U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _______

Commission file number 1-12401

WITS BASIN PRECIOUS MINERALS INC.

(Exact Name of Registrant as specified in Its Charter)

Minnesota		84-1236619
(State or Other Jurisdiction of		(I.R.S. Employer Identification No.)
Incorporation or Organization)

80 South 8^th Street, Suite 900, Minneapolis, MN 55402

(Address of Principal Executive Offices)

612.349.5277

(Issuer’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

As of November 11, 2005, there were 65,554,159 shares of common stock, $.01 par value, outstanding.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

WITS BASIN PRECIOUS MINERALS INC.

FORM 10-QSB INDEX

SEPTEMBER 30, 2005

		Page

PART I	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	4

	Condensed Consolidated Balance Sheets - As of September 30, 2005 and December 31, 2004	4

	Condensed Consolidated Statements of Operations - For the three months and nine months ended September 30, 2005 and September 30, 2004	5

	Condensed Consolidated Statements of Cash Flows -For the nine months ended September 30, 2005 and September 30, 2004	6

	Notes to the Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Controls and Procedures	29

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 5.	Other Information	31

Item 6.	Exhibits	31

	Signatures	32

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-QSB contains certain statements which are forward-looking in nature and are based on the current beliefs of our management as well as assumptions made by and information currently available to management, including statements related to the uncertainty of the quantity or quality of probable ore reserves, the fluctuations in the market price of such reserves, general trends in our operations or financial results, plans, expectations, estimates and beliefs. In addition, when used in this Form 10-QSB, the words “may,”“could,”“should,”“anticipate,”“believe,”“estimate,”“expect,”“intend,”“plan,”“predict” and similar expressions and their variants, as they relate to us or our management, may identify forward-looking statements. These statements reflect our judgment as of the date of this Form 10-QSB with respect to future events, the outcome of which is subject to risks, which may have a significant impact on our business, operating results or financial condition. Readers are cautioned that these forward-looking statements are inherently uncertain. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein. We undertake no obligation to update forward-looking statements. The risks identified in the section of Item 2 entitled “RISK FACTORS,” among others, may impact forward-looking statements contained in this Form 10-QSB.

WITS BASIN PRECIOUS MINERALS INC., and SUBSIDIARIES

(AN EXPLORATION STAGE COMPANY)

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets

		(unaudited) September 30, 2005			December 31, 2004
ASSETS
CURRENT ASSETS
Cash and equivalents	$	77,184		$	1,122,348
Receivables		--			30,817
Prepaid expenses		455,839			317,276
Investment		8,292			18,904
Total current assets		541,315			1,489,345

PARTICIPATION MINING RIGHTS, net		153,179			840,310
DEBT ISSUANCE COSTS, net		14,611			80,359
	$	709,105		$	2,410,014

LIABILITIES and SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Promissory notes payable	$	269,190		$	87,279
Accounts payable		107,252			191,631
Accrued expenses		54,190			133,595
Total current liabilities		430,632			412,505


ACCRUED GUARANTY FEE		30,000			30,000
PRIVATE PLACEMENT ESCROW		--			734,950
Total liabilities		460,632			1,177,455

COMMITMENTS and CONTINGENCIES

SHAREHOLDERS’ EQUITY
Common stock, $.01 par value, 150,000,000 shares authorized;
64,038,639 and 42,601,612 shares issued and outstanding		640,386			426,016
Additional paid-in capital		33,377,910			31,388,817
Warrants		6,727,031			5,238,405
Accumulated deficit		(22,932,460	)		(22,932,460	)
Deficit accumulated during exploration stage, subsequent
to April 30, 2003		(17,564,394	)		(12,888,219	)
Total shareholders’ equity		248,473			1,232,559
	$	709,105		$	2,410,014

See accompanying notes to condensed consolidated financial statements

WITS BASIN PRECIOUS MINERALS INC., and SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,						May 1, 2003 (inception) to
	2005			2004			2005			Restated 2004			September 30, 2005
Revenues	$	--		$	--		$	--		$	--		$	--

