
Comstock
Lode 150
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
8.4
|
|||||||
|
NMC983404
|
Comstock
Lode 151
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
14.5
|
|||||||
|
NMC983405
|
Comstock
Lode 152
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.1
|
|||||||
|
NMC983406
|
Comstock
Lode 153
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983407
|
Comstock
Lode 154
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983408
|
Comstock
Lode 155
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983409
|
Comstock
Lode 156
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983410
|
Comstock
Lode 157
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983411
|
Comstock
Lode 158
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983412
|
Comstock
Lode 159
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983413
|
Comstock
Lode 160
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983414
|
Comstock
Lode 161
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
15.6
|
|||||||
|
NMC983415
|
Comstock
Lode 162
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
19.5
|
|||||||
|
NMC983416
|
Comstock
Lode 163
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
7.7
|
|||||||
|
NMC983417
|
Comstock
Lode 164
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
12.8
|
|||||||
|
NMC983418
|
Comstock
Lode 165
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.5
|
|||||||
|
NMC983419
|
Comstock
Lode 166
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
6.3
|
|||||||
|
NMC983420
|
Comstock
Lode 167
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC983421
|
Comstock
Lode 168
|
12/21/2007
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
16.2
|
|||||||
|
NMC992973
|
Comstock
Lode 169
|
07/10/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
1.4
|
|||||||
|
NMC992974
|
Comstock
Lode 172
|
04/25/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC992975
|
Comstock
Lode 173
|
04/25/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC992976
|
Comstock
Lode 174
|
04/25/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.2
|
23
|
Serial #
|
Claim
Name
|
Location
Date
|
Owner /
Lessor
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC992977
|
Comstock
Lode 175
|
04/25/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC992978
|
Comstock
Lode 176
|
04/25/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
15.5
|
|||||||
|
NMC992979
|
Comstock
Lode 177
|
04/25/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
19.0
|
|||||||
|
NMC992980
|
Comstock
Lode 179
|
04/25/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC992981
|
Comstock
Lode 180
|
04/25/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC992982
|
Comstock
Lode 181
|
04/25/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
20.1
|
|||||||
|
NMC992983
|
Comstock
Lode 182
|
04/25/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
10.3
|
|||||||
|
NMC992984
|
Comstock
Lode 183
|
04/25/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
19.8
|
|||||||
|
NMC992985
|
Comstock
Lode 184
|
04/25/2008
|
Plum
Mining
|
Lode
|
Fee
|
BLM
|
0.0
|
|||||||
|
NMC965375
|
Ghost
#1
|
09/30/2007
|
GSPG
|
Load
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC965376
|
Ghost
#2
|
09/30/2007
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC965377
|
Ghost
#3
|
09/30/2007
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC965378
|
Ghost
#4
|
09/30/2007
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC965379
|
Ghost
#5
|
09/30/2007
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC965380
|
Ghost
#6
|
09/30/2007
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC965381
|
Ghost
#7
|
09/30/2007
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC965382
|
Ghost
#8
|
09/30/2007
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC965383
|
Ghost
#9
|
09/30/2007
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC965384
|
Ghost
#10
|
09/30/2007
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC965385
|
Ghost
#11
|
09/30/2007
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC810323
|
Lee
#2
|
11/31/1999
|
GSPG
|
Lode
|
Fee
|
BLM
|
19.8
|
|||||||
|
NMC810324
|
Lee
#3
|
11/31/1999
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC810321
|
Lee
#5
|
11/31/1999
|
GSPG
|
Lode
|
Fee
|
BLM
|
19.4
|
|||||||
|
NMC814553
|
Lee
#8
|
01/29/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
19.5
|
|||||||
|
NMC814554
|
Lee
#9
|
01/29/2000
|
GSPG
|
Lode
|
Fee
|
BLM
|
19.2
|
|||||||
|
NMC1003426
|
Loring
1
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
11.0
|
|||||||
|
NMC1003427
|
Loring
2
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
18.8
|
|||||||
|
NMC1003428
|
Loring
3
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
18.7
|
|||||||
|
NMC1003429
|
Loring
4
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
18.9
|
|||||||
|
NMC1003430
|
Loring
5
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
15.6
|
|||||||
|
NMC1003431
|
Loring
6
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
9.1
|
|||||||
|
NMC1003432
|
Loring
7
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.6
|
|||||||
|
NMC1003433
|
Loring
8
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.7
|
|||||||
|
NMC1003434
|
Loring
9
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1003435
|
Loring
10
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1003436
|
Loring
11
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1003437
|
Loring
12
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1003438
|
Loring
13
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1003439
|
Loring
14
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1003440
|
Loring
15
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
24
|
Serial #
|
Claim
Name
|
Location
Date
|
Owner /
Lessor
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC1003441
|
Loring
16
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1003442
|
Loring
17
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.6
|
|||||||
|
NMC1003443
|
Loring
18
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1003444
|
Loring
19
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1003445
|
Loring
20
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.6
|
|||||||
|
NMC1003446
|
Loring
21
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
13.9
|
|||||||
|
NMC1003447
|
Loring
22
|
11/24/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
6.6
|
|||||||
|
NMC1000122
|
Omaha
Fraction #1
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
7.2
|
|||||||
|
NMC1000123
|
Omaha
Fraction #2
|
11/08/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
0.9
|
|||||||
|
NMC1000124
|
Omaha
Fraction #3
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.6
|
|||||||
|
NMC1000125
|
Omaha
Fraction #4
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
0.2
|
|||||||
|
NMC1000126
|
Omaha
Fraction #5
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
0.2
|
|||||||
|
NMC1000127
|
Omaha
Fraction #6
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.8
|
|||||||
|
NMC1000128
|
Omaha
Fraction #7
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
2.3
|
|||||||
|
NMC1000129
|
Omaha
Fraction #8
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
0.3
|
|||||||
|
NMC1000130
|
Omaha
Fraction #9
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
6.5
|
|||||||
|
NMC1000131
|
Omaha
Fraction #10
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
0.8
|
|||||||
|
NMC1000132
|
Omaha
Fraction #11
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.1
|
|||||||
|
NMC1000133
|
Omaha
Fraction #12
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
0.4
|
|||||||
|
NMC1000134
|
Omaha
Fraction #13
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.1
|
|||||||
|
NMC1000135
|
Omaha
Fraction #14
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.4
|
|||||||
|
NMC1000136
|
Omaha
Fraction #17
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.6
|
|||||||
|
NMC1000137
|
Omaha
Fraction #18
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.3
|
|||||||
|
NMC1000138
|
Omaha
Fraction #19
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
2.2
|
|||||||
|
NMC1000139
|
Omaha
Fraction #20
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.0
|
|||||||
|
NMC1000140
|
Omaha
Fraction #21
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.1
|
|||||||
|
NMC1000141
|
Omaha
Fraction #22
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
3.0
|
25
|
Serial #
|
Claim
Name
|
Location
Date
|
Owner /
Lessor
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC1000142
|
Omaha
Fraction #23
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
2.3
|
|||||||
|
NMC1000143
|
Omaha
Fraction #24
|
10/30/2008
|
GSPG
|
Lode
|
Fee
|
BLM
|
2.3
|
|||||||
|
NMC704516
|
Overman
#1
|
08/27/1994
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.0
|
|||||||
|
NMC884216
|
Plum
|
11/19/2004
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.4
|
|||||||
|
NMC1015613
|
West
Lode 59
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
4.5
|
|||||||
|
NMC1015630
|
West
Lode 77
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
2.3
|
|||||||
|
NMC1015631
|
West
Lode 78
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
13.3
|
|||||||
|
NMC1015632
|
West
Lode 79
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.6
|
|||||||
|
NMC1015648
|
West
Lode 96
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
10.2
|
|||||||
|
NMC1015649
|
West
Lode 97
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
19.8
|
|||||||
|
NMC1015650
|
West
Lode 98
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015651
|
West
Lode 99
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015666
|
West
Lode 115
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
18.3
|
|||||||
|
NMC1015667
|
West
Lode 116
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015668
|
West
Lode 117
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015669
|
West
Lode 118
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015670
|
West
Lode 119
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015691
|
West
Lode 203
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
16.3
|
|||||||
|
NMC1015692
|
West
Lode 204
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
10.4
|
|||||||
|
NMC1015693
|
West
Lode 205
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
4.6
|
|||||||
|
NMC1015694
|
West
Lode 206
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
0.2
|
|||||||
|
NMC1015696
|
West
Lode 223
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015697
|
West
Lode 224
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015698
|
West
Lode 225
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015699
|
West
Lode 226
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
19.1
|
|||||||
|
NMC1015700
|
West
Lode 227
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
13.5
|
|||||||
|
NMC1015701
|
West
Lode 228
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
7.6
|
|||||||
|
NMC1015702
|
West
Lode 229
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
1.9
|
|||||||
|
NMC1015703
|
West
Lode 243
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
15.3
|
26
|
Serial #
|
Claim
Name
|
Location
Date
|
Owner /
Lessor
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC1015704
|
West
Lode 244
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
13.6
|
|||||||
|
NMC1015705
|
West
Lode 245
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
18.9
|
|||||||
|
NMC1015706
|
West
Lode 246
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015707
|
West
Lode 247
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015708
|
West
Lode 248
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015709
|
West
Lode 249
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.5
|
|||||||
|
NMC1015710
|
West
Lode 250
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
16.6
|
|||||||
|
NMC1015711
|
West
Lode 263
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
12.4
|
|||||||
|
NMC1015712
|
West
Lode 264
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
7.2
|
|||||||
|
NMC1015713
|
West
Lode 265
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
15.3
|
|||||||
|
NMC1015714
|
West
Lode 266
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015715
|
West
Lode 267
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015716
|
West
Lode 268
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015717
|
West
Lode 269
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015718
|
West
Lode 270
|
09/10/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015719
|
West
Lode 301
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015720
|
West
Lode 302
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC1015721
|
West
Lode 303
|
09/09/2009
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
27
28
29
Present
Condition of Property and Work Performed
We have
completed extensive geological mapping, sampling, and drilling on a portion of
the Comstock Project property, in order to characterize the mineralized
material. We have performed preliminary metallurgical testing, mine
planning, and economic analysis, and have produced internal reports of our
mineralized material inventory. However, we have not established
reserves that meet the requirements of SEC Industry Guide 7. Therefore, any
activity we perform on the property is considered exploratory in nature. Part of
our exploration included operating a test mine. The purpose of the test mine was
to determine our capital and operating costs, metallurgical recoveries, and
other mining factors, and determine if we could make a profit over and above our
capital and operating costs.
Description
of Equipment and other Infrastructure Facilities
We own a
mine office building and shop building, a Merrill-Crowe gold precipitation
plant, an agglomerator, crusher, screen, water truck, generators, dozers, cement
silo with a screw feeder, and conveyors. The Merrill-Crowe gold
precipitation plant and the mineral processing equipment are less than five
years old. The net book value of these assets and land at December
31, 2009 was $416,189 and $1,885,277 respectively.
Geology, Structure and
Mineralization
Gold and
silver mineralization in the project area is highly dependent on geologic
structural ground preparation over million of years, as it is throughout the
Comstock Mining District. The heavily-faulted, volcanic-hosted
setting of the Plum Mine area is favorable with respect to the natural
conditions under which gold and silver mineralization occurs.
Mineralization
in the Hartford Complex area is hosted by the northwest striking Silver City
fault zone and is enhanced in volume and grade where intersected by
cross-cutting east-west and northeast striking structures. Detailed
geologic studies by our geologic staff have identified four sub-parallel
northwest striking faults within the Silver City fault zone. The
spacing between these faults is about 150 feet, while thicknesses of
mineralization along individual faults range from 40 to 120 feet.
Mineralization
within the project drill area is more gold enriched with silver to gold ratios
of approximately 10:1. This compares to ratios of silver to gold of
100:1 over the historic Comstock bonanzas. Drilling has outlined gold
and silver mineralization over a strike distance of nearly one mile, with
in-fill drilling on 50 to 70 foot centers over .6 of a
mile. Mineralization is open-ended to the north and south along
strike and down-dip to the east.
Mineralized
Material
Based on
the results of the 2007-2009 drilling program, our team of mining industry
professionals drafted a report, compiled in accordance with the Society of
Mining, Metallurgy, and Exploration (SME) 2007 reporting
guidelines. That report, finalized in June, 2009, estimated that our
deposit of mineralized material contained 22.9 million tons, with an average
grade of 0.028 ounces per ton gold and 0.370 ounces per ton
silver. The report further estimated a mineable portion of the
mineralized material to be 20.3 million tons, with an average grade of 0.029
ounces per ton gold, and 0.395 ounces per ton silver. However, we
have not established any proven or probable reserves that meet the requirements
of SEC Industry Guide 7.
Future
Exploration Potential
The
Comstock Mining district is a well-known, historic mining district, with over
150 years of production history. We have access to extensive reports
and maps on various properties in the district, but to-date, we have only
conducted detailed geologic exploration on approximately 2% of our 5,200 acre
land position. We are conducting an ongoing exploration program to
locate and test surface mineral targets as well as deep underground bonanza
targets by using historic compilation, geological mapping, geochemical and
geophysical investigations and drilling.
30
Spring
Valley Project (South Comstock)
We own a
100% interest in the 25 federal unpatented placer claims located in Lyon County,
Nevada known as the Gold Canyon and Spring Valley claims. The 25 unpatented
placer claims cover approximately 850 acres and are located about 30 miles
southeast of Reno and six miles south of Virginia City, Nevada. In
late 2008, we leased seven patented lode mining claims for this project. 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 have no plans to begin test mining operations on these
properties in the near-term.
In 2008,
we conducted geological reconnaissance in this area. As part of the
2007-2009 drilling program, six reverse circulation drill holes were drilled in
Spring Valley. While all of these holes encountered anomalous
mineralization, the fifth hole was significant as a “discovery hole”,
encountering 30 feet of mineralized material averaging 0.209 ounces per ton
gold, and 0.992 ounces per ton of silver. This previously-unknown
mineral occurrence was found beneath just 40 feet of
pediment. Additional drilling is needed to define the extent of this
material.
Lyon
County Unpatented Placer Claims:
|
Serial #
|
Claim Name
|
Location Date
|
Owner
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC677117
|
Harlesk
#1
|
3/8/1993
|
GSPG
|
Placer
|
Fee
|
BLM
|
4.4
|
|||||||
|
NMC677118
|
Harlesk
#2
|
3/8/1993
|
GSPG
|
Placer
|
Fee
|
BLM
|
19.7
|
|||||||
|
NMC677119
|
Harlesk
#3
|
3/8/1993
|
GSPG
|
Placer
|
Fee
|
BLM
|
17.8
|
|||||||
|
NMC677120
|
Harlesk
#4
|
3/8/1993
|
GSPG
|
Placer
|
Fee
|
BLM
|
4.5
|
|||||||
|
NMC677121
|
Harlesk
#5
|
3/8/1993
|
GSPG
|
Placer
|
Fee
|
BLM
|
20.1
|
|||||||
|
NMC677122
|
Harlesk
#6
|
3/8/1993
|
GSPG
|
Placer
|
Fee
|
BLM
|
17.7
|
|||||||
|
NMC677123
|
Harlesk
#7
|
3/8/1993
|
GSPG
|
Placer
|
Fee
|
BLM
|
20.3
|
|||||||
|
NMC677124
|
Harlesk
#8
|
3/8/1993
|
GSPG
|
Placer
|
Fee
|
BLM
|
17.4
|
|||||||
|
NMC677125
|
Harlesk
#9
|
3/8/1993
|
GSPG
|
Placer
|
Fee
|
BLM
|
18.9
|
|||||||
|
NMC677126
|
Harlesk
#10
|
3/8/1993
|
GSPG
|
Placer
|
Fee
|
BLM
|
19.9
|
|||||||
|
NMC872176
|
Harlesk
#100
|
4-19-2004
|
GSPG
|
Placer
|
Fee
|
BLM
|
21.0
|
|||||||
|
NMC872177
|
Harlesk
#101
|
4-19-2004
|
GSPG
|
Placer
|
Fee
|
BLM
|
21.2
|
|||||||
|
NMC872178
|
Harlesk
#102
|
4-19-2004
|
GSPG
|
Placer
|
Fee
|
BLM
|
21.0
|
|||||||
|
NMC872179
|
Harlesk
#103
|
4-19-2004
|
GSPG
|
Placer
|
Fee
|
BLM
|
20.8
|
|||||||
|
NMC99064
|
SD
Placer
|
9/30/1967
|
GSPG
|
Placer
|
Fee
|
BLM
|
42.3
|
|||||||
|
NMC99065
|
DS
Placer
|
9/30/1967
|
GSPG
|
Placer
|
Fee
|
BLM
|
82.1
|
|||||||
|
NMC99066
|
Trio
Claims
|
9/30/1967
|
GSPG
|
Placer
|
Fee
|
BLM
|
41.5
|
|||||||
|
NMC99067
|
Gold
Star Placers
|
7/18/1972
|
GSPG
|
Placer
|
Fee
|
BLM
|
81
|
|||||||
|
NMC99068
|
Badger
Placer
|
8/13/1966
|
GSPG
|
Placer
|
Fee
|
BLM
|
21.0
|
|||||||
|
NMC99072
|
EZ
Placer
|
2/6/1970
|
GSPG
|
Placer
|
Fee
|
BLM
|
40.2
|
|||||||
|
NMC99075
|
Nugget
Placer
|
9/1/1959
|
GSPG
|
Placer
|
Fee
|
BLM
|
80.0
|
|||||||
|
NMC99076
|
Star
Placer
|
11/12/1966
|
GSPG
|
Placer
|
Fee
|
BLM
|
41.1
|
|||||||
|
NMC99078
|
Stans
Placer
|
9/2/1969
|
GSPG
|
Placer
|
Fee
|
BLM
|
80.3
|
|||||||
|
NMC99079
|
Stangs
Placer
|
10/15/169
|
GSPG
|
Placer
|
Fee
|
BLM
|
41
|
|||||||
|
NMC99074
|
Mustang
|
9/6/1969
|
GSPG
|
Placer
|
Fee
|
BLM
|
38
|
MICHAEL
& KATHRYN S. DONDERO LEASE:
On
November 1, 2008 we entered into a mineral exploration and mining
lease agreement with Michael & Kathryn S. Dondero covering seven patented
claims located in Lyon County. The lease remains in effect for as long as
exploration, development, mining, or processing operations are conducted on a
continuous basis, without a lapse of activity for more than 180 days. We pay a
royalty to the lessor amounting to the greater of $1,000 per month or a 3% NSR.
We are also responsible for payment and filing of annual maintenance fees, if
any, and taxes for these claims. We also have an option to purchase
the land and related patents for $900,000.
31
Dondero
Patented & Town Lots w/mineral rights Claims:
|
Parcel
Number
|
Claim
Name
|
Position
|
Land
Source
|
Acres
|
||||
|
16-121-10
|
Lease
|
Private
Land
|
2.9
|
|||||
|
16-121-11
|
Lease
|
Private
Land
|
1.04
|
|||||
|
16-121-12
|
Lease
|
Private
Land
|
.08
|
|||||
|
16-121-22
|
Lease
|
Private
Land
|
20.03
|
|||||
|
16-121-23
|
Lease
|
Private
Land
|
20
|
|||||
|
16-121-24
|
Lease
|
Private
Land
|
20
|
|||||
|
16-121-25
|
Lease
|
Private
Land
|
20
|
32
33
The
Como Project
We own a
100% interest in the 8 unpatented lode mining claims, covering an area of
approximately 168 acres in Lyon County, Nevada, that comprise the Como
Project. We have conducted geological reconnaissance in this area,
but have not conducted any drilling or sampling programs on this
property.
