# Comstock Inc.: Form 10-K for the period ended Dec 31, 2009

- Company: [Comstock Inc.](/companies/lode.md) (CIK 1120970)
- Form: 10-K
- Filed: 2010-04-12
- Accepted by EDGAR: Apr 12, 2010, 06:07 ET
- Period: 2009-12-31
- Accession: 0001144204-10-019468
- Inline XBRL: no
- Main document: https://www.sec.gov/Archives/edgar/data/1120970/000114420410019468/v179963_10k.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1120970/000114420410019468/

## Business

As filed, 7,178 characters.

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.

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.

| Name | Location | Type |
| --- | --- | --- |
| Comstock Lode Gold and Silver Properties | Storey and Lyon Counties, Nevada | Gold and silver lode claims |
| Spring Valley and Gold Canyon (South Comstock) | Lyon County, Nevada | Placer and lode gold and silver claims |
| Como | Lyon County, Nevada | Gold and silver lode claims |
| Big Mike | Pershing County, Nevada | Copper lode claims |

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.

### 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

- 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.
- 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.

## Risk factors

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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.

**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.

***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.

***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.

***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.

***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.

***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.

## Properties

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### 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.

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.

### 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 31st, 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.

### 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.

### 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

### 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.

### 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.

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

### 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

### 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

## Legal proceedings

As filed, 286 characters.

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.

## Management's discussion and analysis

As filed, 28,018 characters.

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.

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.

### 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:

- 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 10th, 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.

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.

### 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.

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.

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.

## Controls and procedures

As filed, 3,732 characters.

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:

(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.

Filed Apr 12, 2010.
Source: SEC EDGAR, the filing index for accession 0001144204-10-019468. Last ingested by Listed: Nov 4, 2026, 17:20 ET. No prices; not investment advice.