Operating Expenses:
General and administrative		724,163			208,941			3,193,196			1,324,018			6,332,151
Exploration expenses		379,068			201,624			1,007,055			903,114			7,503,887
Depreciation and amortization		--			75,234			105,650			160,956			433,997
Stock issued as penalty		--			--			--			2,152,128			2,152,128
Loss on impairment of Brazmin		--			--			(75,000	)		466,578			667,578
Loss on disposal of assets		--			--			--			--			1,633
Total operating expenses		1,103,231			485,799			4,230,901			5,006,794			17,091,374
Loss from Operations		(1,103,231	)		(485,799	)		(4,230,901	)		(5,006,794	)		(17,091,374	)

Other Income (Expense):
Interest income		(47	)		--			--			--			2,225
Interest expense		(193,211	)		(124,583	)		(434,661	)		(166,113	)		(729,706	)
Unrealized loss on investment		(8,842	)		--			(10,613	)		--			(10,613	)
Total other expense		(202,100	)		(124,583	)		(445,274	)		(166,113	)		(738,094	)
Loss from operations before income tax
refund and discontinued operations		(1,305,331	)		(610,382	)		(4,676,175	)		(5,172,907	)		(17,829,468	)
Benefit from income taxes		--			--			--			--			243,920
Loss from Continuing Operations	$	(1,305,331	)	$	(610,382	)	$	(4,676,175	)	$	(5,172,907	)	$	(17,585,548	)

Discontinued Operations (See Note 11)
Gain from discontinued operations		--			--			--			--			21,154
Net Loss	$	(1,305,331	)	$	(610,382	)	$	(4,676,175	)	$	(5,172,907	)	$	(17,564,394	)

Basic and Diluted Net Loss
Per Common Share:
Continuing operations	$	(0.02	)	$	(0.02	)	$	(0.08	)	$	(0.16	)	$	(0.48	)
Discontinued operations		--			--			--			--			--
Net Loss	$	(0.02	)	$	(0.02	)	$	(0.08	)	$	(0.16	)	$	(0.48	)

Basic and diluted weighted average
outstanding shares		62,704,111			33,404,653			60,432,512			32,864,214			36,452,385

See accompanying notes to condensed consolidated financial statements

WITS BASIN PRECIOUS MINERALS INC., and SUBSIDIARIES

(AN EXPLORATION STAGE COMPANY)

Condensed Consolidated Statements of Cash Flows

(unaudited)

		Nine months ended September 30,						May 1, 2003 (inception) to September 30,
		2005			2004			2005

OPERATING ACTIVITIES:
Net loss	$	(4,676,175	)	$	(5,172,907	)	$	(17,564,394	)
Adjustments to reconcile net loss to cash flows from operating activities:
Depreciation and amortization		105,650			160,956			433,997
Loss on disposal of assets		--			--			1,633
Loss on impairment of Brazmin		--			466,578			742,578
Issue of common stock for exploration rights		94,000			--			4,935,290
Amortization of participation mining rights		581,481			695,500			1,946,821
Amortization of debt issuance costs		65,748			29,222			116,886
Amortization of original issue discount		324,999			144,446			577,778
Amortization of prepaid consulting fees related to issuance of warrants and common stock		846,064			--			1,510,147
Compensation expense related to stock options and warrants		265,497			199,467			734,995
Contributed services by an executive		75,000			60,000			179,500
Issuance of common stock as penalty related to October 2003 private placement		--			2,152,128			2,152,128
Unrealized loss on investment		10,613			--			10,613
Interest expense related to issuance of common stock and warrants		67,647			--			67,647
Changes in operating assets and liabilities:
Accounts receivable, net		50,817			--			63,017
Prepaid expenses		132,511			248,637			176,877
Accounts payable		(84,378	)		269,773			54,111
Accrued expenses		(79,406	)		(5,506	)		(141,398	)
Net cash used in operating activities		(2,219,932	)		(751,706	)		(4,001,774	)

INVESTING ACTIVITIES:
Proceeds from sale of Brazmin		--			25,000			25,000
Investment in participation mining rights		--			(378,482	)		(2,239,121	)
Net cash used in investing activities		--			(353,482	)		(2,214,121	)

FINANCING ACTIVITIES:
Payments on long-term debt		(127,781	)		(40,861	)		(293,281	)
Private placement advances held in escrow		(734,950	)		--			--
Cash proceeds from issuance of common stock		1,628,669			--			4,725,272
Cash proceeds from exercise of stock options		--			152,400			169,900
Cash proceeds from exercise of warrants		158,830			131,608			302,938
Cash proceeds from short-term debt		250,000			--			250,000
Cash proceeds from long-term debt		--			650,000			650,000
Debt issuance costs		--			(131,497	)		(131,497	)
Net cash provided by financing activities		1,174,768			761,650			5,673,332