Unpatented
Como claims:
|
Serial #
|
Claim Name
|
Location Date
|
Owner
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC17092
|
Como
Comet 1
|
8/28/1976
|
GSPG
|
Lode
|
Fee
|
BLM
|
21.0
|
|||||||
|
NMC17093
|
Como
Comet 2
|
8/28/1976
|
GSPG
|
Lode
|
Fee
|
BLM
|
21.0
|
|||||||
|
NMC4439
|
Como
Comet 3
|
4/26/1977
|
GSPG
|
Lode
|
Fee
|
BLM
|
21.0
|
|||||||
|
NMC4440
|
Como
Comet 4
|
4/26/1977
|
GSPG
|
Lode
|
Fee
|
BLM
|
21.0
|
|||||||
|
NMC6121
|
Como
Comet 6
|
4/30/1977
|
GSPG
|
Lode
|
Fee
|
BLM
|
21.0
|
|||||||
|
NMC6122
|
Como
Comet 7
|
5/15/1977
|
GSPG
|
Lode
|
Fee
|
BLM
|
21.0
|
|||||||
|
NMC6123
|
Como
Comet 8
|
5/15/1977
|
GSPG
|
Lode
|
Fee
|
BLM
|
21.0
|
|||||||
|
NMC6124
|
Como
Comet 9
|
5/15/1977
|
GSPG
|
Lode
|
Fee
|
BLM
|
21.0
|
34
35
Big
Mike Copper Project
We own a
100% interest in the 17 unpatented lode claims and one placer claim, covering a
total of approximately 310 acres in Pershing County, Nevada, that comprise the
Big Mike Copper property. The Big Mike Copper property is located approximately
32 miles south of Winnemucca in Pershing County, Nevada. Access to
this site is available by way of Grass Valley Road, a county maintained paved
and gravel road, for 30 miles and then two miles on a BLM gravel road. The
property is situated at an elevation of 5,000 to 5,500 feet. We have not
completed any exploration activity or undertaken any geologic, engineering or
economic studies on the Big Mike Copper property. The property includes an open
pit, mineralized material in a stockpile, and waste dumps. As the site was
previously mined, there are also roads and graded areas on the property. Two
cased water wells with rights to two cubic feet per second are also present on
the property.
At the
end of September 2006, we entered into a ten year lease with a local company,
controlled by a former GoldSpring director, for a 10 year lease of all of its
mining claims for our Big Mike copper project. The lessor defaulted on the lease
in 2009, and through his actions allowed a lien to be placed on the property by
a contractor. We are negotiating to have the lien removed, and
restore our property rights.
Unpatented
Big Mike Claims:
|
Serial #
|
Claim Name
|
Location Date
|
Owner
|
Type
|
Position
|
Land
Source
|
Acres
|
|||||||
|
NMC87482
|
Big
Mike Lode
|
6/18/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC87483
|
Big
Mike 4 Lode
|
6/18/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC87484
|
Big
Mike 6 Lode
|
6/18/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC87485
|
Big
Mike 7 Lode
|
6/18/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC87486
|
Big
Mike 9 Lode
|
6/18/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC87487
|
Big
Mike 10 Lode
|
6/18/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC87488
|
Big
Mike 11 Lode
|
6/18/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC87489
|
Big
Mike 12 Lode
|
6/18/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC87490
|
Big
Mike 16 Lode
|
6/18/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC87491
|
Big
Mike 20 Lode
|
6/18/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC87492
|
Big
Mike 24 Lode
|
6/18/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC87493
|
Big
Mike 30 Lode
|
6/18/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.7
|
|||||||
|
NMC87494
|
Big
Mike Extension
|
7/27/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
17.7
|
|||||||
|
NMC87495
|
Big
Mike Extension #1
|
7/27/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
17.7
|
|||||||
|
NMC87496
|
Big
Mike Extension #2
|
7/26/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
17.7
|
|||||||
|
NMC87497
|
Brandi
Placer
|
6/18/1979
|
GSPG
|
Placer
|
Fee
|
BLM
|
20.0
|
|||||||
|
NMC510111
|
Big
Ron
|
7/26/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.0
|
|||||||
|
NMC510112
|
Big
Bruce
|
7/26/1979
|
GSPG
|
Lode
|
Fee
|
BLM
|
20.0
|
36
37
From time
to time, we are involved in lawsuits, claims, investigations and proceedings
that arise in the ordinary course of business. There are no matters pending that
we expect to have a material adverse impact on our business, results of
operations, financial condition or cash flows.
None.
PRICE
RANGE OF COMMON STOCK
Our
common stock is currently traded on the OTC Bulletin Board under the symbol
“GSPG.OB”. The following table sets forth, for the periods indicated, the high
and low inter-dealer closing prices per share of our common stock as reported on
the Over The Counter Bulletin Board, without retail mark-up, mark-down or
commission and may not represent actual transactions. As of December 31, 2009,
we had over 11,000 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, 2009, we had 3,662,067,844, shares of common stock issued
and outstanding.
The
following table sets forth the high and low bid prices for our common stock
since for the last two years.
|
Year
|
Quarter
|
High
|
Low
|
|||||||
|
2008
|
First
|
.0022 | .011 | |||||||
|
2008
|
Second
|
.0035 | .017 | |||||||
|
2008
|
Third
|
.006 | .018 | |||||||
|
2008
|
Fourth
|
.024 | .011 | |||||||
|
2009
|
First
|
.018 | .010 | |||||||
|
2009
|
Second
|
.020 | .010 | |||||||
|
2009
|
Third
|
.015 | .006 | |||||||
|
2009
|
Fourth
|
.012 | .007 | |||||||
EQUITY
COMPENSATION PLAN INFORMATION
The
following table sets forth information with respect to our common stock that may
be issued upon the exercise of stock options under our incentive stock option
plans as of December 31, 2009
|
Plan Category
|
(a)
Number of
Securities to
Be Issued Upon
Exercise of
Outstanding
Options,
Warrants, and
Rights
|
|
(b)
Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants, and
Rights
|
|
(c)
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a))
|
||
|
Equity
Compensation Plans Approved by
Stockholders
|
90,000,000
|
$
|
0.00963
|
700,000,000
|
|||
|
Equity
Compensation Plans Not Approved by Stockholders
|
—
|
—
|
—
|
||||
|
Equity
Compensation Plans Non Plan Based
|
80,000,000
|
$
|
0.01119
|
—
|
|||
|
Total
|
170,000,000
|
$
|
.0.0104
|
700,000,000
|
|||
38
Dividend
Policy
We have
never declared or paid any dividends on our common stock. We do not anticipate
paying any cash dividends on our common stock in the foreseeable future. We
currently intend to retain future earnings, if any, to finance operations and
the expansion of our business. Any future determination to pay cash dividends
will be at the discretion of the board of directors and will depend upon our
financial condition, operating results, capital requirements and other factors
the board of directors deems relevant. We are restricted from declaring
dividends under the terms of the senior secured convertible
debentures.
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 also included in this
10-K.
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, 2009, as well as our future results.
Overview
GoldSpring,
Inc. is a North American precious metals mining company, focused in Nevada, with
extensive, contiguous property in the Comstock Lode District. Our
Company acquired two properties in the Comstock Lode in 2003. We
secured permits, built an infrastructure and brought the exploration project
into test mining production within a year of its acquisition. We
began consolidating the Comstock Lode in 2005, by acquiring additional
properties in the district, expanding our footprint and creating opportunities
for exploration and mining.
We
produced 16,175 ounces of gold and 68,514 ounces of silver between 2004 and
2006, from our test mining operation. Our test mining activities were
suspended in 2007, and we began an exploration and drilling program to gather
the detailed information to allow us to restart mining with a high degree of
confidence.
We are
looking to build on our success through the acquisition of other mineral
properties in the Comstock Lode District with significant precious metals
exploration potential. Our activities during 2009 were focused on
specific objectives: to increase our mineralized material inventory through
exploration, expand our mineral estate footprint in the Comstock, resume mining
with optimized production of gold and silver, and maximize shareholder
value.
Land
During
2009, we worked diligently to expand our mineral estate in the Comstock Lode
mining district. We focused on accumulating contiguous properties
with high potential as mineral exploration targets, as well as properties with
the surface rights and water rights needed for mining.
39
On August
13, 2008, we entered into a binding letter of intent to purchase certain
property owned by DWC Resources, Inc. in Storey County, Nevada. We
simultaneously entered into a binding letter of intent to sublease the Sutro
Tunnel Lease dated January 1, 2008 between Sutro Tunnel Co. and John Winfield or
his nominee. During 2009, we continued to meet our obligations under the
DWC and Sutro letters of intent, while negotiations continued to consummate
these transactions. We expect to finalize the acquisitions during the
first half of 2010.
We
acquired a mining lease for nine patented mining claims and sixteen unpatented
mining claims for our Comstock Lode project from Railroad and Gold,
LLC. The lease also includes rights for nine town lots and a rural
parcel in American Flats. These claims added 344 acres to the mineral
estate for the project. The claims include a number of high quality
exploration targets, including the area of the previously-mined Overman pit, and
the under-exploited Caledonia area, which have been identified through our
ongoing Comstock-wide geologic exploration program.
We
purchased three town lots in Gold Hill, Nevada, totaling 4.79 acres, from Angelo
and Joan Petrini. The property is adjacent to our northern extension
exploration target. It provides potential drill locations, as well as
a possible location for surface facilities. On February 17, 2009, we
purchased these 4.79 acres in the Comstock District for $130,000. We
partially financed this transaction through a $90,000 first deed of trust that
is interest only for two years and bears interest at 16% per
annum. The note is due and payable on February 17,
2011.
We
secured long-term control of eleven patented mining claims in Storey and Lyons
Counties, Nevada, though a purchase agreement from the Obester
Group. This property includes five patented claims in the Lucerne /
Billie the Kid area, which has been the focus of the recent drilling
program. It also includes six claims in the Occidental area, which
provide a target for future exploration. The claims have previously
been controlled by GoldSpring and our predecessor organizations through mining
leases.
The total
price to be paid to the Obester Group is $1,650,000. We made two
initial payments totaling $250,000, with the balance to be paid in quarterly
payments of $250,000 with an interest rate of 6%. These payments are
current as of the date of this report. The transaction is expected to
close through escrow on or before April 15, 2010. Once the
transaction is complete, the Obester Group will receive a Net Smelter Royalty
(NSR) of 1% of all future mineral production from the property.
We also
entered into an agreement in October, 2009 with Precious Royalties, LLC, a
Nevada LLC, to sell a Net Smelter Royalty (NSR) on gold and silver production
from the patented claims purchased from the Obester Group. The
agreement calls for a maximum NSR of 5%, based on funding of $4,500,000, to be
received by us by March 31, 2010. If the amount funded is less than
$4,500,000, the NSR percentage will be reduced
proportionately. $260,000 of this funding was received by us during
2009. As of the date of this report, a total of $810,000 has been
received from Precious Royalties, which has earned them a 0.95%
NSR. The purchase agreement and the royalty sale combined to reduce
our royalty obligation by 80% on these claims.
In the
fourth quarter of 2009, we staked 165 lode mining claims in an area we called
the “West Lode”. This was contiguous to our earlier claims, and
extended the project footprint significantly to the northwest. Our
claim filings were initially accepted by the BLM and Washoe
County. However, in the first quarter of 2010, we were notified by
the BLM that a significant portion of this area had been withdrawn from mineral
entry as part of the Washoe County master plan, and thus rendered the
corresponding claims invalid. The remaining 43 lode mining claims
continue to be recognized as valid claims by the BLM.
During
2009, we chose not to pursue the Drossulis mining lease, for six unpatented
mining claims in Storey County, Nevada, nor the Leda Resources mining lease, for
three unpatented mining claims in Storey and Washoe Counties,
Nevada. This move allows us to focus our exploration resources on
higher-quality mineral exploration targets.
At the
end of 2009, our mineral estate in our Comstock Lode project includes 78
patented mining claims and 304 unpatented mining claims, totaling 5,200
acres. We continue to focus on adding strategic properties to our
portfolio in the Comstock, which we believe will provide opportunities to
increase our mineral resources through our ongoing exploration
program.
40
Concluded
Drill Program
The
exploration and developmental drilling program that commenced at the Comstock
project in mid December 2007 was completed during February 2009. We
drilled 182 reverse circulation (RC) holes at the Lucerne / Hartford Complex,
totaling 92,800’ of drilling. Each drill hole was sampled on
five-foot intervals, with assays performed by American Assay Labs, a certified,
independent commercial laboratory. Check assays for certain intervals
were performed by ALS Chemex Laboratories, a second certified, independent
commercial laboratory.
Part of
the 2007-2009 drilling program included six reverse circulation drill holes in
Spring Valley. While all of these holes encountered anomalous
mineralization, the fifth hole was significant as a “discovery hole”,
encountering 30 feet of mineralized material averaging 0.209 ounces per ton
gold, and 0.992 ounces per ton of silver. This previously-unknown
mineral occurrence was found beneath just 40 feet of
pediment. Additional drilling is needed to define the extent of this
material.
Completed
Geological Model and Mine Plan
Once the
2007-2009 drilling program was complete, we worked with Techbase International,
of Morrison, Colorado, to develop a three dimensional model of the
mineralization in the Hartford Complex. The model used the assay
information from the 182 newly-drilled drill holes, plus 514 holes drilled by
previous operators. The Techbase software was used to
geostatistically estimate gold and silver grades into a set of 10x10x10’ cubes,
in a project volume of 4,110’ E-W, 4,510’ N-S, and 1,200’
vertically. This computerized definition of the mineralized material
was used to develop a mine plan, and estimate the economics for a proposed
mining and processing operation.
The
GoldSpring team of mining industry professionals then drafted an internal
report, compiled in accordance with the Society of Mining, Metallurgy, and
Exploration (SME) 2007 reporting guidelines. That report, finalized
in June, 2009, estimated that our deposit of mineralized material contained 22.9
million tons, with an average grade of 0.028 ounces per ton gold and 0.370
ounces per ton silver. The report further estimated the mineable
portion of the mineralized material to be 20.3 million tons, with an average
grade of 0.029 ounces per ton gold, and 0.395 ounces per ton
silver. Based on this favorable result, the GoldSpring Board of
Directors made a commitment to proceed with the steps necessary to resume mining
and processing by early 2011.
A
third-party review of the SME-based report, and its geostatistical modeling was
completed by Robert Cameron, PhD, in September, 2009. Dr. Cameron is
an authority on computerized mineral resource and reserve calculations and
methodology. He visited the site and reviewed the project data, and
interviewed the professional team. He re-ran portions of the analysis
using the Techbase software. His report was favorable, and concluded
that our estimation of the mineralized material was reasonable.
In
December, 2009, we engaged Behre Dolbear, a mining consulting firm based in
Denver, Colorado, to review our mine model, and to produce a technical report
compliant with the Canadian NI 43-101 standard. The 43-101 standard is not
recognized by SEC Guide 7, but this report is expected to help us attract
international mining investors, who are accustomed to evaluating projects
through this standard. The report is expected to be complete in the
second quarter of 2010.
Permits
In March,
2009, we submitted a major modification application to our Water Pollution
Control Permit, to the Nevada Division of Environmental Protection
(NDEP). The modified permit was approved by the NDEP in
November. The modifications to the permit include:
41
|
|
·
|
Installation
of a new three-stage crushing
system;
|
|
|
·
|
Construction
and operation of two new crushed-material storage
areas;
|
|
|
·
|
Implementation
of a high-grade milling circuit in a contained
area;
|
|
|
·
|
Increasing
the capacity of the leach solution pumping
system;
|
|
|
·
|
Construction
of a new pregnant solution pond;
and
|
|
|
·
|
Doubling
the Merrill-Crowe processing plant
capacity.
|
The
milling circuit is a key factor in improving the economics of the project, once
mining resumes. We estimate that the addition of the mill will
improve gold recovery from 65% to approximately 95%. The improved
crushing system will produce more-uniform crushed material, which will improve
the recovery from heap leach processing.
We last
modified our Reclamation Permit in mid-2008. No further modifications
to the Reclamation Permit were required in 2009. We have maintained
all of our Federal, State, and Local permits in good standing throughout the
year. We did not have any liability associated with reclamation in
2009.
We expect
to submit an application for a major modification to our Air Quality Permit and
an application for a new Mercury Emissions Permit in April
2010. These permits are required before mining and processing can
begin. Dennis Anderson, Professional Mine Engineer, leads the mine
permitting efforts and is supported by the engineering consultants at Telesto
Nevada, LLC, and Enviroscientists, Inc, both of Reno Nevada.
Organizational
Changes
In
October, Robert Reseigh was appointed to serve as interim Chief Executive
Officer (CEO). In this role, Mr. Reseigh oversees all activities of
the company, focusing on the resumption of mine production for our Comstock Lode
project and the search for a permanent Chief Executive Officer. Mr.
Reseigh has served as a Director of the Company since 2008, and is a recognized
expert and independent consultant for tunnel, shaft, and mine development
projects. He has over 40 years of experience in the mining and
underground construction industries.
Financial
One of
our primary goals is to resume mine production at our Comstock Lode project,
which will require a significant capital investment. In November, we
retained Moelis & Company to serve as our exclusive financial
advisor. Moelis & Company is a global investment bank that
provides financial advisory services and capital raising solutions to a broad
client base, through its offices in New York, Boston, Chicago, Los Angeles,
London, and Sydney. We are confident that the relationship will
improve the likelihood that we will be able to finance our Comstock Lode project
on favorable terms.
In
December, we entered into a definitive agreement to obtain $4.5 million in new
debt financing for our Comstock Lode project. The financing is being
provided through a consortium led by an existing shareholder, who is an
accredited investor. The funding will be provided through convertible
debentures, in six monthly increments of $750,000, which commenced December
10
th
,
2009. Each debenture has a term of three years, carries an interest
rate of 8%, and is convertible to restricted common stock, at $.01 per share
through maturity. The debentures also include warrants for 50% of the
face amount, exercisable at $.0175, a 100% premium to the current stock price,
for three years.
Strategic
Plan
We
engaged Symmetry Advisors Inc. to guide our senior management through a planning
process to build a detailed and optimized plan to further explore our Comstock
Lode properties, return the mine to production, and unlock the maximum value of
the project for our shareholders. Symmetry Advisors, based in
Cleveland, Ohio, is a management firm that directly enables organizational
transformation, restructuring and performance improvements toward achieving an
organization’s stated goal.
42
Starting
in November, 2009, Symmetry worked with our Directors, senior management, and
technical team to establish a united goal for the company, draft a detailed
strategic plan, backed up with detailed schedules and spending estimates
required for achieving the goal. The plan was finalized in the first
quarter of 2010, and presented to the Board of Directors for
approval. The goal includes the resumption of mining by January,
2011, and the validation of mineralized material containing over 3 million
gold-equivalent ounces within three years.
Early
2010 Developments
Our
strategic plan calls for additional infill drilling and metallurgical testing
prior to the resumption of mining. Two drilling programs are
scheduled to begin during the first quarter, 2010. These drilling
programs will be managed by Larry Martin, CPG, our Chief Geologist.
The first
program is a reverse circulation drilling program, to provide additional
information for a detailed mine design. It includes 52 infill holes
in the Lucerne pit area, and another 12 condemnation holes in the areas
designated for waste dumps and processing facilities. The drilling
will initially be performed using two drilling rigs and crews supplied by George
DeLong Construction, Inc., of Winnemucca, Nevada. Additional drilling
rigs may be added later to accelerate the program.
The
second drilling program will drill six core holes, using a diamond drilling rig
and crews supplied by KB Drilling, of Moundhouse, Nevada. The core
will be used for metallurgical testing, needed for final design of the
processing flow sheet, and also for geotechnical testing, needed to finalize the
slope stability calculations for the open pit walls.
The
information from these drill programs will be used to develop a detailed mine
design for reopening the mine, and to fine-tune our mineral processing
procedures to maximize gold and silver recovery. We continue to take
all needed steps needed to resume production.
The
Company has prepared an application for a major modification to our Air Quality
Permit and an application for a new Mercury Emissions Permit in the first
quarter of 2010, under the direction of Dennis Anderson, PE, our Senior
Engineer. These permits, to be issued by the Nevada Division of
Environmental Protection (NDEP), are required before mining and processing can
begin.
Additional
activities planned for 2010:
A
drilling program to evaluate what we have designated as the “northern extension”
mineralization has been designed. This additional drilling will begin
once the first program of infill and condemnation holes has been
completed. Our strategic plan also calls for a program of exploration
drilling on the 36 exploration targets already identified by our geologic team,
throughout our extensive land holdings in the Comstock Lode
district.
We will
continue to increase our footprint in the Comstock Lode district by staking or
leasing mining claims with potential for exploration success. We
consider the historic Comstock Lode central to our growth strategy. We work
collaboratively with Federal, State, and local regulatory agencies to ensure
that we obtain all remaining permits needed resume mining.
The
Company will accelerate out program to catalog and digitize our library of
historic mining maps and reports, so that our team can leverage the knowledge
accumulated by over 150 years of mining experience in the Comstock
Lode.