Change in Cash and Equivalents; and Liabilities of Discontinued Operations		--			(13,580	)		(77,293	)
Decrease in Cash and Equivalents		(1,045,164	)		(357,118	)		(619,856	)
Cash and Equivalents, beginning of period		1,122,348			363,990			697,040
Cash and Equivalents, end of period	$	77,184		$	6,872		$	77,184

See accompanying notes to condensed consolidated financial statements

WITS BASIN PRECIOUS MINERALS INC.

(AN EXPLORATION STAGE COMPANY)

Notes to Condensed Consolidated Financial Statements

September 30, 2005

(unaudited)

NOTE 1 - NATURE OF BUSINESS

Wits Basin Precious Minerals Inc., and subsidiaries (“we,” “us,” “our,” “Wits Basin” or the “Company”) is a minerals exploration and development company based in Minneapolis, Minnesota. We currently have interests in mineral exploration projects in South Africa, Canada and Colorado. Our primary holding is a 35 percent interest in the company Kwagga Gold (Proprietary) Limited (“Kwagga”), which holds the rights and interests in the “FSC Project,” an exploration project covering approximately 110,000 hectares (approximately 270,000 acres) adjacent to the historic Witwatersrand goldfields in South Africa. We own the exploration rights of the “Holdsworth Project,” a property consisting of 19 contiguous patented mining claims covering approximately 304 hectares (approximately 750 acres), located in the Wawa area near the village of Hawk Junction, Ontario, Canada. The mining claims allow us to conduct exploration and exploitation activities in the near surface oxide zone of the Holdsworth Project. In June 2004, we entered into an option agreement to earn a 70 percent interest in five mining claims covering approximately 1,295 hectares (approximately 3,200 acres) in the McFaulds Lake area of the James Bay Lowlands, Attawapiskat Region of northern Ontario, currently held under option by an affiliate of ours, Hawk Precious Minerals Inc. (“Hawk”). The area is a site of a VMS (volcanogenic massive sulphide) base metals project. On January 21, 2005, we acquired purchase rights under a purchase agreement, which provides us with exploration rights of the Bates-Hunter Gold Mine located in Central City, Colorado and the possible future purchase of the assets of the Hunter Gold Mining Corporation. As of the date of this report, we do not claim to have any mineral reserves on any project.

Our principal office is located at 80 South 8^th Street, Suite 900, Minneapolis, Minnesota 55402. Our telephone number is (612) 349-5277 and our Internet address is www.witsbasin.com.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Financial Statement Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Form 10-KSB filed March 31, 2005. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the year as a whole.

Segment Reporting

We have a single operating segment of minerals exploration.

Revenue Recognition

We currently do not generate revenues from the FSC, the Holdsworth, McFaulds Lake or the Bates-Hunter projects. Furthermore, we do not expect to generate revenues for the remainder of fiscal 2005. We estimate that the Bates-Hunter project, should the historical data prove accurate, would be the first project to provide a source of revenue.

Net Loss per Common Share

Basic and diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the periods presented. The impact of common stock equivalents has been excluded from the computation of weighted average common shares outstanding, as the net effect would be antidilutive.

Use of Estimates

Preparing financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Income Taxes

We account for income taxes using the liability method to recognize deferred income tax assets and liabilities. Deferred income taxes are provided for differences between the financial reporting and tax bases of our assets and liabilities at currently enacted tax rates.

We have recorded a full valuation allowance against the net deferred tax asset due to the uncertainty of realizing the related benefits.

Exploration Costs

Exploration costs incurred in the search for new minerals are charged to expense as incurred.

Off Balance Sheet Arrangements

As of September 30, 2005, we did not have any off-balance sheet activities (including the use of structured finance or special purpose entities) or any trading activities in non-exchange traded commodity contracts that have a current or future effect on our financial condition, changes in the financial condition, revenues or expenses, results of operation, liquidity, capital expenditures or capital resources that are material to our investors.

Stock Based Compensation

As permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” we currently account for share-based payments to employees using the intrinsic value method under Accounting Principles Board (“APB”) Opinion No. 25. As such, we do not recognize compensation cost related to employee stock options if the exercise price of the options equals or exceeds the fair value of the underlying stock at issuance date. Our general policy is to grant stock options and warrants at fair value at the date of grant. We recorded expense related to stock based compensation issued to non-employees in accordance with SFAS No. 123.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 123(R), “Share-Based Payment,” which is a revision of SFAS No. 123, and supersedes APB Opinion No. 25. Statement No. 123(R) requires all share-based payments to employees and directors, as well as other equity-based compensation arrangements, to be recognized in the financial statements based on their fair values, using prescribed option-pricing models. On April 14, 2005, the SEC adopted a new rule that amended the compliance dates for Statement No. 123(R), such that we are now allowed to adopt the new standard effective January 1, 2006. The pro forma disclosures previously permitted under SFAS No. 123 will no longer be an alternative to financial statement recognition after that date.

For the quarter ended September 30, 2005, and as still permitted by SFAS No. 123, we accounted for share-based payments to employees using the APB Opinion No. 25 intrinsic value method. We recorded no compensation expense for the three months ended September 30, 2005 as compared to $27,492 for the same period in 2004 and we recorded no compensation expense for the nine months ended September 30, 2005 as compared to $61,272 for the same period in 2004. However, had compensation expenses for employees been recognized based upon the fair value of options at the grant date consistent with the provisions of SFAS No. 123, our results would have been as follows:

		Three Months Ended September 30,						Nine Months Ended September 30,						May 1, 2003 (inception) to
		2005			2004			2005			Restated 2004			September 30, 2005
Net loss:	$	(1,305,331	)	$	(610,382	)	$	(4,676,175	)	$	(5,172,907	)	$	(17,564,394	)
Stock based employee
compensation expense
included in net loss (1)	$	--		$	27,492		$	--		$	61,272		$	88,764
Stock based employee
compensation expense
determined under the fair
value based method (1)	$	--		$	(50,000	)	$	(359,564	)	$	(1,235,965	)	$	(5,055,908	)
Pro forma net loss	$	(1,305,331	)	$	(632,890	)	$	(5,035,739	)	$	(6,347,600	)	$	(22,531,538	)
Loss per share (basic and diluted)
As reported	$	(0.02	)	$	(0.02	)	$	(0.08	)	$	(0.16	)	$	(0.48	)
Pro forma	$	(0.02	)	$	(0.02	)	$	(0.08	)	$	(0.19	)	$	(0.62	)

(1) Reported net of related tax effect.

In determining the compensation expense of the options granted during the three and nine months ended September 30, 2005 and 2004, as specified by SFAS No. 123, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes pricing model and the weighted average assumptions used in these calculations are summarized below.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Risk free interest rate		4.5	%		4.5	%		4.5	%		4.5	%
Expected life of options granted		10 years			10 years			10 years			10 years
Expected volatility factor		169	%		339	%		177	%		354	%
Expected dividend yield		--			--			--			--

The impact of adopting Statement No. 123(R) can not be predicted at this time because it will depend on levels of share-based payments granted in the future, valuation methodology adopted and assumptions selected at the time of future grants. Upon adoption of Statement No. 123(R), we may elect to utilize a different valuation method and/or different valuation assumptions. These selections may have a significant impact on the amount of share-based payment expense under Statement No. 123(R).

NOTE 3 - RECEIVABLES

On August 3, 2004, we completed a termination agreement in which we sold our South American subsidiary, Brazmin Ldta., back to the original owner. In that agreement, we were due an additional $25,000 payment due on December 31, 2004. The final payment was received January 3, 2005.

On December 2, 2004, we entered into an agreement with MacDonald Mines Exploration Ltd., whereby they can earn a 55 percent interest (subject to the 2% royalties) in the McFaulds Lake Project. One of the provisions under the agreement required MacDonald to make a cash payment of Cdn$10,000 by December 31, 2004, which we extended until January 31, 2005. This cash payment is pro rata shared between Hawk Precious Minerals Inc., Canada, and us on our respective 30 percent and 70 percent basis. The US Dollar value of our 70 percent (Cdn$7,000) was $5,817 on December 31, 2004. We received the payment in January 2005.