43
Comparative
Financial Information
|
Twelve Months
ended
December 31,
2009
|
Twelve Months
ended
December 31,
2008
|
Difference
|
||||||||||
|
Revenue
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||
|
Depreciation,
depletion & amortization
|
154,683
|
148,466
|
(6,217
|
)
|
||||||||
|
Reclamation,
Exploration and Test Mining Expenses
|
2,864,854
|
3,896,931
|
1,032,077
|
|||||||||
|
Consulting
and professional
|
244,610
|
213,507
|
(31,103
|
)
|
||||||||
|
General
and administrative
|
1,303,939
|
3,882,372
|
2,578,433
|
|||||||||
|
Gain
Extinguishment of debt
|
-
|
(1,348,199
|
)
|
(1,348,199
|
)
|
|||||||
|
Change
in fair value of warrant and embedded liability, net
|
(2,829,446
|
)
|
31,965
|
2,861,411
|
||||||||
|
Other,
net
|
(22,000
|
)
|
393,314
|
|
(415,314
|
)
|
||||||
|
Interest
Expense
|
4,348,029
|
|
9,268,367
|
4,921,298
|
||||||||
|
Net
Loss
|
$
|
(6,064,669
|
)
|
$
|
(16,487,683
|
)
|
$
|
10,423,014
|
||||
In years
presented, we did not produce or sell any gold or silver at our Comstock project
in Nevada. In February 2007, we suspended mining activity to focus on
geology and exploration / developmental drilling and have not yet resumed
mining.
Reclamation,
Exploration and Test Mining Expenses were $ 1,032,077 less for the year ended
December 31, 2009 compared to the year ended December 31, 2008. The variance
reflects the completion of our phase 1 Comstock Project exploration and
developing drill program in the first quarter 2009. The Phase 1 drill
program commenced in December 2007 and ended in February 2009.
Consulting
and professional expenses for 2009 were $244,610 compared to $213,507 for 2008,
amounting to a $31,103 year over year increase. This negative
variance stems from higher auditing and related fees in 2009.
2009
General and administrative expenses decreased by $2,578,433 from
2008. The decrease reflects $2.6 million of stock based compensation
expense realized in 2008 from the issuance of stock options and stock
grants. Total stock based compensation in 2009, which reflects stock
grants issued to two employees, totaled $67,250.
In 2008
we recorded a Gain on Extinguishment of Debt of $1,348,199 which resulted from a
modification of a conversion feature in two convertible notes.
Derivative
change in Fair Value decreased in 2009 by $2,861,411 from 2008. This favorable
variance reflects the year over year fair value calculation change for
beneficial features (embedded derivatives) and detachable instrument (warrants)
contained in various notes at the end of 2009.
The year
over year negative variance of $415,314 of Other Expense primarily reflects an
accrual adjustment to liquidated damages in 2008 resulting from the
extinguishment of debt and financing costs.
Interest
expense decreased in 2009 by $4,921,298 from 2008. This favorable variance
reflects $5.4 million year over year decrease from the recognition of fair value
calculation for convertible features (embedded derivatives) contained in various
notes in 2009.
44
Our
Company is an Exploration Stage enterprise as defined by SEC Industry Guide 7,
and, in accordance with SEC Industry Guide 7, infrastructure expenditures such
as haul roads, leach pads and start-up costs and all drilling were
expensed.
|
Quarter ended
December 31,
2009
|
Quarter ended
December 31,
2008
|
Difference
|
||||||||||
|
Revenue
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||
|
Reclamation,
Exploration and Test Mining Expenses
|
287,033
|
1,481,100
|
1,194,067
|
|||||||||
|
Consulting
and professional
|
67,000
|
71,522
|
4,522
|
|||||||||
|
General
and administrative
|
281,269
|
2,349,598
|
2,068,329
|
|||||||||
|
Gain
Extinguishment of debt
|
0
|
(1,348,199
|
)
|
(1,348,199
|
)
|
|||||||
|
Change
in fair value of warrant and embedded derivative liability,
net
|
(4,808,784
|
)
|
1,030,581
|
5,839,365
|
||||||||
|
Other,
net
|
0
|
(183,999
|
)
|
(183,999
|
)
|
|||||||
|
Interest
Expense
|
1,051,884
|
7,216,319
|
6,164,435
|
|||||||||
|
Net
Loss
|
$
|
3,080,988
|
$
|
(10,585,388
|
)
|
$
|
13,666,376
|
|||||
In the
fourth quarter 2009 and the fourth quarter 2008, we did not produce or sell any
gold or silver at our Comstock project in Nevada. In February 2007,
we suspended mining activity to focus on geology and exploration / developmental
drilling and have not yet resumed mining.
Reclamation,
Exploration and Test Mining Expenses were $287,033 for the fourth quarter 2009
compared to $1,481,100 for the fourth quart quarter 2008. The
$2,068,329 reduction in reclamation, exploration and test mining expenses
reflects the completion of our Comstock Project exploration and developing drill
program, which commenced in December 2007 and finished in the first quarter of
2009.
Fourth
quarter 2009 General and administrative expenses decreased by $2,068,329
compared to the fourth quarter of 2008. The decrease reflects $1.8
million of stock based compensation expense realized in 2008 from the issuance
of stock options and stock grants, and increased labor costs in 2008 from the
hiring of additional employees in 2008 as part of our Comstock Project
exploration drill program that ended in the first quarter 2009.
The Gain
on Extinguishment of Debt of $1,348,199 in 2008 arises out of modification of a
conversion feature in two convertible note resulting in debt extinguishment
accounting guidance to be applied.
Derivative
change in Fair Value decreased in the fourth quarter 2009 by $5,839,365 from the
fourth quarter 2008. This favorable variance reflects the quarter over quarter
fair value calculation change for beneficial features (embedded derivatives) and
detachable instrument (warrants) contained in various notes at the end of
2009.
Interest
expense for the fourth quarter 2009 was $1,051,884 compared to $7,216,319 in the
fourth quarter 2008. The decrease in interest expenses of $6,164,435
primarily represents the 2008 $6.3 million fair value calculation for
convertible features (embedded derivatives) and detachable instruments
(warrants) contained in various notes.
45
Our
Company is an Exploration Stage enterprise as defined by SEC Industry Guide 7,
and, in accordance with SEC Industry Guide 7, infrastructure expenditures such
as haul roads, leach pads and start-up costs and all drilling were
expensed
Liquidity
and Capital Resources
Our cash
resources are limited. Our continued existence and plans for mining production
depend on our ability to obtain the capital necessary to operate, through the
issuance of additional debt, royalty financing or equity. If we are unable to
raise additional working capital through outside financing, it is unlikely that
the cash generated from our internal operations will suffice as a primary source
of the liquidity necessary for anticipated working capital requirements, capital
expenditure requirements and interest payments associated with our lease
obligations and indebtedness. For a further discussion of risks that
can impact our liquidity, see Item 1A. “Risk Factors,”
During
2009, we secured $3,647,500 in net financing. Specifically, we raised net
$902,500 through private placements of our common stock during the first fiscal
quarter of 2009, $2 million through the issuance of convertible notes and
$750,000 in December 2009, through the issuance of convertible
notes. The December financing included a commitment of an additional
$3.75 million which should be in monthly tranches of $750,000 through May of
2010. While this additional funding may meet our immediate working capital
needs, if we are not able to generate sufficient revenues and cash flows or
obtain additional or alternative funding, we will be unable to continue as a
going concern. See “Risk Factors -- If we are not able to obtain financing, it
is unlikely that we will be able to continue as a going
concern.” We have yet to realize an operating profit at our
Company. As disclosed herein, our independent registered public accounting firm
raises substantial doubt about our ability to continue as a going concern due to
our recurring losses and negative cash flow.
As of
December 31, 2009, the Company was in default of the terms on several
outstanding notes payable with John V. Winfiled and affiliates (“the
Winfield Group’) totaling $13,369,987 of principal and $4,170,756 of
interest. The Winfield Group consists of Mr. Winfield, Sante Fe
Financial Corporation, Portsmouth Square and InterGroup Corporation, Combined,
the Winfield Group represent the Company’s largest creditor and a significant
stockholder. Mr. Winfield is affiliated with these Companies through
a direct controlling interest and/or as their Chairman of the
Board. Because we are in default, the entire note balances of the
defaulted notes have been recorded as current liabilities.
Mr.
Winfield and his affiliates held various notes and debentures issued by the
Company that are reported in several different liabilities accounts that are in
default as of December 31, 2009. The notes are as
follows:
|
Principal
|
Interest
|
|||||||
|
Convertible
Debentures Payable – Investors (Note 8)
|
$
|
687,929
|
$
|
58,410
|
||||
|
Convertible
Debentures Payable - Mandatory Redemption payment (Note 8)
|
4,412,058
|
980,338
|
||||||
|
Convertible
Notes Payable - 2006 & 2007 (Note 8)
|
1,620,000
|
932,658
|
||||||
|
Promissory
Notes – July 2005 Financing (Note 9)
|
1,200,000
|
1,345,878
|
||||||
|
Promissory
Notes – Plum Mine (Note 9)
|
250,000
|
56,250
|
||||||
|
Promissory
Notes Payable – December 2007 (Note 9)
|
600,000
|
155,579
|
||||||
|
Promissory
Notes Payable – February 2008 (Note 9)
|
600,000
|
142,189
|
||||||
|
Convertible
Notes Payable – 2008 (Note 8)
|
2,500,000
|
390,897
|
||||||
|
Convertible
Notes Payable – December 2008 (Note 8)
|
500,000
|
61,609
|
||||||
|
Convertible
Notes Payable – 2009 (Note 8)
|
1,000.000
|
46,948
|
||||||
|
$
|
13,369,987
|
$
|
4,170,756
|
|||||
The
Winfield Group consists of Mr. Winfield and Santa Fe Financial Corporation,
Portsmouth Square and InterGroup Corporation, and combined, represent the
Company’s largest creditor and a significant stockholder. Mr.
Winfield is affiliated with these Companies through a direct controlling
interest and/or as their Chairman of their respective board of
directors. As of December 31, 2009, the Company is in technical
default of the terms on several outstanding notes payable and accordingly the
entire note balances of the defaulted notes have been recorded as current
liabilities.
46
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND 2008
|
Page
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
Consolidated
Balance Sheets
|
F-2
|
|
Consolidated
Statements of Operations
|
F-4
|
|
Consolidated
Statements of Changes in Stockholders’ Deficiency
|
F-5
|
|
Consolidated
Statements of Changes in Cash Flows
|
F-6
|
|
Notes
to Consolidated Financial Statements
|
F-8
|
Report of
Independent Registered Public Accounting Firm
To the
board of directors and shareholders of
GoldSpring,
Inc.
We have
audited the accompanying consolidated balance sheets of GoldSpring, Inc. as of
December 31, 2009 and 2008 and the related consolidated statements of
operations, changes in stockholders’ deficiency and cash flows for the years
ended December 31, 2009 and 2008. 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
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provided a reasonable basis for our
opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of GoldSpring,
Inc. as of December 31, 2009 and 2008, and the consolidated results of its
operations and its cash flows for the years then ended 2009 and 2008 in
conformity with accounting principles generally accepted in the United
States.
These
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the consolidated
financial statements, the Company has operating and liquidity concerns and, has
incurred historical net losses approximating $56,000,000 as of December 31,
2009. The Company also used cash in operating activities of $3,564,779 in 2009.
These factors raise substantial doubt about the ability of the Company to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties. In this
regard, Management is proposing to raise any necessary additional funds through
loans and additional sales of its common stock. There is no assurance that the
Company will be successful in raising additional capital.
|
/s/ Jewett, Schwartz, Wolfe &
Associates
|
|
Jewett,
Schwartz, Wolfe & Associates
|
|
Hollywood,
Florida
April
2, 2010
|
F-1
GOLDSPRING,
INC.
|
December 31,
2009
|
December 31,
2008
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS
|
||||||||
|
Cash
and cash equivalents
|
$
|
246,214
|
$
|
322,938
|
||||
|
Total
Current Assets
|
246,214
|
322,938
|
||||||
|
MINERAL
RIGHTS, PLANT AND EQUIPMENT
|
||||||||
|
Mineral
rights
|
1,270,547
|
1,530,547
|
||||||
|
Plant
and equipment, net
|
2,301,466
|
489,236
|
||||||
|
Total
Mineral Rights, Plant and Equipment
|
3,572,013
|
2,019,783
|
||||||
|
RECLAMATION
BOND DEPOSIT
|
766,768
|
766,768
|
||||||
|
LONG-LIVED
DEFERRED RECLAMATION EXPENSE
|
340,159
|
408,190
|
||||||
|
TOTAL
ASSETS
|
$
|
4,925,154
|
$
|
3,517,679
|
||||
The
accompanying notes are an integral part of these consolidated financial
statements.
F-2
GOLDSPRING,
INC.
CONSOLIDATED
BALANCE SHEETS (Continued)
|
December 31,
2009
|
December 31,
2008
|
|||||||
|
LIABILITIES AND STOCKHOLDERS’
DEFICIENCY
|
||||||||
|
CURRENT
LIABILITIES
|
||||||||
|
Accounts
payable
|
$
|
1,608,493
|
$
|
1,222,933
|
||||
|
Accrued
expenses
|
271,054
|
121,750
|
||||||
|
Accrued
interest payable
|
4,870,713
|
3,458,734
|
||||||
|
Convertible
debentures – current portion
|
12,495,698
|
10,187,966
|
||||||
|
Debt
obligation – current portion
|
3,650,000
|
2,660,565
|
||||||
|
Total
Current Liabilities
|
22,895,958
|
17,651,948
|
||||||
|
LONG-TERM
DEBT AND OTHER LONG-TERM LIABILITIES
|
||||||||
|
Convertible
debentures
|
3,025,325
|
3,282,563
|
||||||
|
Debt
obligation
|
490,000
|
-
|
||||||
|
Warrant
and embedded derivative liability
|
4,500,189
|
5,368,333
|
||||||
|
Long-term
reclamation liability
|
1,186,966
|
1,105,342
|
||||||
|
Total
Long-Term Debt and Other Long-Term Liabilities
|
9,202,480
|
9,756,238
|
||||||
|
Total
Liabilities
|
32,098,438
|
27,408,186
|
||||||
|
STOCKHOLDERS’
DEFICIENCY
|
||||||||
|
Common
stock, $.000666 par value 3,950,000,000 shares authorized, shares issued
and outstanding were 3,662,067,844 (2009) and 3,380,948,371
(2008)
|
2,438,937
|
2,251,712
|
||||||
|
Additional
paid-in capital
|
25,316,171
|
22,721,504
|
||||||
|
Accumulated
deficit
|
(54,928,392
|
)
|
(48,863,723
|
)
|
||||
|
Total
Stockholders’ Deficiency
|
(27,173,284
|
)
|
(23,890,507
|
)
|
||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
|
$
|
4,925,154
|
$
|
3,517,679
|
||||
The
accompanying notes are an integral part of these consolidated financial
statements.
F-3
GOLDSPRING,
INC.
|
Years Ended December 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
REVENUE
FROM GOLD SALES, Net
|
$
|
—
|
$
|
—
|
||||
|
COST
AND EXPENSES
|
||||||||
|
Depletion,
depreciation and amortization
|
154,683
|
148,466
|
||||||
|
Reclamation,
exploration and test mining expenses
|
2,864,854
|
3,896,931
|
||||||
|
General
and administrative
|
1,303,939
|
3,882,372
|
||||||
|
Consultants
and professional fees
|
244,610
|
213,507
|
||||||
|
Total
Cost and Expenses
|
4,568.086
|
8,141,276
|
||||||
|
LOSS
FROM OPERATIONS
|
(4,568,086
|
)
|
(8,141,276
|
)
|
||||
|
OTHER
INCOME (EXPENSE)
|
||||||||
|
Gain
on extinguishment of debt
|
—
|
1,348,199
|
||||||
|
Change
in Fair Value of warrant and embedded derivative liability
|
2,829,446
|
(31,965
|
)
|
|||||
|
Other,
net
|
22,000
|
(393.314
|
)
|
|||||
|
Interest
expense
|
(4,348,029
|
)
|
(9,269,327
|
)
|
||||
|
Total
Other Expense
|
(1,496,583
|
)
|
(8,346,407
|
)
|
||||
|
NET
LOSS
|
$
|
(6,064,669
|
)
|
$
|
(16,487,683
|
)
|
||
|
Net
loss per common share - basic
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
||
|
Basic
weighted average common shares outstanding
|
3,549,673,689
|
3,142,593,304
|
||||||
The
accompanying notes are an integral part of these consolidated financial
statements
F-4
GOLDSPRING,
INC.
STATEMENT
OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
For
the Years Ended December 31, 2009 and 2008
(Common
Stock Par value, $.000666 per share; 3,950,000,000 shares
authorized
Preferred
Stock Par Value, per share; 50,000,000 shares authorized)
|
Common
Shares Issued
|
Par value
$.000666
per share
|
Additional
Paid-in
Capital
|
Accumulated
Defici
t
|
Total
|
||||||||||||||||
|
December
31, 2007 (Restated)
|
2,743,508,248
|
$
|
1,827,177
|
$
|
12,969,210
|
$
|
(32,376,040
|
)
|
$
|
(17,579,653
|
)
|
|||||||||
|
Common
stock issued for:
|
||||||||||||||||||||
|
Debenture
principal
|
196,155,028
|
130,639
|
1,949,634
|
—
|
2,080,273
|
|||||||||||||||
|
Debenture
interest
|
151,961,857
|
101,207
|
1,456,497
|
—
|
1,557,704
|
|||||||||||||||
|
Mineral
rights
|
3,866,667
|
2,575
|
76,983
|
—
|
79,558
|
|||||||||||||||
|
Consulting
services
|
7,166,704
|
4,773
|
106,323
|
—
|
111,096
|
|||||||||||||||
|
Mining
software
|
2,434,892
|
1,622
|
8,118
|
—
|
9,740
|
|||||||||||||||
|
Directors
|
20,000,000
|
13,320
|
221,080
|
—
|
234,400
|
|||||||||||||||
|
Employees
|
10,665,714
|
7,103
|
132,787
|
—
|
139,890
|
|||||||||||||||
|
Private
placement
|
137,000,000
|
91,242
|
1,428,758
|
—
|
1,520,000
|
|||||||||||||||
|
529,250,862
|
352,481
|
5,380,180
|
—
|
5,732,661
|
||||||||||||||||
|
Warrant
cost and stock based option compensation
|
3,434,323
|
—
|
3,434,323
|
|||||||||||||||||
|
Liquidated
damages
|
108,189,261
|
72,054
|
937,791
|
—
|
1,009,845
|
|||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
(16,487,683
|
)
|
(16,487,683
|
)
|
|||||||||||||
|
December
31, 2008
|
3,380,948,371
|
$
|
2,251,712
|
$
|
22,721,504
|
$
|
(48,863,723
|
)
|
$
|
(23,890,507
|
)
|
|||||||||
|
Common
stock issued for:
|
||||||||||||||||||||
|
Debenture
principal
|
26,652,890
|
17,751
|
174,517
|
—
|
192,268
|
|||||||||||||||
|
Debenture
interest
|
150,366,583
|
100,144
|
1,377,453
|
—
|
1,477,597
|
|||||||||||||||
|
Employees
|
5,500,000
|
3,663
|
63,587
|
—
|
67,250
|
|||||||||||||||
|
Private
placement
|
98,600,000
|
65,667
|
836,833
|
—
|
902,500
|
|||||||||||||||
|
281,119,473
|
187,255
|
2,452,390
|
—
|
2,639,284
|
||||||||||||||||
|
Stock
based option compensation
|
142,277
|
—
|
142,277
|
|||||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
(6,064,669
|
)
|
(6,895,001
|
)
|
|||||||||||||
|
December
31, 2009
|
3,662,067,844
|
$
|
2,438,937
|
$
|
25,316,171
|
$
|
(54,928,392
|
)
|
$
|
(27,173,284
|
)
|
|||||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
F-5
GOLDSPRING,
INC.
|
Years Ended December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
OPERATING
ACTIVITIES:
|
||||||||
|
Net
loss
|
$
|
(6,064,669
|
)
|
$
|
(16,487,683
|
)
|
||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
|
Depreciation
and amortization
|
154,683
|
148,466
|
||||||
|
Stock
warrants and stock based compensation and note accretion
|
209,527
|
3,681,113
|
||||||
|
Interest
and liquidated damages paid through the issuance of stock
|
1,477,597
|
2,567,549
|
||||||
|
Interest
from derivatives
|
1,535,686
|
6,512,462
|
||||||
|
Other
|
5,000
|
120,836
|
||||||
|
Extinguishment
of debt
|
―
|
(1,348,199
|
)
|
|||||
|
Net
change in derivative fair value
|
(2,829,446
|
)
|
31,965
|
|||||
|
Net
loss adjusted for non-cash operating activities
|
(5,511,622
|
)
|
(4,773,491
|
)
|
||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Prepaid
and other current assets
|
―
|
185,417
|
||||||
|
Other
current assets
|
―
|
―
|
||||||
|
Accounts
payable
|
385,560
|
917,296
|
||||||
|
Accrued
expenses
|
1,561,283
|
(711,186
|
)
|
|||||
|
Other
operating assets and liabilities
|
―
|
―
|
||||||
|
Other
|
―
|
(130,052
|
)
|
|||||
|
NET
CASH USED IN OPERATING ACTIVITIES
|
(3,564,779
|
)
|
(4,512,016
|
)
|
||||
|
INVESTING
ACTIVITIES:
|
||||||||
|
Reclamation
bond deposit
|
―
|
(389,599
|
)
|
|||||
|
Mineral
claims
|
260,000
|
(161,152
|
)
|
|||||
|
Purchase
of land, plant and equipment
|
(378,880
|
)
|
(158,630
|
)
|
||||
|
NET
CASH USED IN INVESTING ACTIVITIES
|
(118,880
|
)
|
(709,381
|
)
|
||||
|
FINANCING
ACTIVITIES:
|
||||||||
|
Principal
payments on Note Payable
|
(40,565
|
)
|
(55,105
|
)
|
||||
|
Net
proceeds from the issuance of company stock
|
902,500
|
1,501,500
|
||||||
|
Proceeds
from the issuance of note payable to related party
|
2,745,000
|
3,922,944
|
||||||
|
NET
CASH PROVIDED BY FINANCING ACIVITIES
|
3,606,935
|
5,369,339
|
||||||
|
INCREASE
IN CASH AND CASH EQUIVALANTS
|
(76,724
|
)
|
147,942
|
|||||
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
322,938
|
174,996
|
||||||
|
CASH
AND CASH EQUIVALENTS, END OF YEAR
|
$
|
246,214
|
$
|
322,938
|
||||
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
||||||||
|
INCOME
TAXES
|
$
|
―
|
$
|
―
|
||||
|
INTEREST
PAID
|
$
|
―
|
$
|
―
|
||||
F-6
GOLDSPRING,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)
|
Supplemental
disclosure of non-cash investing and financing activities:
|
||||||||
|
Issuance
of company stock for interest
|
$
|
1,477,597
|
$
|
1,557,704
|
||||
|
Issuance
of company stock for liquidated damages
|
$
|
―
|
$
|
1,009,845
|
||||
|
Conversion
of debt principal into company’s common shares
|
$
|
192,268
|
$
|
2,080,273
|
||||
|
Issuance
of company stock to employees
|
$
|
67,250
|
$
|
139,890
|
||||
|
Issuance
of company stock for directors’ fees
|
$
|
―
|
$
|
234,400
|
||||
|
Issuance
of company stock for software
|
$
|
―
|
$
|
9,740
|
||||
|
Issuance
of company stock for consulting services
|
$
|
―
|
$
|
111,096
|
||||
|
Issuance
of company shares for acquisition of mineral claims
|
$
|
―
|
$
|
79,558
|
||||
|
Seller
notes for acquisition of land
|
$
|
1,520,000
|
$
|
―
|
||||
|
Issuance
of company stock for financing fees
|
$
|
36,000
|
$
|
―
|
||||
The
accompanying notes are an integral part of these consolidated financial
statements.
F-7
GOLDSPRING,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended December 31, 2009 and 2008
We are a
North American precious metals mining company with an operating gold and silver
test mine in northern Nevada. Our Company refocused as a mining company, when we
acquired the Plum property in November 2003. In our relatively short history, we
secured permits, built an infrastructure and brought the Plum exploration
project into test mining production. Beginning in 2005, we started acquiring
additional properties around the Plum project in Northern Nevada, expanding our
footprint and creating opportunities for exploration. We are an emerging company
operating test mine, looking to build on our success through the acquisition of
other mineral properties in North America with reserves and exploration
potential that can be efficiently put into near-term production. Our objectives
are to increase production; increase reserves through exploration and
acquisitions; expand our footprint at the Plum Mine; and maximize value for our
shareholders.
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America
which contemplate continuation of the Company as a going concern. However, the
Company has net losses from operations and had no revenues from operations in
either 2009 or 2008. For the year ended December 31, 2009 the Company incurred a
net loss of $6,064,699 and used cash in operations of approximately $3,565,000.
Further, the Company has inadequate working capital to maintain or develop its
operations, and is dependent upon funds from private investors and the support
of certain stockholders.
These
factors raise substantial doubt about the ability of the Company to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of these uncertainties. In this regard, Management
is proposing to raise any necessary additional funds through loans and
additional sales of its common stock. There is no assurance that the Company
will be successful in raising additional capital.
Terms
and Definitions
|
Company
|
GoldSpring,
Inc. and Subsidiaries
|
|
ASC
|
Accounting
Standards Codification
|
|
ASU
|
Accounting
Standards Update
|
|
EITF
|
Emerging
Issues Task Force
|
|
FASB
|
Financial
Accounting Standards Board
|
|
FSP
|
FASB
Staff Position
|
|
Plum
LLC
|
Plum
Mining Company, LLC
|
|
SAB
|
SEC
Staff Accounting Bulletin
|
|
SEC
|
Securities
Exchange Commission
|
|
SFAS
or FAS
|
Statement
of Financial Accounting Standards
|
|
SOP
|
Statement
of Position
|
F-8
Summarized
below are the significant accounting policies of GoldSpring, Inc.
Principles
of Consolidation
The
consolidated financial statements include the accounts of our company and its
wholly owned subsidiaries: GoldSpring, LLC, Ecovat Copper Nevada, LLC, The Plum
Mining Company, LLC, and the Plum Mine Special Purpose Company LLC. All material
inter-company transactions and balances have been eliminated in
consolidation. Certain reclassifications have been made in the 2008
results to conform to the presentation used in 2009.
Cash
and Cash Equivalents
We
consider all highly liquid debt securities purchased with original or remaining
maturities of three months or less to be cash equivalents. The carrying value of
cash equivalents approximates fair value.
Fair
Value of Financial Instruments
The
carrying amounts of cash and cash equivalents, accounts payable, and accrued
expenses approximate fair market value because of the short maturity of those
instruments. Furthermore, convertible debenture and other notes payable amounts
approximate fair value at December 31, 2009 and 2008.
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.
F-9
Impairment
of Long Lived Assets and Long Lived Assets to be Disposed Of
The
Company accounts for impairment and disposal of long-lived assets in accordance
with ASC 360 Property, Plant, and Equipment. This ASC 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.
We
implemented ASC 360 in our evaluation of the fair value of certain assets
described in Notes 4 and 5.
Revenue
Recognition
The
Company recognizes revenue in accordance with the provisions of ASC 600 Revenue,
which states that revenue is realized or realizable and earned when all of the
following four criteria are met:
|
|
1)
|
Persuasive evidence of an
arrangement exists,
|
|
|
2)
|
Delivery has occurred or services
have been rendered,
|
|
|
3)
|
The seller’s price to the buyer
is fixed or determinable,
and
|
|
|
4)
|
Collectability is reasonably
assured.
|
Specifically,
when we are in operational status, sales of gold and silver dore are recorded
when we issue a sales order to our refiner, Johnson Matthey, to sell a specified
quantity of metals. Sales orders are typically executed within 48
hours of receipt. Upon receipt of the sale order, Johnson-Matthey
confirms quantities available and executes the sale at the current market price
of the metals on the day and time of the sales order. We record
revenues on the day the sales order is issued based on the confirmed quantity of
metal at the confirmed market price. Proceeds from the sale of metals
are typically wired to our bank within twenty-four hours.
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 10 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
Rights
We defer
acquisition costs until we determine the viability of the property. Since we do
not have proven and probable reserves as defined by SEC 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. Also, we were not in mining in 2009 and thus we did not
amortize any of our mineral rights.
F-10
We review
the carrying value of our interest in each mineral claim on a quarterly basis to
determine whether impairment has incurred in accordance with ASC 360 (formerly
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.”)
Where
information and conditions suggest impairment, we write-down these properties to
net recoverable amount, based on estimated discounted 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.
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 related to asset retirements we recognize the obligations in accordance
with ASC 410.30 (formerly SOP No. 96-1).
The
Company accounts for its reclamation liabilities and asset retirement
obligations in accordance with ASC 410 Asset Retirement and Environmental
Obligations (ASC 410). The ASC requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred. ASC 410 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.
Share
Based Compensation
The
Company accounts for share based compensation in accordance with ASC 718
Compensation – Stock Compensation. Accordingly, the Company measures
the cost of employee services received in exchange for an award of equity
instruments based on the grant date fair value of the award and recognizes cost
over the requisite service period.
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, 2009 and 2008, we had net losses for which the affect of common
stock equivalents would be anti-dilutive. Accordingly only basic and dilutive
loss per share is presented.
Use
of Estimates
In
preparing financial statements in conformity with generally accepted accounting
principles, we are required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenditures during the reported periods. Actual results could differ materially
from those estimates. Estimates may include those pertaining to the estimated
useful lives and valuation of property and equipment, software and mineral
rights determining the estimated net realizable value of receivables, and the
realization of deferred tax assets.
F-11
Risks and
Uncertainties
We
regularly evaluate risks and uncertainties and, when probable that a loss or
expense will be incurred, record a charge to current period
operations.
Income
Taxes
We
recognize deferred tax assets and liabilities based on differences between the
consolidated financial statement carrying amounts and tax bases of assets and
liabilities (using the applicable enacted tax rates and laws). We provide a
valuation allowance for deferred tax assets for which we do not consider
realization of such deferred tax assets to be likely.
Recent
Authoritative Pronouncements
Recent
accounting pronouncements that the Company has adopted or will be required to
adopt in the future are summarized below.
Recent
Authoritative Pronouncements
In
June 2009, FASB issued its final SFAS No. 168,
“
The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles a Replacement of FASB Statement
No. 162”, codified
as ASC 105. ASC 105 made the FASB Accounting Standards Codification (the
Codification) the single source of U.S. GAAP used by nongovernmental
entities in the preparation of financial statements, except for rules and
interpretive releases of the SEC under authority of federal securities laws,
which are sources of authoritative accounting guidance for SEC registrants. The
Codification is meant to simplify user access to all authoritative accounting
guidance by reorganizing U.S. GAAP pronouncements into roughly 90
accounting topics within a consistent structure; its purpose is not to create
new accounting and reporting guidance. The Codification supersedes all existing
non-SEC accounting and reporting standards and was effective for the Company
beginning July 1, 2009. Following ASC 105, the FASB will not issue new
standards in the form of Statements, FASB Staff Positions, or Emerging Issues
Task Force Abstracts; instead, it will issue ASU. The FASB will not consider
ASUs as authoritative in their own right; these updates will serve only to
update the Codification, provide background information about the guidance, and
provide the bases for conclusions on the change(s) in the
Codification.
In August
2009, the FASB issued ASU 2009-05 which includes amendments to Subtopic 820-10,
“Fair Value Measurements and Disclosures—Overall”. The update provides
clarification that in circumstances, in which a quoted price in an active market
for the identical liability is not available, a reporting entity is required to
measure fair value using one or more of the techniques provided for in this
update. The amendments in this ASU clarify that a reporting entity is not
required to include a separate input or adjustment to other inputs relating to
the existence of a restriction that prevents the transfer of the liability and
also clarifies that both a quoted price in an active market for the
identical liability at the measurement date and the quoted price for the
identical liability when traded as an asset in an active market when no
adjustments to the quoted price of the asset are required are Level 1 fair value
measurements. The guidance provided in this ASU is effective for the first
reporting period, including interim periods, beginning after
issuance. The adoption of this standard did not have a material
impact on the Company’s (consolidated) financial position and results of
operations.
Other
ASUs, not effective until after December 31, 2009, are not expected to have a
significant effect on the Company’s consolidated financial position or results
of operations.
F-12
Mineral
rights at December 31, 2009 and 2008 consisted of the following:
|
2009
|
2008
|
|||||||
|
Comstock
Placer Claims
|
$
|
100,000
|
$
|
100,000
|
||||
|
Big
Mike Copper Claims
|
69,138
|
69,138
|
||||||
|
Comstock
Lode Claims
|
1,011,409
|
1,271,409
|
||||||
|
Water
rights
|
90,000
|
90,000
|
||||||
|
$
|
1,270,547
|
$
|
1,530,547
|
|||||
In
November 2009, we sold a 0.29% net smelter royalty on our Obester Property for
$260,000 to Precious Royalties, LLC. These funds were used to offset
the purchase of the Obester Property in December 2009.
Plant and
equipment at December 31, 2009 and 2008, consisted of the
following:
|
2009
|
2008
|
|||||||
|
Land
and Building
|
$
|
2,327,443
|
$
|
547,166
|
||||
|
Vehicle
and Equipment
|
302,094
|
302,094
|
||||||
|
Processing
and Lab
|
704,528
|
585,924
|
||||||
|
Furniture
and Fixtures
|
49,390
|
49,390
|
||||||
|
3,383,455
|
1,484,574
|
|||||||
|
Less
accumulated depreciation
|
(1,081,989
|
)
|
(995,338
|
)
|
||||
|
$
|
2,301,466
|
|
$
|
489,236
|
||||
During
2009, we purchased the Obester Property for $1,650,000 and the Petrini Property
for $130,000. These have been included under land and
buildings.
Depreciation
expense for the years ended December 31, 2009 and 2008 was $86,651 and $80,434,
respectively.
We use
the straight-line method of depreciation for financial reporting purposes,
depreciating buildings over 15 years and other assets over useful lives ranging
from 3 to 10 years.
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 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 Plans we secured a $1,106,882 mine reclamation financial assurance
instrument through the Nevada Division of Minerals' Bond Pool
Program. As required by the bond pool program, a cash deposit of
$766,768 was made.
F-13
We have
an accrued a long-term liability of $1,186,966 and $1,105,342 as of December 31,
2009 and 2008 respectively, with regard to our obligations to reclaim our
Comstock Mine facility based on our reclamation plan submitted and approved by
the Nevada State Environmental Commission and Division of Environmental
Protection. In conjunction with recording the reclamation liability
we recorded a deferred reclamation expense of which the value is being amortized
over the period of the anticipated land disturbance. Costs of future
expenditures for environmental remediation are discounted to their present
value. Such costs are based on management’s current estimate of amounts expected
to be incurred when the remediation work is performed within current laws and
regulations. It is reasonably possible that, due to uncertainties associated
with the application of laws and regulations by regulatory authorities and
changes in reclamation or remediation technology, the ultimate cost of
reclamation and remediation could change in the future. We periodically review
accrued liabilities for such reclamation and remediation costs as evidence
becomes available indicating that our liabilities have potentially
changed. The reclamation liability accretion expense for 2009 was
$81,624 and the amortization of long-lived deferred reclamation expense was
$68,031 for 2009.
Following
is a reconciliation of the aggregate retirement liability associated with our
reclamation plan for our Comstock Project:
|
2009
|
2008
|
|||||||
|
Long-term
reclamation obligation 1/1/
|
$ | 1,105,342 | $ | 553,190 | ||||
|
Additional
obligations incurred
|
― | 476,222 | ||||||
|
Liabilities
settled during the period
|
― | ― | ||||||
|
Increase
in present value of the reclamation obligation (accretion
expense)
|
81,624 | 75,930 | ||||||
|
Long-term
asset retirement obligation 12/31/
|
$ | 1,186,966 | $ |
1,105,342
|
||||
Following
is a reconciliation of the aggregate long-lived deferred reclamation expense
associated with on our reclamation plan for our Comstock Project:
|
2009
|
2008
|
|||||||
|
Net
long-lived deferred reclamation expense 1/1/
|
$ | 408,190 | $ | — | ||||
|
Additional
obligations incurred
|
― | 476,222 | ||||||
|
Amortization
of deferred reclamation expense
|
(68,031 | ) | (68,032 | ) | ||||
|
Long-term
asset retirement obligation 12/31/
|
$ | 340,159 | $ | 408,190 | ||||
The
following is a summary of the Convertible debentures as of December 31, 2009 and
2008. :
|
2009
|
2008
|
|||||||
|
Convertible
Debentures Payable – Investors
|
$
|
1,105,908
|
$
|
1,105,908
|
||||
|
Convertible
Debentures Payable - Mandatory Redemption payment
|
4,412,058
|
4,412,058
|
||||||
|
Convertible
Notes Payable - 2006 & 2007
|
2,170,000
|
2,170,000
|
||||||
|
Convertible
Notes Payable: June – November 2008
|
2,500,000
|
2,500,000
|
||||||
|
Convertible
Notes Payable – July 2008 Longview Amended and Restated
Note)
|
2,782,563
|
2,782,563
|
||||||
|
Convertible
Notes Payable – December 2008
|
500,000
|
500,000
|
||||||
|
Convertible
Notes Payable – May – August 2009
|
1,807,732
|
―
|
||||||
|
Convertible
Notes Payable – December 2009, net
|
242,762
|
―
|
||||||
|
Subtotal
|
15,521,023
|
13,470,529
|
||||||
|
Less
current portion of convertible debentures
|
(12,495,698
|
) |
(10,187,966
|
) | ||||
|
Long
term portion of convertible debentures
|
$
|
3,025,325
|
$
|
3,282,563
|
||||
The terms
of the convertible debentures included above are as follows:
F-14
Convertible Debentures
Payable – Investors
During
March 2004, we completed a private placement of securities transaction (the
“March Offering”), which generated $10 million in gross proceeds from a group of
accredited institutional and individual investors. On
November 30, 2004, we restructured the March Offering and entered into a
new agreement (the “Subscription Agreement”) whereby we exchanged
21,739,129 shares of common stock and 21,739,129 warrants issued for 8%
convertible notes, with the following terms;
|
Convertible
|
|
|
Loan
Amount:
|
$11.1
million, which includes the initial $10 million investment and
approximately $1.1 million in accrued penalties resulting from the delay
in the registration of common stock held by investors. Since
initial funding, approximately $10 million has been paid or refinanced
leaving a balance of approximately $1.1 million.
|
|
Interest
Rate:
|
15%,
payable in arrears in cash or stock at the lender’s
option
|
|
Conversion:
|
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 debenture; or
(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. In no event shall the conversion price be higher
than $.01, as noted below.
|
|
Term:
|
Note
is currently due and in
default
|
As a
result of the Company completing other financing arrangements at a lower
conversion price, the reset provision clause was triggered and established a new
fixed maximum conversion rate of $0.01 in February 2008.
Convertible Debentures
Payable – Mandatory Redemption Payment
John V.
Winfield, a major shareholder and note holder, and his affiliates elected to
convert approximately $3.3 million of their convertible debentures under the
November 30, 2004 Subscription Agreement into common stock . In March
2005, because we did not deliver the share certificates within the period
required in the November 30, 2004 subscription agreement, John V. Winfield and
his affiliates, a major shareholder and note holder elected to demand payment of
approximately $6.9 million pursuant to the mandatory redemption payment
provisions of the November 30, 2004 subscription agreement and consequently
forfeited his right to receive shares in lieu of payment.
The
Company did not have sufficient funds to meet this obligation. On March 31,
2005, Mr. Winfield and his affiliates entered into a Settlement Agreement with
the Company whereby he agreed to convert the $6.9million obligation into
Convertible Debentures (“the Debentures”).
F-15
The terms
of the Debentures are noted below:
|
Convertible
|
|
|
Loan
Amount:
|
$6.9
million, of which approximately $2.5 million has been paid or refinanced
since initial funding leaving a remaining balance of approximately $4.4
million.
|
|
Interest
Rate:
|
18%,
payable in arrears in cash or stock at the lender’s
option
|
|
Payments:
|
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
|
|
Conversion:
|
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; or (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. In no event shall the conversion price be higher
than $.01
|
|
Term:
|
Note
is currently due and in default
|
|
Security
interest:
|
Pursuant
to the terms of the Settlement Agreement, the Debentures are granted a
priority collateralized position, second only to our note payable to the
Brockbank Trust (See Note 7) in substantially all of our
assets.
|
As a
result of the Company completing other financing arrangements at a lower
conversion price, the reset provision clause was triggered and established a new
fixed conversion rate of $0.01 in February 2008.