NOTE 4 - PREPAID EXPENSES

In November 2003, we issued 150,000 five-year warrants exercisable at $0.60 per share and 500,000 shares of our common stock as consulting fees in connection with marketing and public relations services. The five-year warrants were valued at $155,000 using the Black-Scholes pricing model and the common stock was valued at $230,000 based on the closing price of our common stock as listed on the OTCBB. The total amount recorded, $385,000 is being amortized over a period of two years beginning in November 2003.

In January 2005, we issued 2,000,000 warrants (which expire on December 31, 2006) exercisable at $0.225 per share as consulting fees in connection with international marketing and public relations services provided by a foreign corporation, Caribbean Consultants Holdings Associated S.A. The warrants were valued at $710,664 using the Black-Scholes pricing model and are being amortized over a one-year period (beginning in January 2005) to coincide with the term of the consulting agreement.

In April 2005, we issued (i) 300,000 shares of our common stock (valued at $73,200 based on an average five day closing sale price of our common stock) and 300,000 two-year warrants (valued at $54,794 using the Black-Scholes pricing model), exercisable at $0.50 per share as compensation to a consultant, related to our website marketing and monitoring programs; (ii) 150,000 two-year warrants (valued at $32,994 using the Black-Scholes pricing model) in 50,000 increments exercisable at $0.25, $0.50 and $0.75 per share as compensation to a consultant, related to advice of the investment capital markets and investment banking relationships and (iii) 150,000 two-year warrants (valued at $28,668 using the Black-Scholes pricing model) exercisable at $0.30 per share as compensation to two consultants (one 50,000 and one 100,000 issuance) who directly will be working with us on the Bates-Hunter project. Amortization of these issuance costs will vary between one and two years.

In May 2005, we entered into warrant exercise agreements with two warrant holders, allowing them a reduced exercise price on previously issued and outstanding warrants. They held an aggregate of 3,063,834 warrants exercisable with a range of original pricing was from $0.40 to $5.50 per share. Each warrant exercise agreement allows for monthly exercises with an exercise price of $0.20 per share. For the three months ending September 30, 2005, an aggregate of 354,150 warrants were exercised providing net proceeds of $70,830. For the nine months ending September 30, 2005, an aggregate of 794,150 warrants were exercised providing net proceeds of $158,830. Each month thereafter, until March 31, 2006, they can exercise an aggregate of 262,400 warrants. Should each warrant holder exercise their maximum monthly allotment, we would net $52,480 per month. An additional expense resulted from the modification of these warrants and was calculated using the Black-Scholes pricing model. An additional $209,817 was recorded and is being amortized over an eleven month period to coincide with the terms of the agreements.

In September 2005, we issued 50,000 shares of our common stock (valued at $7,000 based on an average five day closing sale price of our common stock and amortized over a four month period to coincide with the terms of the agreement) as compensation to a consultant related to advice of the investment capital markets.

The other prepaid expenses contain amounts we have prepaid for marketing purposes. We have engaged the services of a variety of firms for increased market exposure, including: direct mailing campaigns, emailing to opt-in investment community members, minerals trade publications, research analysts, luncheons and special invite events of minerals based investors and improvements to our website (www.witsbasin.com). All other prepaid expenses are being expensed as utilized.

Components of prepaid expenses are as follows:

	September 30, 2005		December 31, 2004
Prepaid consulting fees	$	431,491	$	160,417
Other prepaid expenses		24,348		156,859
	$	455,839	$	317,276

The estimated usage during the quarter ending December 31, 2005, will be approximately $325,000.

NOTE 5 - INVESTMENT

On June 10, 2004, we entered into an option agreement to earn a 70% interest in five mining claims in the McFaulds Lake area of the James Bay Lowlands, Attawapiskat Region of northern Ontario, currently held under option by an affiliate of ours, Hawk Precious Minerals Inc. On December 2, 2004, we entered into an agreement with MacDonald Mines Exploration Ltd. (“MacDonald”) whereby they can earn a 55 percent interest (subject to the 2% royalties) in the McFaulds Lake Project. One of the provisions under the agreement required MacDonald to issue 250,000 shares of its common stock. This stock issuance is pro rata shared between Hawk and us on our respective 30 percent and 70 percent basis. The US Dollar value of our 70 percent (175,000 shares of MacDonald, TSXV:BMK) was $18,904 on December 31, 2004. The US Dollar value of our 175,000 shares was $8,292 on September 30, 2005. We consider this a current asset since we contemplate selling these shares during the final quarter of 2005.

NOTE 6 - PARTICIPATION MINING RIGHTS

The Participation Mining Rights were the initial investments we made in the mineral exploration projects of: (i) the FSC Project in South Africa, (ii) the Holdsworth and McFaulds Lake projects in Canada, and (iii) the South American project, Brazmin, Ltda., which was purchased and sold within the 2004 calendar year. These investments were in the form of: (a) shares of our common stock and warrants issued to purchase the rights to explore or buy assets, (b) cash expenditures required by the agreements we entered into to obtain those rights, (c) historical costs we recorded as part of certain acquisitions, and (d) impairment charges we recognized. We have amortized all of the projects costs except for the remaining cash balance held by Kwagga for the FSC Project. We do not have the right to a refund of that remaining balance, except for very specific events and therefore do not consider those funds to be a prepaid expense, but an investment in exploration. As described below, regarding the results from the second drillhole, BH48, we believe that the FSC Project has better merit today that it did when we first obtained it back in June 2003.

We have adopted the policy to expense all further exploration project costs as incurred until we can establish a timeline for revenue recognition from either the mining of a mineral or the sale of a developed property.

FSC and Holdsworth Projects

In June 2003, we acquired two exploration projects in a transaction with Hawk Precious Minerals USA, Inc., (“Hawk USA”), a wholly owned subsidiary of Toronto-based Hawk Precious Minerals Inc., (“Hawk”). Hawk is an affiliate of ours. One of the projects is the FSC Project, in which we have acquired a 35 percent equity interest in the company Kwagga Gold (Proprietary) Limited (“Kwagga”) in exchange for a $2,100,000 investment. Kwagga is a wholly owned subsidiary of AfriOre International (Barbados) Ltd., (“AfriOre”). Kwagga holds the exploration rights for the FSC Project covering approximately 110,000 hectares (approximately 270,000 acres) located in the Republic of South Africa adjacent to the major goldfields discovered at the historic Witwatersrand Basin. AfriOre is a precious minerals exploration company with offices in Johannesburg, South Africa and the operator of the FSC Project

To date, we have invested $2,100,000 in Kwagga, which is being used to fund a three drillhole exploration program on the FSC Project that commenced in October 2003. Once the current exploration activities being conducted on the FSC Project are complete, estimated to be completed June 2006, AfriOre and Kwagga will deliver to us a report describing the results of these activities. Within 120 days of our receipt of that report, we have the option to increase our ownership position in Kwagga to 50 percent in exchange for a further investment of $1,400,000. We have had initial conversations with AfriOre regarding possible financing options for the next investment. If we choose not to make this additional investment, then we would continue to own the shares representing our 35 percent interest, but we would no longer have any rights to increase our participation and would be subject to dilution resulting from any additional investment in Kwagga. Furthermore, should Kwagga fail to complete the entire drillhole program, we could realize a complete loss of the funds advanced to Kwagga.

AfriOre consults with us regarding the work to be carried out on the FSC Project. AfriOre is responsible for ensuring that the property and the project are at all times in compliance with applicable laws. AfriOre is also required to provide us with quarterly written reports describing the work completed and the funds expended therewith. As consideration for its role as the project operator, AfriOre is entitled to a fee equal to 10 percent of all qualified expenditures made in connection with the FSC Project.

In accordance with South African legislation, Kwagga will offer to a black economic empowerment group an option to purchase up to a 28 percent equity stake in Kwagga at a price to be mutually agreed upon by us, Kwagga and AfriOre. If such empowerment groups exercises such right to be granted, our interest in Kwagga would be proportionately diluted. For example, if we own 50 percent of Kwagga’s outstanding capital stock prior to the time any black economic empowerment group purchases a 28 percent stake, we would own 36 percent of Kwagga’s outstanding capital after the sale.

After all of the funds contributed by us and any black empowerment group have been expended on the FSC Project, we, AfriOre and any such empowerment group will contribute on a pro rata basis all such further amounts necessary to continue funding the exploration work on the project on a pro rata basis. In the event any of the parties do not fully contribute in proportion to their respective equity interest in Kwagga, such party’s interest will be proportionately diluted.