Convertible Notes Payable –
2006 & 2007
The
convertible notes payable as of December 31, 2009 and 2008 are as
follows:
|
Face amount
|
||||
|
Winfield
Group Debentures Payable
|
$
|
1,620,000
|
||
|
Longview
Debentures Payable
|
550,000
|
|||
|
$
|
2,170,000
|
|||
The terms
of the agreement are as follows:
|
Convertible
|
|
|
Loan
Amount:
|
$2,170,000
|
|
Interest
Rate:
|
18%,
payable in arrears in cash or stock at the lender’s
option
|
|
Conversion:
|
The
principal amount of the Note and interest is convertible into GoldSpring
Common Stock at the lesser of (A) $.01 per share, or (B) .85 multiplied by
the “Volume Weighted Average Price” for the Borrower’s Common Stock for
the five trading days immediately prior to the Conversion
Date.
|
|
Term:
|
Note
is currently due and in default
|
|
Warrants:
|
20,000,000
|
|
Security:
|
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
|
F-16
In
February 2008, as a result of the Company completing other financing
arrangements at a lower conversion price, the reset provision clause was
triggered and established a new fixed conversion rate of $0.01.
Convertible Notes Payable:
June – November 2008
In June
2008, the Company entered into a Loan Agreement with John Winfield and
affiliates (“Winfield”) pursuant to which Winfield has agreed to loan the
Company $2,500,000 no later than December 31, 2008 through issuance of a series
of secured notes (“Notes”). In each month, during the five months ended December
2008, Winfield lent the Company $500,000 pursuant to the Loan
Agreement. These notes have been in default since late 2008 because we had
failed to make any monthly payment on the notes. Pursuant to the
terms and conditions of the loan agreement, the notes become immediately payable
upon default and thus the note balance has been recorded as a current
liability.
The terms
of the agreement are as follows:
|
Convertible
Loan Amount:
|
$2,500,000
|
|
Interest
Rate:
|
9%,
payable in arrears in cash or stock at the lender’s
option
|
|
Conversion:
|
The
principal amount of the Note and interest is convertible into GoldSpring
Common Stock at the lesser of (A) $.01 per share, or (B) .85 multiplied by
the “Volume Weighted Average Price” for the Borrower’s Common Stock for
the five trading days immediately prior to the Conversion
Date.
|
|
Term:
|
Three
Years
|
|
Warrants:
|
50%
Stock warrant coverage (Maximum warrants: 80,000,000) with an exercise
price of $0.02 and a term of four (4) years
|
|
Security:
|
Security
interest in all of the Company’s assets,
pari passu
with the
existing security interests
|
On
December 22, 2008, as a result of the Company completing other financing
arrangements at a lower conversion price, the reset provision clause was
triggered and established a new fixed conversion rate of $0.01.
Convertible Notes Payable –
July 2008 (Longview Amended and Restated Note)
On July
10, 2008, the Company amended $2,175,000 principal amount of unsecured
promissory notes issued to Longview Fund, L.P. through the issuance of an
Amended and Restated Promissory Note issued by the Company in favor of Longview
Fund, L.P. The amended terms are as follows:
|
Convertible
|
|
|
Loan
Amount:
|
$2,782,563
(Includes an initial principal amount of $2,175,000 and accrued interest
of $607,563)
|
|
Expiration
Date:
|
July
10, 2011
|
|
Interest
Rate:
|
11%,
payable per annum
|
|
Conversion:
|
The
principal amount of the Note and interest is convertible into GoldSpring
Common Stock at the lesser of (A) $.01 per share, or (B) .85 multiplied by
the “Volume Weighted Average Price” for the Borrower’s Common Stock for
the five trading days immediately prior to the Conversion
Date.
|
|
Term:
|
Three
Years
|
F-17
The
Amended and Restated Promissory Note, in the aggregate, totals $2,782,563,
$2,175,000 was outstanding principal and $607,563 was related outstanding
interest.
On
December 22, 2008, as a result of the Company completing other financing
arrangements at a lower conversion price, the reset provision clause was
triggered and established a new fixed conversion rate of
$0.01.
Convertible Notes Payable
–December 2008
On
December 8, 2008, we completed a financing transaction with Mr. Winfield and his
affiliates which provided us with $500,000 in funding. Pursuant to the terms and
conditions of the note agreement, the notes become immediately payable upon
default and thus the note balance has been recorded as a current liability as of
December 31, 2009
The terms
of the agreement are as follows:
|
Convertible
Loan Amount:
|
$500,000
|
|
Interest
Rate:
|
11%,
payable quarterly in cash or stock at the Company’s
option
|
|
Conversion:
|
The
principal amount of the Note and interest is convertible into GoldSpring
Common Stock at the lesser of (A) $.01 per share, or (B) .85 multiplied by
the “Volume Weighted Average Price” for the Borrower’s Common Stock for
the five trading days immediately prior to the Conversion
Date.
|
|
Term:
|
Note
is currently in default
|
|
Warrants:
|
12,500,000
|
|
Security:
|
Security
interest in all of the Company’s assets,
pari passu
with the
existing security interests
|
Convertible Notes Payable –
May 2009- August 2009
On May 1,
2009 the Company secured a $2,000,000 commitment for additional convertible debt
financing. The agreement upon 30 days prior written notice, permitted
the Company to request financing in tranches between $250,000 and $500,000 per
request. Funding requests were permitted at any time between May 1,
2009 and August 28, 2009. The Company requested and received
$2,000,000 from this financing. The notes are in default because we do not have
sufficient authorized shares. Pursuant to the terms and conditions of
the loan agreement, the notes become immediately payable upon default and thus
the note balance has been recorded as a current liability.
F-18
The terms
of the agreement are as follows:
|
Convertible
|
|
|
Loan
Amount:
|
$2,000,000
|
|
Interest
Rate:
|
9%,
payable in arrears in cash or stock at the lender’s
option
|
|
Conversion:
|
The
principal amount of the Note and interest is convertible into GoldSpring
Common Stock at the lesser of (A) $.0125 per share, or (B) .85 multiplied
by the “Volume Weighted Average Price” for the Borrower’s Common Stock for
the five trading days immediately prior to the Conversion
Date.
|
|
Term:
|
Note
is currently in default
|
|
Warrants:
|
50%
Stock warrant coverage (Maximum warrants: 80,000,000) with an exercise
price of $0.02 and a term of four (4) years
|
|
Security:
|
Security
interest in all of the Company’s assets,
pari passu
with the
existing security
interests
|
|
Note
Balance
|
||||
|
Balances
@ January 1, 2009
|
$ | — | ||
|
Convertible
Note
|
2,000,000 | |||
|
Principal
Payments
|
(192,268 | ) | ||
|
Balances
@ December 31, 2009
|
1,807,732 | |||
The
Convertible Loan Agreement Payable –May through August 23 2009 contained both an
embedded beneficial conversion feature and detachable warrants at the commitment
dates. Accordingly, we applied the accounting guidance of ASC 470-20
which covers convertible instruments with beneficial conversion features to
determine the fair value of these items. Specifically, it states that
when an instrument contains both a detachable instrument (warrants) and an
embedded beneficial conversion feature, the proceeds of issuance should be
allocated among the detachable instrument and the convertible instrument based
on their relative fair values. Accordingly, we applied 470-20-35 to
determine the amount allocated to the convertible instrument.
Regarding
the freestanding warrants, applied the guidance of ASC 815-40. These
warrants are cashless and only require settlement in shares, not cash or
transfer of assets, and there is no obligation for the Company to repurchase the
shares. The warrants are indexed solely to our own
stock. We determined that the warrants were not within the scope of
ASC 480-10-25-15. The value of the warrants was determined to be
$545,404. In general, the fair value of the warrants is recorded as a
debt discount and amortized over the term of the note, but since we were in
default, the entire amount has been recognized as interest expense in
2009. The fair value of the convertible feature, based on the
intrinsic value methodology, was $897,867 and has been recognized as interest
expense in 2009.
Because
we do not have sufficient authorized shares to physically settle all outstanding
potential conversions, should they occur, we may not be able to deliver the
required shares. The guidance offered in ASC 815-40, indicates that
“if share settlement is not
within the control of the Company an asset or liability classification is
required.”
Consequently, we finally classified its warrants as
liabilities and began to measure them at fair value in each subsequent reporting
period.
F-19
The
following summarizes the activity for Convertible Notes Payable – May 2009 –
August 2009
|
Note Principal
|
Debt Discount
(*)
|
Conversion
Price per
Share
|
Number of
Shares
Underlying
Convertible
Note
|
Effective
Interest Rate
|
Earnings per
Share Impact
|
||||||||||||||||
| $ |
2,000,000
|
1,443,271 | $ | 0.0125 | 160,000,000 | 33.1 | % | 0.01 | |||||||||||||
(*)
- The debt was in default and immediately due payable, therefore the
entire unamortized debt discount was recognized as interest expense in
2009. The unamortized debt discount that was included in interest
expense consists of the fair value of the warrants of $545,404 and
the convertible feature of $897,867, for a total of $1,443,271.
Convertible Notes Payable–
December 2009
On
December 10, 2009, we secured $4,500,000 commitment for additional convertible
debt financing. The agreement provided initial funding of $750,000
and on each 30
th
day
thereafter another tranche of $750,000 through May 2010. As of
December 31, 2009, we have received $750,000 from this
financing.
The terms
of the agreement are as follows:
|
Convertible
|
|
|
Loan
Amount:
|
$4,500,000
total commitment, of which $750,000 was funded
through
|
|
December
31, 2009
|
|
|
Interest
Rate:
|
8%,
payable in arrears in cash or stock at the lender’s
option
|
|
Conversion:
|
The
principal amount of the Note and interest is convertible into GoldSpring
Common Stock at the lesser of (A) $.01 per share, or (B) .85 multiplied by
the “Volume Weighted Average Price” for the Borrower’s Common Stock for
the five trading days immediately prior to the Conversion
Date.
|
|
Term:
|
Three
Years
|
|
Warrants:
|
50%
Stock warrant coverage (Maximum warrants: 257,142,857) with an exercise
price of $0.0175 and a term of three (3) years
|
|
Security:
|
Security
interest in all of the Company’s assets,
subject to
(a) Seller
Note – plum Mine; (b) certain lenders (the “
Additional
Lenders
”) as of March 31, 2005, July 15, 2005, September 26, 2005,
December 12, 2007, June 27, 2008, December 8, 2008, May 1, 2009 and May
13, 2009.
|
The
Convertible Loan Agreement Payable –December 2009 contained both an
embedded beneficial conversion feature and detachable warrants at the commitment
dates. Accordingly, we applied the accounting guidance of ASC 470-20
which covers convertible instruments with beneficial conversion features to
determine the fair value of these items. Specifically, it states that
when an instrument contains both a detachable instrument (warrants) and an
embedded beneficial conversion feature, the proceeds of issuance should be
allocated among the detachable instrument and the convertible instrument based
on their relative fair values. Accordingly, we applied 470-20-35 to
determine the amount allocated to the convertible instrument.
Regarding
the freestanding warrants, applied the guidance of ASC 815-40. These
warrants are cashless and only require settlement in shares, not cash or
transfer of assets, and there is no obligation for the Company to repurchase the
shares. The warrants are indexed solely to our own
stock. We determined that the warrants were not within the scope of
ASC 480-10-25-15. The value of the warrants was determined to be
$201,428. The fair value of the warrants is recorded as a debt
discount and amortized over the term of the note. In December 2009,
$4,196 of the fair value of the warrants was recognized as interest expense. The
fair value of the convertible feature, based on the intrinsic value methodology,
was $316,602. The value of the conversion option is recorded as a
debt discount and amortized over the term of the note. In December
2009, $6,596 of the fair value of the convertible feature was recognized as
interest expense
F-20
Because
we do not have sufficient authorized shares to physically settle all outstanding
potential conversions, should they occur, we may not be able to deliver the
required shares. The guidance offered in ASC 815-40, indicates that
“if share settlement is not
within the control of the Company an asset or liability classification is
required.”
Consequently, we finally classified its warrants as
liabilities and began to measure them at fair value in each subsequent reporting
period.
The
following summarizes the activity for Convertible Notes Payable – May 2009 –
August 2009
|
Note Balance
|
||||
|
Balances
@ January 1, 2009
|
$ | — | ||
|
Convertible
Note
|
750,000 | |||
|
Debt
Discount
|
(507,238 | ) | ||
|
Balances
@ December 31, 2009
|
242,762 | |||
|
Note Principal
|
Debt Discount
|
Conversion
Price per
Share
|
Number of
Shares
Underlying
Convertible
Note
|
Effective
Interest Rate
|
Earnings per
Share Impact
|
||||||||||||||||
| $ |
750,000
|
$ | 518,030 | $ | 0.01 | 75,000,000 | 31.0 | % | 0.01 | ||||||||||||
The debt
discount consists of the fair value of the warrants of $201,428 and
the convertible feature of $316,602, for a total of $507,238.
Debt
Discount at December 31, 2009:
|
2009
|
||||
|
Debt
discount beginning balance – Jan. 1, 2009
|
$
|
—
|
||
|
Debt
discount – embedded conversion feature
|
(316,602
|
)
|
||
|
Debt
discount – detachable warrants
|
(201,428
|
)
|
||
|
Less
amortization of debt discount
|
10,792
|
|||
|
Unamortized
debt discount
|
$
|
(507,238
|
)
|
|
Our debt
obligations as of December 31, 2009 and 2008 include the following:
|
2009
|
2008
|
|||||||
|
Promissory
Notes Payable - 2005 through 2008
|
$
|
2,400,000
|
$
|
2,400,000
|
||||
|
Debt
–Note (Plum Mine)
|
250,000
|
250,000
|
||||||
|
Debt
–Note (Obester Property)
|
1,400,000
|
—
|
||||||
|
Debt -
Note (Petrini)
|
90,000
|
—
|
||||||
|
Equipment
Financing
|
—
|
10,565
|
||||||
|
Subtotal
|
4,140,000
|
2,660,565
|
||||||
|
Less
current portion
|
(3,650,000
|
)
|
(2,660,565
|
) | ||||
|
Long
term portion of debt obligations
|
$
|
490,000
|
$
|
—
|
||||
F-21
The terms
of the debt obligations listed above are as follows;
Promissory Notes Payable
–2005 through 2008
The
Company has the following promissory notes payable as of December 31,
2009 and 2008:
|
2009
|
2008
|
|||||||
|
Promissory
Notes Payable-July 2005 Financing
|
$
|
1,200,000
|
$
|
1,200,000
|
||||
|
Promissory
Notes Payable-December 2007 Financing
|
600,000
|
600,000
|
||||||
|
Promissory
Notes Payable-January 2008 Financing
|
600,000
|
600,000
|
||||||
|
$
|
2,400,000
|
$
|
2,400,000
|
|||||
Promissory
Notes Payable - July 2005 Financing
In July
of 2005, we borrowed $1.2 million from companies controlled by John V. Winfield,
a major investor. Proceeds from the notes were reduced by a 33.3% original issue
discount and other origination fees. Net proceeds received by the Company from
the borrowing were $740,000. The notes currently accrue interest at 17% per
annum and are payable in monthly installments of principal and interest over a
24 month period with the remaining entire balance of unpaid principal and
interest due on July 15, 2007. The notes are collateralized by
substantially all of the Company’s assets subject to the security interest of
the Brockbank Trust (See Note 7). We had failed to make any payments on the
notes; hence, they are in default and the original issue discount is
fully amortized as of December 31, 2009.
Promissory
Notes Payable – December 2007 Financing
In
December 2007, we completed a financing transaction with Mr. Winfield and his
affiliates which provided us with $500,000 in funding. In consideration for the
financing, we issued promissory notes with a face value of $600,000, reflecting
an original discount of sixteen and seventeen hundreds (16.17%) percent. The
notes evidencing the loan bear interest at the rate of 18% per annum, payable on
or prior to the one year anniversary of the respective loan date. We had failed
to make any payments on the notes; hence, they are in default and the
original issue discount is fully amortized as of December 31,
2009.
Promissory
Notes Payable – January 2008 Financing
On
January 31, 2008, we completed a financing transaction with Mr. Winfield and his
affiliates which provided us with $500,000 in funding. In consideration for the
financing, we issued promissory notes with a face value of $600,000, reflecting
an original discount of sixteen and seventeen hundreds (16.17%) percent. The
notes evidencing the loan bear interest at the rate of 18% per annum, payable on
or prior to the one year anniversary of the respective loan date. We had
failed to make any payments on the notes; hence, they are in default
and the original issue discount is fully amortized as of December 31,
2009.
Debt – Note (Plum
Mine)
We have a
5% bearing note payable note related to our purchase of the Plum Mining
property. The note was payable on June 2006 and we are in default on this note.
As of December 31, 2009 and 2008, we still had a $250,000 note balance
due. There is a first security interest on the assets of Plum Mining
Property for this note.
Debt - Note (Obester
Property)
In
December 2009, we purchased mineral properties, which we had been leasing, from
Claire Obester, Jim Obester, Alan Obester, and Julian Smith (“sellers”) for
$1,650,000 plus a 1% royalty. Pursuant to the purchase agreement, we
made initial payments of $250,000 and we issued a note to the “sellers” for
$1,400,000. The note bears interest of six percent (6%) per annum.
Interest and principal payments shall be made in quarterly installments of
$250,000 with the first payment due on April 1, 2010 and continuing on the same
day of each consecutive quarter, until July 1, 2011, when the then unpaid
principal and accrued interest is due and payable.
F-22
Debt - Note (Petrini
Property)
On
February 17, 2009 we purchased 4.79 acres in the Comstock District for
$130,000. We paid $40,000 in cash and financed the balance of $90,000
through a first deed of trust. The note is interest only for two
years and bears interest at 16% per annum. The note is due and
payable on February 17, 2011.
Equipment
Financing
During
2004, we purchased certain equipment and financed our purchases through GMAC and
Ford Motor Company credit agencies. Aggregated principal and interest due
pursuant to the financings is due monthly in equal installments of $1,054, at an
average interest rate of 7.2%. In 2009, final principal of $10,565
plus unpaid interest payments were made on these notes.
Mr.
Winfield and his affiliates are the largest lenders to the
Company. At December 31, 2009, we had approximately
$19,661,000 of outstanding note principal of which $13,619,987 or 69%, was held
by Mr. Winfield and his affiliates. In addition, of the $13,619,987
total debt principal held by Mr. Winfield and his associates, $13,441,000
represented convertible note principal and related interest due. Had
Mr. Winfield converted all of his convertible holdings into our common stock at
December 31, 2009, we would have been obligated to issue Mr. Winfield
2,134,000,000 shares representing 37% of our outstanding common
shares. The amounts listed below have been reflected in the
schedules presented in Note 8 and Note 9.
|
Debt
Position
with
Mr.
Winfield
and
his
Affilates
|
||||||||||||
|
At
Deecember
31,
2009
|
||||||||||||
|
Note
Descriptions
(Mr.
Winfield
and
affiliates)
|
Principal
|
Unpaid
Interest
|
Total
|
|||||||||
|
Convertible
Notes Payable - Investors
|
$ | 687,929 | $ | 58,410 | $ | 746,339 | ||||||
|
Convertible
Debentures Payable - Mandatory Redemption Payment
|
4,412,058 | 980,338 | 5,392,396 | |||||||||
|
Convertible
Notes Payable - 2006 - 2007
|
1,620,000 | 932,658 | 2,552,658 | |||||||||
|
Convertible
Notes Payable - June - November 2008
|
2,500,000 | 390,897 | 2,890,897 | |||||||||
|
Convertible
Notes Payable - December 2008
|
500,000 | 61,609 | 561,609 | |||||||||
|
Convertible
Notes Payable - May - August 2009
|
1,000,000 | 46,948 | 1,046,948 | |||||||||
|
Convertible
Notes Payable - December 2009
|
250,000 | 556 | 250,556 | |||||||||
|
Promissory
Note Payable - July 2005
|
1,200,000 | 1,345,878 | 2,545,878 | |||||||||
|
Promissory
Note Payable - December 2007 Financing
|
600,000 | 155,579 | 755,579 | |||||||||
|
Promissory
Note Payable - January 2008 Financing
|
600,000 | 142,189 | 742,189 | |||||||||
|
Debt
Seller Note (Plum Mine)
|
250,000 | 56,250 | 306,250 | |||||||||
|
Total
at December 31, 2009
|
$ | 13,619,987 | $ | 4,171,312 | $ | 17,791,299 | ||||||
The
Company issues various note instruments with various terms but they are
typically convertible into the Company’s common stock and issued with detachable
warrants. The following sections discuss in general those conversion
features and warrants.
F-23
Conversion
Features
The terms
of the conversion feature of our debt instruments will differ between specific
notes but their typical terms contain the following
characteristics. Specific terms for each note are discussed in Notes
8 – 11 as appropriate.
|
|
·
|
The
conversion feature is an embedded beneficial conversion feature, where by
debt is convertible into Goldspring’s common stock at approximately 85% of
market price (based on a “lookback”
formula),
|
|
|
·
|
The
embedded beneficial conversion feature is immediately
exercisable,
|
|
|
·
|
Exercising
the embedded beneficial conversion feature is not contingent on a future
event,
|
|
|
·
|
Exercising
the embedded beneficial conversion feature may be converted into cash or
stock at the discretion of the issuer
(Goldspring),
|
|
|
·
|
The
conversion price is a fixed discount, there is no stated price floor or
shares issued cap to the potential number of shares that can be converted
to satisfy the conversion feature
|
Although
such conversion features are typically considered equity instruments, because
the conversion feature is a fixed discount from our traded stock price without a
limit to the number of shares that may be issued, the Company cannot be assured
that it has sufficient authorized shares to execute the conversion if
presented. Accordingly, the Company is not “in control” of the
conversion and recognition of the value of the conversion feature is deemed a
liability for financial reporting purposes under the guidance offered in FAS
150. As liabilities related to financial instruments, we therefore
apply fair value measurement to each conversion feature liability at each
reporting period. See Note 13 for a discussion of fair value
measurement.
Warrants
The terms
of the warrants attached to our debt instruments will differ between specific
notes but their typical terms contain the following
characteristics. Specific terms for each note are discussed in Notes
8 – 11 as appropriate.
|
|
·
|
Detachable
warrants are included with the debt offering, as debt “sweetener”, that
generally provide for conversion at a fixed
price,
|
|
|
·
|
There
is no active trading market for our
warrants
|
|
|
·
|
Goldspring
lacks sufficient authorized shares to satisfy all conversion options if
presented.
|
Although
such warrants are typically considered equity instruments, because the Company
cannot be assured that it has sufficient authorized shares to execute the
conversion if presented. Accordingly, the Company is not “in control”
of the conversion and recognition of the value of the conversion feature is
deemed a liability for financial reporting purposes under the guidance offered
in FAS 150. In addition, the guidance offered in ASC 815, indicates
that
“if share settlement is
not within the control of the Company an asset or liability classification is
required.”
Consequently, we classified our warrants as
liabilities and began to measure them at fair value in each subsequent reporting
period. See Note 13 for a discussion of fair value
measurement.
F-24
As
discussed in Note 3, ACS 820 provides a framework for measuring fair value under
GAAP
ASC 820
defines fair value as the price that would be received upon sale of an asset or
paid upon transfer of a liability in an orderly transaction between market
participants at the measurement date and in principal or most advantageous
market for that asset or liability. The fair value should be
calculated based on assumptions that market participants would use in pricing
the asset or liability, not on assumptions specific to the entity. In
addition, the fair value of liabilities should include consideration of
non-performance risk, including the Company’s own credit risk.
In
addition to defining fair value, ASC 820 expands the disclosure requirements
around fair value and establishes a fair value hierarchy for valuation
inputs. The hierarchy prioritizes the inputs into three levels based
on the extent to which inputs used in measuring fair value are observable in the
market. Each fair value measurement is reported in one of three
levels, which is determined by the lowest level input that is significant to the
fair value measurement in its entirety. These levels
are:
|
|
·
|
Level
1 – inputs are based upon unadjusted quoted prices for identical
instruments traded in active
markets.
|
|
|
·
|
Level
2 – inputs are based upon quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets
that are not active, and model-based valuation techniques for which all
significant assumptions are observable in the market or can be
corroborated by observable market data for substantially the full term of
the assets or liabilities.
|
|
|
·
|
Level
3 – inputs are generally unobservable and typically reflect management’s
estimates of assumptions that market participants would use in pricing the
asset or liability. The fair values are therefore determined
using model-based techniques that include option pricing models,
discontinued cash flow models, and similar
techniques.
|
The
following describes the valuation methodologies the Company uses to measure
financial assets and liabilities at fair value.
Liabilities Measured at Fair
Value on a Recurring Basis
The
following table presents our liabilities at December 31, 2009 and December 31,
2008, which are measured at fair value on a recurring basis:
|
Fair Value Measurements at
December 31, 2009
|
||||||||||||||||
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
|
Liabilities:
|
||||||||||||||||
|
Convertible
features and warrants
|
$ | 4,500,189 | $ | — | $ | — | $ | 4,500,189 | ||||||||
|
Total
Liabilities
|
$ | 4,500,189 | $ | — | $ | — | $ | 4,500,189 | ||||||||
|
Fair
Value Measurements at
December 31, 2008
|
||||||||||||||||
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
|
Liabilities:
|
||||||||||||||||
|
Convertible
features and warrants
|
$ | 5,368,333 | $ | — | $ | — | $ | 5,368,333 | ||||||||
|
Total
Liabilities
|
$ | 5,368,333 | $ | — | $ | — | $ | 5,368,333 | ||||||||
F-25
As
discussed in Note 12, conversion feature liability represents the discount on
convertible notes proceeds associated with the fair value of the embedded
conversion features of our notes. Warrant liabilities represent
detachable warrants issued in association with various notes
payable.
The fair
values for the conversion feature and warrant liabilities included in Level 3
are estimated using industry standard valuation models, such as the
Black-Scholes-Merton model. Level 3 derivative liabilities primarily
include certain over-the-counter options.
Gains
(losses) from changes in fair values of the conversion feature and warrant
liabilities that are not designated as hedges are recognized in other income
(expense). The amounts recognized during the year ended
December 31, 2009 and December 31, 2008 are as follows:
|
Liabilities
|
|||||||||||
|
As of December 31,
2009
|
As of December
31, 2008
|
||||||||||
|
Balance Sheet
Location
|
Fair Value
|
Balance Sheet
Location
|
Fair Value
|
||||||||
|
Derivative not designated as
hedging Instruments under ASC 815
|
|||||||||||
|
Convertible features and
warrants
|
Long-term
Debt
|
$ | 4,500,189 |
Long-term
Debt
|
$ | 5,368,333 | |||||
|
Total Instruments not designated
as hedging instruments under ASC 815
|
$ | 4,500,189 | $ | 5,368,333 | |||||||
|
Amount
of
Loss
Recognized
in
Income
on
Derivative
|
||||||||||
|
Derivatives
Not
Designated
as
Hedging
Instruments
under
ASC
815
|
Location
of
Loss
Recognized
in
income
on
Derivative
|
For
the
year
ended
December
31,
2009
|
For
the
year
ended
December
31,
2009
|
|||||||
|
Convertible
features and warrants
|
Interest Expense
|
$ | 1,454,063 | $ | 4,594,948 | |||||
|
Total:
|
$ | 1,454,063 | $ | 4,594,948 | ||||||
F-26
The
following table indicates the changes in fair value of the
instruments:
|
Convertible
Features
and
Warrants
|
||||
|
Balances @ January 1,
2008
|
$ | 776,835 | ||
|
Additions
|
4,591,498 | |||
|
Reductions
|
||||
|
Balances @ December 31,
2008
|
5,368,333 | |||
|
Additions
|
1,961,302 | |||
|
Reductions
|
(2,829,446 | ) | ||
|
Balances @ December 31,
2009
|
$ | 4,500,189 | ||
Common
stock was issued during the year ended December 31, 2009 and December 31, 2008
for the following purposes:
|
|
2009 Share
Issuances
|
Share Value
|
2008 Share
Issuances
|
Share Value
|
||||||||||||
|
Debenture
principal
|
26,652,890
|
$
|
192,268
|
196,155,028
|
$
|
2,080,273
|
||||||||||
|
Debenture
Interest
|
150,366,583
|
1,477,597
|
151,961,857
|
1,557,704
|
||||||||||||
|
Liquidated
damages
|
—
|
—
|
108,189,261
|
1,009,845
|
||||||||||||
|
Private
placements
|
98,600,000
|
986,000
|
137,000,000
|
1,520,000
|
||||||||||||
|
Mineral
claims
|
—
|
—
|
3,866,667
|
79,558
|
||||||||||||
|
Mining
software
|
—
|
—
|
2,434,892
|
9,740
|
||||||||||||
|
Consulting
|
—
|
—
|
7,166,704
|
111,096
|
||||||||||||
|
Employees
and directors
|
5,500,000
|
67,250
|
30,665,714
|
374,290
|
||||||||||||
|
Total
|
281,119,473
|
$
|
2,723,115
|
637,440,123
|
$
|
6,742,506
|
||||||||||
The following schedules provide
additional detail on the summary listed above.
Debenture Principal,
Debenture Interest and Liquidated Damages for 2009
The
following represents principal and interest payments on debt, made in 2009 with
the issuance of our common stock. The shares were valued in accordance
with each respective convertible note's term as disclosed in Note
8.
|
Note Description
|
Principal
Payment
Number of
Shares
|
Value of
Shares
|
Interest
Payment
Number of
shares
|
Value of
Shares
|
||||||||||||
|
Convertible
Debentures Payable-Investors
|
—
|
$
|
—
|
29,373,214
|
$
|
257,618
|
||||||||||
|
Convertible
Debentures Payable- Mandatory Redemption payment
|
—
|
—
|
99,000,000
|
990,000
|
||||||||||||
|
Long-Term
Convertible Notes – July 2008 (Longview Amended and Restated
Note)
|
—
|
—
|
21,993,369
|
229,979
|
||||||||||||
|
Convertible
Notes: May 2009 – Aug. 2009
|
26,652,890
|
192,268
|
—
|
—
|
||||||||||||
|
26,652,890
|
$
|
192,268
|
150,366,583
|
$
|
1,477,597
|
|||||||||||
F-27
Debenture Principal,
Debenture Interest and Liquidated Damages
The
following represents principal and interest payments on debt, made in 2008 with
the issuance of our common stock.
|
Note Description
|
Principal
Payment
Number of
Shares
|
Value of
Shares
|
Interest
Payment
Number of
shares
|
Value of
Shares
|
||||||||||||
|
Convertible
Debentures Payable-Investors
|
47,587,404
|
$
|
464,329
|
20,880,311
|
$
|
193,339
|
||||||||||
|
Convertible
Debentures Payable- Mandatory Redemption payment
|
134,001,185
|
1,325,000
|
116,849,523
|
1,113,785
|
||||||||||||
|
Convertible
Debentures Payable- Failure to Deliver Shares
|
9,258,584
|
90,944
|
6,815,961
|
66,942
|
||||||||||||
|
Long-Term
Convertible Notes – July 2008 (Longview Amended and Restated
Note)
|
—
|
—
|
4,329,541
|
67,338
|
||||||||||||
|
|
||||||||||||||||
|
Promissory
Notes Payable-December 2005 Financing
|
5,307,855
|
200,000
|
3,086,521
|
116,300
|
||||||||||||
|
|
196,155,028
|
$
|
2,080,273
|
151,961,857
|
$
|
1,557,704
|
||||||||||
Liquidated
Damages
The
following represents liquidated damage payments on debt, made during 2008 with
the issuance of our common stock. There were no liquidated damages
incurred or paid out during 2009.
|
Note Description
|
Liquidated
Damage
Payment
Number of
Shares
|
Value of
Shares
|
Total Shares
Issued
|
Total Value
of Shares
|
||||||||||||
|
Convertible
Debentures
Payable-Investors
|
18,799,801
|
$
|
166,509
|
87,267,516
|
$
|
824,177
|
||||||||||
|
Convertible
Debentures Payable- Mandatory Redemption payment
|
87,686,922
|
826,618
|
338,537,630
|
3,265,403
|
||||||||||||
|
Convertible
Debentures Payable- Failure to Deliver Shares
|
1,702,538
|
16,718
|
17,777,083
|
174,604
|
||||||||||||
|
Longview
Amended and Restated Note - 2008
|
—
|
—
|
4,329,541
|
67,338
|
||||||||||||
|
Promissory
Notes Payable-December 2005 Financing
|
—
|
—
|
8,394,376
|
316,300
|
||||||||||||
|
Total
|
108,189,261
|
$
|
1,009,845
|
456,306,146
|
$
|
4,647,822
|
||||||||||
F-28
Private
Placements
The
following 2009 private placement transactions raised a gross total of $986,000
in exchange for 98,600,000 shares of our unregistered Common stock, placed with
accredited investors. In general, the proceeds were used to fund
exploratory drilling and for general working capital.
|
|
·
|
During the first quarter 2009,
$986,000 for 98,600,000 shares at $0.01 per share and 95,000.000
warrants. The warrants have an exercise price of $.015 and a term of
six years. .
|
The
following 2008 private placement transactions raised a total of $1,520,000 in
exchange for 137,000,000 shares of our unregistered Common stock, were place
with accredited investors. In general, the proceeds were used to fund
exploratory drilling and for general working capital.
|
|
·
|
In the first quarter 2008,
$500,000 for 40,000,000 shares at $0.015 per
share.
|
|
|
·
|
During the second quarter 2008,
$500,000 for 40,000,000 shares at $0.0125 per share and 40,000.000
warrants. The warrants have an exercise price of $.02 and a term of
six years. .
|
|
|
·
|
On July 18, 2008, $150,000 for
10,000,000 shares at $0.015 per
share.
|
|
|
·
|
In December 2008, $370,000 for
37,000,000 shares at $0.01 per share and 32,000.000 warrants. The
warrants have an exercise price of $.015 and a term of six
years.
|
Mineral
Claims
In 2008,
3,866,667 unregistered common shares, valued at $79,558 or an average of $0.021
per share, were issued for the acquisition of mining claims in the Comstock Lode
District.
Computer
Software
Pursuant
to an agreement in late 2007, a vendor in March 2008 was issued 2,434,892 shares
valued at $9,740 or $0.004 per share, for computer modeling
software.
Consultants
During
2008, the following shares were issued to consultants for services
performed:
|
|
·
|
In May 2008, a consultant was
issued 5.53 million shares valued at $88,480 or $0.016 per share, for
services.
|
|
|
·
|
In August 2008, a consultant was
issued 136,704 shares valued at $2,616 or $0.019 per share, for
services
|
|
|
·
|
In October 2008, a consultant was
issued 500,000 shares valued at $10,000 or $0.02 per share, for
services.
|
Employees and
directors
During
2009, the following share grants were issued to employees:
F-29
|
|
·
|
Mr. Larry Martin, our Chief
Geologist, pursuant to his employee contract, received three million
(3,000,000) of our unregistered common shares. The value of the common
shares at the time of issuance was $37,250, averaging $0.0124 per
share. Shares are valued at the closing market price on date of
issue.
|
|
|
·
|
In April 2009, Dennis Anderson,
the Company’s senior engineer, pursuant to his employment arrangement, was
issued a total of two million five hundred thousand (2,500,000) of our
unregistered common shares. The value of the common shares at
the time of issuance was $30,000, averaging $0.012 per share. Shares
are valued at the closing market price on date of
issue.
|
During
2008, the following share grants were issued to employees and Company
directors:
|
|
·
|
In January 2008, our two outside
directors were issued, in aggregate, twenty million shares of our
unregistered common stock as director compensation. The value of the
common shares at the time of issuance was $234,400, averaging $0.012 per
share.
|
|
|
·
|
In March 2008, Dennis Anderson,
our senior engineer, was issued a total of one million of our unregistered
shares, valued at $18,690 or $0.01869 per share, for services
performed. In August 2008, Mr. Anderson, pursuant his employee
agreement, was awarded 1.5 million unregistered shares valued at $24,900
or $0.0167 per share for achieving various
milestones.
|
|
|
·
|
In August 2008, Mr. James Golden,
the Chief Operating Officer, exercised 10,000,000 stock options at a price
of $0.0525. Mr. Golden elected the cashless exercise method and
thus received a total of 8,165,714 unregistered shares of our common
stock. As of the date of this report, Mr. Golden has not sold
any of these shares.
|
Basic
earnings per share is computed by dividing net loss, after deducting preferred
stock dividends accumulated during the period, by the weighted average number of
shares of common stock outstanding. Diluted earnings per share is computed by
dividing net income, after deducting preferred stock dividends accumulated
during the period, by the weighted average number of shares of common stock and
dilutive common stock equivalent shares outstanding. For the
years ended December 31, 2009 and December 31, 2008, there were approximately
3,777 million and 1,770 million, respectively, of common stock equivalent shares
excluded from the dilutive earnings per share calculation because they were
anti-dilutive. The following is a reconciliation of the number of shares used in
the basic and diluted computation of net income per share (in
millions):
|
|
For the Year Ended
December 31
|
||||||
|
2009
|
2008
|
||||||
|
Weighted
average number of common shares outstanding – basic
|
3,550
|
3,143
|
|||||
|
Dilution
from convertible debt, stock options and warrants
|
3,777
|
1,770
|
|||||
|
Weighted
average number of common shares outstanding – diluted
|
7,327
|
4,913
|
|||||
F-30
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
December 31, 2009 and 2008, the Company had 182,000,000 outstanding Standard
Employee and Director Options to acquire company shares, of which 176,000,000 of
these derivatives were vested and exercisable. During the period ended December
31, 2009, there were no additional options issued and none had been
exercised.
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-Merton option pricing model. Black-Scholes-Merton
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, 2009 and 2008.
|
|
2009
|
2008
|
||||||
|
Expected
volatility (No options were issued in 2009)
|
—
|
%
|
199
|
%
|
||||
|
Expected
term (years)
|
—
|
5.14
|
||||||
|
Risk
free rate
|
—
|
%
|
3.09
|
%
|
||||
|
Dividend
Yield
|
0.0
|
%
|
0.0
|
%
|
||||
|
Weighted
average grant date fair value
|
$
|
0.0
|
$
|
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, 2009, $142,277 was recognized as compensation
expense in the consolidated statements of operations. . As of
December 31, 2009, the remaining unrecognized compensation costs related to
unvested options was $106,708.
A summary
of the option activity under the Company’s share based compensation plan for the
fiscal years ended December 31, 2009 and 2008 is as follows:
|
|
2009 Options
|
2009
Weighted
Average
Exercise
Price
|
2008
Options
|
2008
Weighted
Average
Exercise
Price
|
||||||||||||
|
Balance,
Beginning of year
|
182,000,000
|
$
|
0.011
|
10,000,000
|
$
|
0.00963
|
||||||||||
|
Granted
|
—
|
—
|
182,000,000
|
0.00963
|
||||||||||||
|
Exercised
|
—
|
—
|
10,000,000
|
0.00963
|
||||||||||||
|
Forfeited
|
—
|
—
|
0
|
—
|
||||||||||||
|
Balance,
end of year
|
182,000,000
|
0.011
|
182,000,000
|
0.011
|
||||||||||||
|
Exercisable
at December 31,
|
176,000,000
|
$
|
0.0107
|
170,000,000
|
$
|
0.0104
|
||||||||||
F-31
The
following table sets forth stock options outstanding at December 31,
2009.
|
Total
Outstanding Options:
|
182,000,000
|
Total
"in-the-money" Outstanding Options:
|
0
|
||||||
|
Average
Price of Outstanding Options:
|
$
|
0.0110
|
Average
Price of "in-the-money" Outstanding Options:
|
$
|
—
|
||||
|
Total
Vested Options:
|
176,000,000
|
Total
"in-the-money" Vested Options:
|
0
|
||||||
|
Average
Price of Vested Options:
|
$
|
0.0107
|
Average
Price of "in-the-money" Vested Options:
|
$
|
—
|
||||
|
Total
Unvested Options:
|
6,000,000
|
Total
"in-the-money" UN-Vested Options:
|
0
|
|
Options Breakdown by Range as at 12/31/2009
|
||||||||||||||||||||||||
|
|
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
|
8.3819
|
$
|
0.0110
|
176,000,000
|
8.3692
|
$
|
0.0107
|
||||||||||||||||
|
$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
|
8.3819
|
$
|
0.0110
|
176,000,000
|
8.3692
|
$
|
0.0107
|
||||||||||||||||
The total
options outstanding at December 31, 2009 had a weighted average remaining life
of 8.3 years and an average intrinsic value of $0 based upon the closing price
of the Company’s common stock of March 21, 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 $0 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 deferred tax assets, it did not recognize any tax
benefit related to stock based compensation expense for the year ended December
31, 2009.
As of
January 1, 2009, GoldSpring Inc. had 104,200,000 outstanding warrants to acquire
company shares, all of which were vested and exercisable. During 2009, the
Company issued 197,928,571 of warrants associated with convertible debt
issuances. During the period ended December 31, 2009,
none of these were exercised. Warrants outstanding at December 31, 2009 were
302,128,571. No warrants expired during the fiscal year ended December 31,
2009.
The
Company recognizes warrant 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 five
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 warrant exercises
and stock awards.
The fair
value of each grant was estimated at the date of the grant using the
Black-Scholes-Merton option pricing model. Black-Scholes-Merton
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.
F-32
|
2009
|
2008
|
|||||||
|
Weighted
Average volatility
|
148 | % | 149 | % | ||||
|
Expected
term (years)
|
4.43 | 4.12 | ||||||
|
Risk
free rate
|
0.86 | % | 3.09 | % | ||||
|
Dividend
Yield
|
0.0 | % | 0.0 | % | ||||
|
Weighted
average grant date fair value
|
$ | 0.01 | $ | 0.01 | ||||
Stock
warrant issuance is recognized using the fair value when granted and are
amortized over the warrants' vesting period. During the year ended December 31,
2009, $549,600 was recognized as interest expense in the consolidated statements
of operations.
A summary
of the warrant activity for the fiscal years ended December 31, 2009 and 2008 is
as follows:
|
|
2009
Warrants
|
2009
Weighted
Average
Exercise
Price
|
2008
Warrants
|
2008
Weighted
Average
Exercise
Price
|
||||||||||||
|
Balance,
Beginning of year
|
104,200,000 | $ | 0.1440 | 47,800,000 | $ | 0.144 | ||||||||||
|
Granted
|
197,928,571 | $ | 0.0173 | 84,200,000 | $ | 0.0173 | ||||||||||
|
Exercised
|
— | — | — | — | ||||||||||||
|
Forfeited
|
— | $ | 0.20 | (27,800,000 | ) | 0.20 | ||||||||||
|
Balance,
end of year
|
302,128,571 | $ | 0.0169 | 104,200,000 | $ | 0.169 | ||||||||||
|
Exercisable
at December 31,
|
302,128,571 | $ | 0.0169 | 104,200,000 | $ | 0.169 | ||||||||||
A summary
of outstanding warrant issuances at December 31, 2009 is as
follows:
|
Note Description
|
Issue Date
|
Number of
Warrants
|
Original
Term
|
Exercise
Price
|
|||||||||
|
Convertible
Notes 2006 & 2007
|
May 06
–
June 07
|
20,000,000 |
5
years
|
Variable
Exercise Price
|
|||||||||
|
Private
Placement Q2 2008
|
Q2 2008 | 40,000,000 |
6
years
|
$ | 0.02 | ||||||||
|
Private
Placement Q4 2008
|
Q4 2008 | 44,200,000 |
6
years
|
0.015 | |||||||||
|
Private
Placement Q1 2009
|
Q1 2009 | 95,000,000 |
6
years
|
0.015 | |||||||||
|
Convertible
Notes May 09 – Aug 09
|
Q2 2009 – Q3 2009 | 80,000,000 |
4
years
|
0.02 | |||||||||
|
Convertible Notes Dec. 2009
|
Dec.
2009
|
22,928,571 |
3
years
|
0.0175 | |||||||||
|
Total
|
302,128,571 | ||||||||||||
Variable Exercise
Price
– The exercise price is equal to eighty-five percent (85%) of the
average of the five (5) lowest closing bid prices of the common stock as
reported by Bloomberg L.P. for the twenty (20) trading days upon day the
warrants are exercise. These warrants have a "Cashless
Exercise".
The
following table sets forth warrants outstanding at December 31,
2009.
|
Total
Outstanding Warrants:
|
302,628,571
|
Total
"in-the-money" Outstanding Warrants:
|
20,000,000
|
||||||
|
Average
Price of Outstanding Warrants:
|
$
|
0.0169
|
Average
Price of "in-the-money" Outstanding Warrants:
|
$
|
0.0063
|
||||
|
|
|||||||||
|
Total
Vested Warrants:
|
302,628,571
|
Total
"in-the-money" Vested Warrants:
|
20,000,000
|
||||||
|
Average
Price of Vested Warrants:
|
$
|
0.0169
|
Average
Price of "in-the-money" Vested Options:
|
$
|
0.00063
|
||||
|
Total
Unvested Options:
|
0
|
Total
"in-the-money" Unvested Options:
|
0
|
F-33
|
Warrants Breakdown by Range as at 12/31/2008
|
||||||||||||||||||||||||
|
|
Outstanding
|
Vested
|
||||||||||||||||||||||
|
Range
|
Outstanding
Warrants
|
Remaining
Contractual
Life
|
WA
Outstanding
Strike Price
|
Vested
Warrants
|
Remaining
Vested
Contractual Life
|
WA Vested
Strike Price
|
||||||||||||||||||
|
$0.000
to
$0.040
|
302,628,571 | 4,3354 | $ | 0.0169 | 302,628,571 | 4.3354 | $ | 0.0169 | ||||||||||||||||
|
$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
|
302,628,571 | 4.3354 | $ | 0.0169 | 302,628,571 | 4.3354 | $ | 0.0169 | ||||||||||||||||
The
following represents the reported gain from debt extinguishment resulting from a
change in an embedded conversion option or an amendment and restatement of a
note accounted for in accordance with the guidance offered in ASC
470-50.
|
|
For the Year Ended
December 31
|
|||||
|
|
2009
|
2008
|
||||
|
Convertible
Notes Payable - 2006 & 2007
|
$
|
—
|
$
|
127,647
|
||
|
Long-Term
Convertible Notes – July 2008 (Longview Amended and Restated
Note)
|
—
|
1,220,552
|
||||
|
Gain
– Debt Extinguishment
|
$
|
—
|
$
|
1,348,199
|
||
Extinguishment
of Debt - Overview
In 2008,
we performed an analysis to determine whether the change in an embedded
conversion option and the amendment and restatement of a note would be recorded
as an extinguishment of debt or a modification of debt. Based on our
analysis, it was determined that the above change in an
embedded conversion option and the amendment and restatement of a
note qualified as debt extinguishment under ASC 470-50-40, and we recorded a
gain of $1,348,199 in the fourth quarter of fiscal 2008.
Convertible
Notes Payable - 2006 & 2007
On
February 20, 2008, as a result of the Company completing other financing
arrangements, a “favored nations” clause was triggered in the 2006 and 2007
convertible notes, which changed the terms of the embedded conversion option and
effectively established a fixed conversion rate of $0.01. Our
analysis indicated that the change in the embedded conversion option qualified
as a substantial modification, and accordingly extinguishment of debt accounting
should be applied.
Upon
issuance, the embedded conversion option was “in the money”. We
recorded the note in accordance with ASC 470-20 regarding accounting for a
beneficial conversion feature. Our calculation of the intrinsic value
of the new embedded conversion option was
$2,380,000. However, ASC 470-20 limits the allocation of
proceeds to the conversion feature, to the face value of the note, therefore we
recorded the value of the embedded conversion option at the face value of the
note, which was $2,170,000.
Since the
modified notes provide for immediate conversion, subject to a 4.9% “blocking
feature”, the entire debt discount has been charged to interest expense in
accordance with the guidance offered in ASC 470-20. Debt discount results from
the allocation of note proceeds to the intrinsic value of the embedded
conversion option.
F-34
A gain on
Debt extinguishment of $127,647 was recorded as a result of the reduction in the
recorded value of the embedded conversion option prior to the change, compared
to the value of the embedded conversion option after the change.
The
following summarizes the convertible note;
| Note Principal |
Unamortized
Debt Discount
|
Conversion
Price per Share
|
Number of
Shares
Underlying
Convertible
Note
|
Interest
Expense
|
|||||||||||||
| $ |
2,170,000
|
— | $ | 0.01 | 217,000,000 | $ | 2,170,000 | ||||||||||
Long-Term
Convertible Notes – July 2008 (Longview Amended and Restated Note)
Debt
Extinguishment July 10, 2008
On July
10, 2008, the Company amended the terms of $2,175,000 of unsecured promissory
notes issued to Longview Fund, L.P. to (a) refinance the outstanding accrued
interest of $607,563 by adding it to the note balance, (b) extend the terms and
(c) to add a conversion feature. The new debt instrument contained a
fixed rate conversion feature of $0.0175 per share which did not previously
exist in the group of original notes being restated. Our analysis
indicated that the change in the terms along with the change in the embedded
conversion option qualified as a substantial modification, and accordingly
extinguishment of debt accounting should be applied. We recorded the
note in accordance with ASC 470-20 pertaining to the beneficial conversion
feature. Our calculation of the intrinsic value of the new embedded
conversion option was $2,305,552. Since the amended and restated
convertible note provide for immediate conversion, subject to a 4.9% “blocking
feature”, the entire debt discount has been charged to interest expense in
accordance with the guidance offered in ASC 470-20. Debt discount results from
the allocation of note proceeds to the intrinsic value of the embedded
conversion option.
The
following summarizes the convertible note;
| Note Principal |
Unamortized
Debt Discount
|
Conversion
Price per Share
|
Number of
Shares
Underlying
Convertible
Note
|
Interest
Expense
|
|||||||||||||
| $ |
2,782,563
|
— | $ | 0.0175 | 159,003,600 | $ | 2,305,552 | ||||||||||
No gain
or loss on extinguishment was recorded.
Debt
Extinguishment December 22, 2008
The
Longview Amended and Restated Note discussed above included a “full
ratchet” provision which resets the stated conversion rate for all subsequent
stock issuances that are less then the conversion price that would be in effect
at that time. On December 22, 2008, as a result of the Company
completing other financing arrangements at a lower conversion price, the reset
provision clause was triggered and established a new fixed conversion rate of
$0.01. Our analysis indicated that the change in the terms along with the change
in the embedded conversion option qualified as a substantial modification, and
accordingly extinguishment of debt accounting should be applied. The intrinsic
value of the convertible feature was determined to be
$1,085,000. In accordance with accounting guidance for
extinguishment of debt, we recorded a gain of $1,220,552, representing the
difference between the July 10, 2008 valuation of the convertible feature and
the December 10, 2008 valuation of the convertible feature.
F-35
The
following table summarizes the Gain on Extinguishment of debt arising from the
Long-Term Convertible Notes – July 2008 (Longview Amended and Restated
Note)
|
Long-Term
Convertible Notes – July 2008 (Longview Amended and Restated Note) –
Valuation of convertible feature at July 10, 2008
|
$ | 2,305,552 | ||
|
Long-Term
Convertible Notes – July 2008 (Longview Amended and Restated Note) –
Valuation of convertible feature at December 22, 2008
|
1,085,000 | |||
|
Gain
– Debt Extinguishment
|
$ | 1,220,552 | ||
The
following summarizes the convertible note after the Change in the conversion
amount;
| Note Principal |
Unamortized Debt
Discount
|
Conversion Price
per Share
|
Number of Shares
Underlying
Convertible Note
|
||||||||||
| $ |
2,782,563
|
— | $ | 0.01 | 278,256,300 | ||||||||
The
provision (benefit) for income taxes from continued operations for the years
ended December 31, 2009 and 2008 consist of the following:
|
2009
|
2008
|
|||||||
|
Current:
|
||||||||
|
Federal
|
$ | — | — | |||||
|
Deferred:
|
— | — | ||||||
|
Federal
|
(2,384,000 | ) | (5,771,000 | ) | ||||
|
Increase
in valuation allowance
|
2,384,000 | 5,771,000 | ||||||
|
Benefit
for income taxes, net
|
$ | — | — | |||||
|
|
|
December 31,
|
|
|
|
2009 and 2008
|
||||
|
Statutory
federal income tax rate
|
35.0
|
%
|
||
|
Increase
in valuation allowance
|
(35.0
|
)%
|
||
|
Effective
tax rate
|
—
|
%
|
||
Deferred
income taxes result from temporary differences in the recognition of income and
expenses for the financial reporting purposes and for tax purposes. The tax
effect of these temporary differences representing deferred tax asset and
liabilities result principally from the following:
|
Deferred
tax assets
|
||||||||
|
Net
operating loss carry-forwards
|
19,500,000 | 17,100,000 | ||||||
|
Stock-based
compensation
|
23,500 | 170,000 | ||||||
| 19,523,500 | 17,270,000 | |||||||
|
Valuation
allowance
|
(19,523,500 | ) | (17,270,000 | ) | ||||
|
Total
deferred tax assets, net of valuation allowance
|
— | — | ||||||
The
valuation allowance increased $2,253,500 from December 31, 2008 to December 31,
2009.
At
December 31, 2009 and 2008 the Company has a net operating loss carry-forward of
approximately $55.8 million and $48.9 million
respectively. These operating loss carry-forwards begin to
expire in 2024 and can offset future taxable income, subject to certain
limitations under section 382 of the Internal Revenue Code of 1986, as amended
and other limitations under state tax laws.
F-36
On
January 13, 2010, we amended our Royalty Sale and Option Agreement dated October
15, 2009 with Precious Royalties, LLC. The amended agreement allows
Precious Royalties until March 31, 2010 to purchase a 5% net smelter royalty on
our Obester Property for $4,500,000 less the $260,000 already paid by Precious
Royalties in 2009. Precious Royalties, in the event the entire
$4,500,000 is not paid, will receive a net smelter royalty on a pro rata
basis. In January 2010, Precious Royalties paid $550,000 increasing
their total net smelter royalty purchase amount to $810,000 ($260,000 from 2009
plus $550,000 from 2010). As of the date of this report, Precious
Royalties has purchased a 0.95% net smelter royalty on our Obester Property for
$810,000.
We filed
a definitive Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 on March 24, 2010. This Statement, which is being mailed to
shareholders on or about March 29, 2010, is furnished in accordance with the
requirements of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended. Notice was given that the holders of a majority of the shares
outstanding shares of the Company’s Common Stock (as of March 1, 2010) may act
by written consent to approve a reverse stock split of the Company’s issued and
outstanding Common Stock, as determined by the Company’s Board of Directors in a
ratio of 1:200.
.
In the
fourth quarter of 2009, we staked 165 lode mining claims in an area we called
the “West Lode”. This was contiguous to our earlier claims, and
extended the project footprint significantly to the northwest. Our
claim filings were initially accepted by the BLM and Washoe
County. However, in the first quarter of 2010, we were notified by
the BLM that a significant portion of this area had been withdrawn from mineral
entry as part of the Washoe County master plan, and thus rendered the
corresponding claims invalid. The remaining 43 lode mining claims
continue to be recognized as valid claims by the BLM.
Not
applicable.
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 Principal Executive Officer and
Principal Accounting 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 Principal Executive
Officer and our Principal Accounting Officer, to allow timely decisions
regarding required disclosures. Our Principal Executive Officer and our
Principal Accounting Officer concluded that, as of December 31, 2009, 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 and 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:
47
(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.
A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will
not be prevented or detected on a timely basis.
Management
has evaluated the effectiveness of the Company's internal control over financial
reporting as of December 31, 2009. Management based its assessment on the
framework set forth in COSO’s Internal Control – Integrated Framework (1992) in
conjunction with Securities and Exchange Commission Release No. 33-8820 entitled
"Commission Guidance Regarding Management’s Report on Internal Control Over
Financial Reporting Under Section 13(a) or 15(d) of the Securities and Exchange
Commission".
We
believe that internal control over financial reporting is effective as of
December 31, 2009. 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
have been no changes during the quarter ended December 31, 2009 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.
Item9B.
Other Information
Not
applicable.
Our board of directors directs the
management of the business and affairs of our Company as provided in our
certificate of incorporation, our by-laws and the Corporation Law of
Nevada
. Members of our board of directors keep
informed about our business through discussions with senior management, by
reviewing analyses and reports sent to them, and by participating in board and
committee meetings.
Board Leadership Structure and Risk
Oversight; Diversity
Our Company is led by Bill Nance, who
has served as our chairman of the board since 2007. The board has
three standing committees – audit, compensation and governance. Given
our size, we do not have standing committees with meet independence requirements
although that is our intention as we continue to grow, and the Board is
responsible for overseeing risk management, and our full board receives periodic
reports from management.
Our board leadership structure is used
by other smaller public companies in the Unites States, and we believe that this
leadership structure is effective for the Company. We believe that
having a separate Chairman and President is the correct form of leadership for
our Company. We have two leaders for our Company and oversight of
Company operations by experienced directors. We believe that our
directors provide effective oversight of the risk management function,
especially through dialogue between the full board and our
management.
48
The
Company does not currently consider diversity in identifying nominees for
director. Due to the small size of the Company, the priority has been
in attracting qualified directors, and issues such as diversity have not yet
been considered.
The
following table sets forth certain information regarding our directors and
officers:
|
Name
|
Age
|
Position
|
||
|
William
J. Nance
|
65
|
Director
|
||
|
Robert
A. Reseigh
|
64
|
Director,
Interim Chief Executive Officer
|
||
|
Scott
H. Jolcover
|
59
|
Director
|
||
|
Robert
T. Faber
|
50
|
Director
, President and CFO
|
||
|
James
Golden
|
51
|
COO
|
William J. Nance
has been a
director of our Company since October 2005. Mr. Nance is a Certified Public
Accountant and private consultant to the real estate and banking industries. He
is also President of Century Plaza Printers, Inc. Mr. Nance is also a Director
of Intergroup Corporation, Santa Fe and Portsmouth. Mr. Nance
provides financial and business expertise to the enterprise. The
Company has determined that Mr. Nance should serve as a director due to his long
history with the Company.
Scott H. Jolcover
has served
as an independent director since January 2008. Mr. Jolcover served as Manager of
the Plum Mine prior to and after it was acquired by GoldSpring in November 2003.
Since leaving GoldSpring in 2006, Mr. Jolcover has worked as a
consultant. Mr. Jolcover’s 25 year mining background and his network
of contacts in the industry provides knowledge to the board. The Company has
determined that Mr. Jolcover should serve as a director due to his extensive
mining experience and history with the Company.
Executive
Officers
Robert Reseigh, Interim
Chief Executive Officer and Director
Mr.
Reseigh was appointed as the Interim Chief Executive Officer in October 2009 and
had been an independent director of the Company since September
2008. Mr. Reseigh has over 35 years of experience in the mining and
underground construction industries. Mr. Reseigh, who holds an Engineer of Mines
degree from the Colorado School of Mines, is a mining and civil engineering
executive who has overseen over $1 billion in civil and mine construction
projects during his career. Mr. Reseigh spent nearly 20 years with the Peter
Kiewit organization, which is a recognized world leader in the mining industry.
He held several positions there, including Vice President and Area Manager for
Precious Metals Mine Projects. Mr. Reseigh also served as Executive Vice
President of Atkinson Construction Company, a subsidiary of Clark Construction,
where he directed all construction projects performed by the corporation. Mr.
Reseigh is a frequent speaker at mining and construction industry conferences
and has published several industry-specific papers. Mr. Reseigh has also been
appointed as a member of the Moles Association and the Beavers Association, East
Coast- and West Coast- based associations of prominent individuals in the heavy
construction industry.
The
Company has determined that Mr. Reseigh should serve as a director due to his
extensive experience in the mining industry.
49
Robert T. Faber,
CPA*
President and Chief
Financial Officer
Mr. Faber
is an executive with 20 years of diverse senior financial and operational
management, business and acquisition experience, including 10 years of
international business 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. Prior to joining
GoldSpring, Inc., Mr. Faber served as Vice President of United Site Services,
Inc., from 2002 until 2003, 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.
) The Company has determined that Mr. Faber should serve as a
director due to his long history with the Company and his finance and accounting
expertise.
(*License
inactive)
Jim Golden, Chief Operating
Officer
Mr.
Golden is a mining engineer with over twenty-five years of experience in the
mining industry before joining us in 2006. Mr. Golden’s mining
experience includes ten years with Peter Kiewit's mining division, where he was
a district manager. A graduate of Montana Tech, Mr. Golden has owned his own
consulting firm since 1990, where he has provided consulting services throughout
the world for over 50 mining companies.
Information
Relating to Corporate Governance and the Board of Directors
Our Board
of Directors has determined, after considering all the relevant facts and
circumstances, that Mr. each of Bob Reseigh and Scott
Jolcover is an independent director, as “independence” is defined by Nasdaq,
because they have no relationship with us that would interfere with their
exercise of independent judgment. Mr. Nance is not independent due to
his working relationship with John Winfield.
Our Board
of Directors had established three standing committees: an Audit Committee, a
Compensation Committee, and a Nominations and Corporate Governance Committee.
Due to the fact that Mr. Nance, who is not independent, was the sole Director
during most of 2007 and 2008, those Committees had been
inactive. However, the committees were revived effective January 1,
2009. Mr. Nance qualifies as an audit committee financial expert as defined
in Item 407(d)(5) of Regulation S-K, but is not independent as previously
stated The following is a summary of the members of each of the
committees:
Audit
Committee:
William
Nance – Chairperson
Robert
Reseigh
Compensation
Committee:
William
Nance – Chairperson
Scott
Jolcover
Corporate
Governance and Nomination Committee
Robert
Faber – Chairperson
Scott
Jolcover
The
Company has adopted a code of ethics that applies to Company’s principal
executive officer, principal financial officer and principal accounting
officer. The code of ethics may be found on the Company’s website at
www.GoldSpring.us
.
Section
16(a) Beneficial Ownership Reporting Compliance
Based
solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company during 2009, the Company has no knowledge of any person
who, at any time during the fiscal year, was a director, officer, beneficial
owner of more than ten percent of any class of equity securities of the Company,
or any other person subject to section 16 of the Exchange Act with respect to
the Company that failed to file on a timely basis, as disclosed in the above
Forms, reports required by section 16(a) of the Exchange Act during
2009.
50
The
following table sets forth, for the periods indicated, the total compensation
for services provided to us in all capacities by all executives who received
aggregate compensation exceeding $100,000 during 2009.
SUMMARY
COMPENSATION TABLE
|
|
Annual Compensation
|
Long-Term
Compensation
Awards
Securities
|
Stock Grant
|
|||||||||||||||
|
Name and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Underlying
Options (#)
|
Compensation
($)
|
TOTAL
|
||||||||||||
|
Robert
A. Reseigh, Interim CEO
(8)
(9)
|
2009
|
$ | 42,000 | $ | — | $ | — | $ | 42,000 | |||||||||
|
Robert
T. Faber(1)(2)
|
2009
|
180,000 | — | — | — | 180,000 | ||||||||||||
|
Robert
T. Faber(1)(2)
|
2008
|
180,000 | — | 80,000,000 | — | 180,000 | ||||||||||||
|
Robert
T. Faber(1)(2)
|
2007
|
180,000 | — | — | — | 180,000 | ||||||||||||
|
Jim
Golden, COO(3)
|
2009
|
150,000 | — | 150,000 | ||||||||||||||
|
Jim
Golden, COO(3)
|
2008
|
150,000 | 69,949 | — | — | 219,949 | ||||||||||||
|
Jim
Golden, COO(3)
|
2007
|
150,000 | — | 100,000,000 | — | 150,000 | ||||||||||||
|
Dennis
Anderson, Senior Engineer (4) (5)(7)
|
2009
|
92,400 | — | — | 30,000 | 122,400 | ||||||||||||
|
Dennis
Anderson, Senior Engineer (4) (5) (7)
|
2008
|
76,300 | — | — | 43,760 | 120,060 | ||||||||||||
|
Larry
Martin, Chief Geologist (6) (7)
|
2009
|
$ | 116,308 | $ | — | $ | 40,650 | $ | 156,958 | |||||||||
|
(1)
|
Mr.
Faber serves as the President and Chief Financial Officer. Mr.
Faber served as President and Chief Executive Officer from September 2004
through October 6, 2009 and Chief Financial Officer since June
2003.
|
|
(2)
|
$103,000
of Mr. Faber’s 2005 - 2009 salary has not yet been paid. We intend to pay
this amount in 2010.
|
|
(3)
|
Mr.
Golden has served as Chief Operating Officer since October 2006. Prior to
October 2006, Mr. Golden served as a consultant to our
Company
|
|
(4)
|
Mr.
Anderson is a part-time employee who dedicates 70% of his time to
GoldSpring.
|
|
(5)
|
Mr.
Anderson, as part of his employment arrangement, was granted a 5,000,000
share grant of which 2,500,000 shares were issued in 2008 and 2,500,000
were issued in 2009.
|
|
(6)
|
Mr.
Martin, pursuant to his employment agreement, was issued stock grants
totaling 3,500,000 shares during
2009.
|
|
(7)
|
We
base the value of stock grants at the market value of our common stock at
the date of issue.
|
|
(8)
|
Mr.
Reseigh was appointed as Chief Executive Officer on October 6,
2009.
|
|
(9)
|
Mr.
Reseigh does not draw a salary. Mr. Reseigh invoices us at a
rate of $1,000 per day.
|
51
Stock
Options
During
2009, we did not issue stock options to any employee, officer or director. There
were, however, shares of common stock underlying unexercised stock options at
December 31, 2009. This information is summarized herein below.
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, 2009, $144,277 was recognized as compensation
expense in the consolidated statements of loss with a corresponding increase in
contributed deficit. As at December 31, 2009, 176,000,000 stock options were
exercisable and the weighted average years to expiration were 8.3
years.
A summary
of the option activity under the Company’s share base compensation plan for the
fiscal years ended December 31, 2009 and 2008 is as follows:
|
|
2009 Options
|
2009
Weighted
Average
Exercise
Price
|
2008
Options
|
2008
Weighted
Average
Exercise
Price
|
||||||
|
Balance,
Beginning of year
|
182,000,000
|
$
|
0.01
|
10,000,000
|
$
|
0.01
|
||||
|
Granted
|
—
|
—
|
182,000,000
|
0,.01
|
||||||
|
Exercised
|
—
|
—
|
(10,000,000
|
)
|
0.01
|
|||||
|
Forfeited
|
—
|
—
|
0
|
—
|
||||||
|
Balance,
end of year
|
182,000,000
|
$
|
0.01
|
182,000,000
|
$
|
0.01
|
||||
|
Exercisable
at December 31, 2009
|
176,000,000
|
$
|
0.01
|
170,000,000
|
$
|
0.01
|
||||
OUTSTANDING
STOCK OPTION AWARDS FISCAL YEAR END FOR 2009
|
|
|
Option Awards
|
|
Stock Awards
|
|
|||||||||||||||||||
|
Name
and
Principal
Position
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
Option
Exercise
Price
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or Units
of
Stock
That
Have
Not
Vested
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
|
|
Number
of
Unearned
Shares or
Other
Rights
That
Have
Not
Vested
|
|
Market
Value or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
|
|
|||||
|
Robert
T. Faber
|
80,000,000
|
—
|
—
|
.01119
|
01/09/18
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
Jim
Golden
|
90,000,000
|
—
|
—
|
.00963
|
12/13/17
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
William
Nance
|
1,500,000
|
1,500,000
|
.02
|
9/30/18
|
||||||||||||||||||||
|
Robert
Reseigh
|
1,500,000
|
1,500,000
|
.02
|
9/30/18
|
||||||||||||||||||||
|
Jonathan
Jaffrey
|
1,500,000
|
1,500,000
|
.02
|
9/30/18
|
||||||||||||||||||||
|
Scott
Jolcover
|
1,500,000
|
1,500,000
|
.02
|
9/30/18
|
||||||||||||||||||||
52
|
|
Option Awards
|
|
|||||||||||
|
Name
and
Principal
Position
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
Option
Exercise
Price
|
|
Option
Expiration
Date
|
Fair Value of
Options at
December 31,
2009
|
||||
|
Robert
T. Faber
|
80,000,000
|
—
|
—
|
.01119
|
01/09/18
|
$
|
560,000
|
||||||
|
Jim
Golden
|
90,000,000
|
—
|
—
|
|
.00963
|
12/13/17
|
629,000
|
||||||
|
William
Nance
|
2,000,000
|
—
|
1,000,000
|
.02
|
9/30/18
|
14,000
|
|||||||
|
Robert
Reseigh
|
2,000,000
|
—
|
1,000,000
|
.02
|
9/30/18
|
14,000
|
|||||||
|
Scott
Jolcover
|
2,000,000
|
|
—
|
1,000,000
|
.02
|
9/30/18
|
14,000
|
||||||
|
Dennis
Anderson
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||
|
Larry
Martin
|
—
|
|
—
|
—
|
—
|
—
|
—
|
||||||
|
TOTAL
|
176,000,000
|
3,000,000
|
$
|
1,231,000
|
|||||||||
The fair
value of each grant was estimated at December 31, 2009 using the
Black-Scholes-Merton option pricing model. Black-Scholes-Merton
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.
|
|
2009
|
2008
|
||||||
|
Expected
volatility
|
233 | % | 199 | % | ||||
|
Expected
term (years)
|
5.14 | 5.14 | ||||||
|
Risk
free rate
|
2.23 | % | 3.09 | % | ||||
|
Dividend
Yield
|
0.0 | % | 0.0 | % | ||||
|
Weighted
average grant date fair value
|
$ | 0.01 | $ | 0.01 | ||||
OUTSTANDING
STOCK GRANT AWARDS AT FISCAL YEAR END FOR 2009
|
|
Stock Awards
|
|
|||||||||
|
Name
and
Principal
Position
|
Number
of
Shares
or Units
of
Stock
That
Have
Not
Vested
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
|
|
Number
of
Unearned
Shares or
Other
Rights
That
Have
Not
Vested
|
|
Market
Value or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
|
|
|||
|
Dennis
Anderson
|
—
|
—
|
—
|
—
|
|||||||
|
Jim
Golden
|
—
|
—
|
—
|
—
|
|||||||
|
William
Nance
|
—
|
—
|
—
|
—
|
|||||||
|
Robert
Reseigh
|
—
|
—
|
—
|
—
|
|||||||
|
Scott
Jolcover
|
—
|
—
|
—
|
—
|
|||||||
|
Dennis
Anderson
|
—
|
—
|
—
|
—
|
|||||||
|
Larry
Martin
|
1,500,000
|
$
|
11,100
|
—
|
$
|
—
|
|||||
53
Compensation
of Directors
The
following table summarizes any compensation given in 2009 and 2008:
DIRECTOR
COMPENSATION TABLE
|
Name
|
Year
|
|
Fees
Paid in
Cash (1)
|
|
Stock
Awards
|
|
Fair Value
of Stock Grant
at
Issue Date
|
|
Option
Awards
|
Fair Value
of Options
At Grant
Date
|
|
All Other
Compensation
|
|
Total
|
|
||||||
|
William
Nance
|
2009
|
$
|
18,750
|
—
|
$
|
—
|
—
|
$
|
—
|
$
|
—
|
$
|
18,750
|
||||||||
|
William
Nance
|
2008
|
7,500
|
15,000,000
|
167,850
|
3,000,000
|
71,139
|
—
|
246,489
|
|||||||||||||
|
Robert
Reseigh
|
2009
|
12,088
|
—
|
—
|
—
|
—
|
—
|
12,088
|
|||||||||||||
|
Robert
Reseigh
|
2008
|
4,834
|
—
|
—
|
3,000,000
|
71,139
|
—
|
75,973
|
|||||||||||||
|
Jonathan
Jaffrey (2)
|
2009
|
14,667
|
—
|
—
|
—
|
14,667
|
|||||||||||||||
|
Jonathan
Jaffrey
|
2008
|
5,667
|
—
|
—
|
3,000,000
|
71,139
|
—
|
76,806
|
|||||||||||||
|
Scott
Jolcover
|
2009
|
12,088
|
—
|
12,088
|
|||||||||||||||||
|
Scott
Jolcover
|
2008
|
4,834
|
5,000,000
|
66,550
|
3,000,000
|
71,139
|
—
|
142,523
|
|||||||||||||
|
Robert
Faber
|
2009
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
Robert
Faber
|
2008
|
—
|
—
|
$
|
—
|
—
|
$
|
$
|
—
|
$
|
—
|
||||||||||
|
(1)
|
As
of January 31, 2010, unpaid director fees totaled $129,000. We
intend to pay this during 2010.
|
|
(2)
|
On
November 9, 2009, Mr. Jaffrey resigned from the board of
directors.
|
DIRECTOR
COMPENSATION TABLE
|
Name
|
|
Fees
Earned
or
Paid in
Cash
|
|
Stock
Awards
|
|
Option
Awards
|
|
Non-Equity
Incentive Plan
Compensation
|
|
Nonqualified
Deferred
Compensation
Earnings
|
|
All Other
Compensation
|
|
Total
|
|
||||
|
William
Nance
|
$
|
7,500
|
15,000,000
|
3,000,000
|
—
|
—
|
—
|
—
|
|||||||||||
|
Robert
Reseigh
|
4,834
|
—
|
3,000,000
|
—
|
—
|
—
|
—
|
||||||||||||
|
Jonathan
Jaffrey
|
5,667
|
—
|
3,000,000
|
||||||||||||||||
|
Scott
Jolcover
|
4,834
|
5,000,000
|
3,000,000
|
||||||||||||||||
|
Robert
Faber
|
$
|
—
|
—
|
—
|
|||||||||||||||
The
following table sets forth certain information regarding the beneficial
ownership of our common stock as of December 31, 2009 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.
54
|
Title of Class Owned or into
Which Warrants / Options are Convertible
|
Name and Address of Beneficial
Owner (and Title for Employees,
Officers and Directors)
|
Amount and
Nature of Beneficial
Ownership(1)
|
Percent of
Class(2)
|
|||||||
|
Officers
and Directors
|
||||||||||
|
Common
Stock
|
Robert
A. Reseigh – Director & CEO
PO
BOX 1118
1200
American Flat Road
Virginia
City, NV 89440
|
1,875,000 | 0.1 | % | ||||||
|
Common
Stock
|
Robert
T. Faber – Director, President & CFO
PO
BOX 1118
1200
American Flat Road
Virginia
City, NV 89440
|
80,180,000 | 2.1 | % | ||||||
|
Common
Stock
|
James
Golden-COO
PO
BOX 1118
1200
American Flat Road
Virginia
City, NV 89440
|
98,265,714 | 2.6 | % | ||||||
|
Common
Stock
|
William
Nance – Director
2025
Avenue of the Stars
Los
Angeles, CA 90067
|
17,000,000 | 0.5 | % | ||||||
|
Common
Stock
|
Scott
Jolcover – Director
PO
Box 1298
Carson
City, NV 89702
|
23,923,904 | 0.7 | % | ||||||
|
All
Officers and Directors as a Group
|
221,369,618 | 6.1 | % | |||||||
|
Other
5% Holders
|
||||||||||
|
Common
Stock
|
None
|
|||||||||
|
(1)
|
Includes, when applicable, shares
owned of record by such person’s minor children and spouse and by other
related individuals and entities over whose shares of common stock such
person has custody, voting control, or power of disposition. Also includes
shares of common stock that the identified person had the right to acquire
within 60 days of December 31, 2008 by the exercise of vested stock
options.
|
|
(2)
|
The percentages shown include the
shares of common stock that the person will have the right to acquire
within 60 days of December 31, 2008. In calculating the percentage of
ownership, all shares of common stock which the identified person will
have the right to acquire within 60 days of December 31, 2008 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.
|
55
EQUITY
COMPENSATION PLAN INFORMATION
See Part
II Item 5
There
were no related party transactions as described in Item 404 of Regulation S-K
during the fiscal years 2009 and 2008.
The
aggregate fees billed to our company by Jewett Schwartz, for the fiscal years
ended December 31, 2009 and December 31, 2008, are as follows:
|
|
2008
|
2007
|
||||||
|
Audit
fees
|
$
|
40,000
|
$
|
52,500
|
||||
|
Audit-related
fees
|
$
|
12,000
|
$
|
10,000
|
||||
|
Tax
fees
|
$
|
10,000
|
$
|
10,000
|
||||
|
All
other fees
|
$
|
0
|
$
|
0
|
||||
Audit
Committee Pre-Approval Policies
The
charter of our Audit Committee provides that the duties and responsibilities of
our Audit Committee include the pre-approval of all audits, audit-related, tax,
and other services permitted by law or applicable SEC regulations (including fee
and cost ranges) to be performed by our independent auditor. Any pre-approved
services that will involve fees or costs exceeding pre-approved levels will also
require specific pre-approval by the Audit Committee. Unless otherwise specified
by the Audit Committee in pre-approving a service, the pre-approval will be
effective for the 12-month period following pre-approval. The Audit Committee
will not approve any non-audit services prohibited by applicable SEC regulations
or any services in connection with a transaction initially recommended by the
independent auditor, the purpose of which may be tax avoidance and the tax
treatment of which may not be supported by the Internal Revenue Code and related
regulations.
To the
extent deemed appropriate, the Audit Committee may delegate pre-approval
authority to the Chairman of the Audit Committee or any one or more other
members of the Audit Committee provided that any member of the Audit Committee
who has exercised any such delegation must report any such pre-approval decision
to the Audit Committee at its next scheduled meeting. The Audit Committee will
not delegate to management the pre-approval of services to be performed by the
independent auditor.
Our Audit Committee
requires that our independent auditor, in conjunction with our Chief Financial
Officer, be responsible for seeking pre-approval for providing services to us
and that any request for pre-approval must inform the Audit Committee about each
service to be provided and must provide detail as to the particular service to
be provided. Our Audit Committee Chair and Audit Committee Financial Expert is
William Nance.
|
(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 -
1
|
|
|
Consolidated
Balance Sheet
|
F -
2
|
|
|
Consolidated
Statements of Operations
|
F -
4
|
|
|
Consolidated
Statements of Changes in Stockholders' Deficiency
|
F -
5
|
|
|
Consolidated
Statements of Cash Flows
|
F -
6
|
|
|
Notes
to Consolidated Financial Statements
|
|
|
(2)
|
Exhibits filed as part of this
Report:
|
56
|
Exhibit
Number
|
Exhibit
|
|
|
23.1
|
Consent
of Jewett, Schwartz Wolfe & Associates
|
|
|
31.1
|
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 2002
|
|
|
32.2
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of
2002
|
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.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
GoldSpring,
Inc.
|
||
|
/s/ Robert T. Faber
|
||
|
Robert
T. Faber
|
||
|
President,
and
Director
(Principal
Financial Officer)
|
||
|
Date
April 9, 2010
|
Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
Signature
|
Title
|
Date
|
||
|
/s/ ROBERT
T. FABER
|
President,
Chief Financial Officer and Director
|
April 9,
2010
|
||
|
Robert
T. Faber
|
(Principal
Financial Officer)
|
|||
|
/s/
scott
h. jolCover
|
Director
|
April
9, 2010
|
||
|
Scott
H. Jolcover
|
||||
|
/s/
William
Nance
|
Chairman
of the Board and Director
|
April
9, 2010
|
||
|
William
Nance
|
||||
|
/s/
Robert
a. reseigh
|
Director,
Interim Chief Executive Officer
|
April
9, 2010
|
||
|
Robert
A. Reseigh
|
(Principal
Executive Officer)
|
57
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission Of Matters To A Vote Of Security HoldersPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 8. Financial Statements and Supplementary DataNote 1 Nature Of BusinessNote 2 Going ConcernNote 3 Summary Of Significant Accounting PoliciesNote 4 Mineral RightsNote 5 Property and Equipment, NetNote 6 Reclamation Bond DepositNote 7 Long-term Reclamation Liability and Deferred Reclamation ExpenseNote 8 - Convertible DebenturesNote 9 Debt ObligationNote 10 - Debt ConcentrationNote 11 Financial InstrumentsNote 12 Fair Value MeasurementsNote 13 Stockholders EquityNote 14 - Earnings Per ShareNote 15- Share Based CompensationNote 16- Stock WarrantsNote 17 Extinguishment Of DebtNote 18 Income TaxesNote 19 - Subsequent EventsItem 9. Changes and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A (t). Controls and ProceduresItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountants Fees and ServicesItem 15. Exhibits Financial Statement Schedules