Certain components of our Participation Mining Rights are based on the distributions made by us to Kwagga and further advanced to AfriOre to fund the drillhole program of the FSC Project. Of the $2,100,000 already invested in Kwagga, $153,179 remains in their cash reserves at September 30, 2005. The majority of all exploration costs that AfriOre deals in, is denominated in the South African Rand, whereas all of our funding has been in the US Dollar. Since June 30, 2003, the Rand has appreciated against the Dollar by approximately 20 percent. This reduction plus the cost overruns associated with BH47 and BH48 (the additional depth drilled on each drillhole and sidewall repair on BH48) are the major factors that have contributed to decreasing our initial 5 to 7 drillhole program on the FSC to be revised to only a three drillhole program. Furthermore, should the Dollar weaken further in relationship to the Rand, we may sustain additional reductions in the number of drillholes completed with our investment.

Currently, AfriOre has completed two drillholes. The initial drillhole, BH47 (completed in June 2004) was drilled in the southern structural block to a depth of 2,984 meters (approximately 9,800 feet) and intersected a well developed succession of lower Proterozoic rocks before it was terminated in a zone of shearing. Although BH47 was not successful in intersecting Witwatersrand rocks to the depths drilled, it provided valuable information which refined the next target selection. The second drillhole, BH48 (completed in August 2005) was drilled to a depth of 2,559 meters (approximately 8,400 feet) and intersected over 600 meters of quartzites, below cover rocks which included a relatively thin succession of Transvaal Supergroup sedimentary rocks (160 meters) and Ventersdorp Supergroup lavas (132 meters) below the Karoo Supergroup rocks. The quartzites have been positively identified as Witwatersrand rocks, both through stratigraphic correlation and age dating analysis. Although the age dating determinations indicated an age of the quartzites in accordance with that of the Witwatersrand Supergroup, expert consultants engaged by the AfriOre correlated the quartzites with the West Rand Group of the Witwatersrand Supergroup. Also identified in BH48 were a number of bands of pyrite mineralization which, while returning assays results with negligible amounts of gold, nevertheless were consistent with similar features encountered throughout the rocks in the main Witwatersrand Basin. In order for AfriOre to begin preparation to commence on the third drillhole, they must receive the drilling permit (issued by the Department of Minerals and Energy, which is currently in process) and be provided with additional satisfaction that we have secured funds of at least $400,000.

The other exploration project we acquired from Hawk USA in June 2003, located in the Wawa area near the village of Hawk Junction, Ontario, Canada, is the Holdsworth Project. The Holdsworth Project consists of 19 contiguous patented mining claims covering approximately 304 hectares (approximately 750 acres). The mining claims allow us to conduct exploration and exploitation activities in the near surface oxide zone of the Holdsworth Project. Once we have secured the financing, which we estimate to be approximately $150,000, we plan to conduct pre-exploration activities on the Holdsworth Project. The primary objective of these pre-exploration activities will be to confirm the results of prior exploration activities conducted on or near this property. Until we have the results of the pre-exploration activities, we will not be in a position to determine the scope and cost of further exploration activities, if any, necessary for the Holdsworth Project.

Hawk USA’s contributions of its right in the FSC Project and its mining claims held in the Holdsworth Project were valued at their historical cost, an aggregate of $246,210. Based on the information we obtained from Hawk, we estimated that the value attributable to the FSC Project was $228,975. Based on this, the remaining value of $17,235 was assigned the Holdsworth Project.

McFaulds Lake

In June 2004, we entered into an option agreement to earn a 70 percent interest in five mining claims covering approximately 1,295 hectares (approximately 3,200 acres) in the McFaulds Lake area of the James Bay Lowlands, Attawapiskat Region of northern Ontario currently held under option by Hawk. The area is a site of a VMS (volcanogenic massive sulphide) base metals project.

The option agreement required us to pay Cdn$60,000 ($45,501 US) and issue 200,000 shares of our common stock, valued at $84,000; therefore, we recorded our initial investment in McFaulds Lake at $129,501.

In December 2004, we entered into an agreement with MacDonald, whereby they can earn a 55 percent interest (subject to the 2% royalties) in the McFaulds Lake Project. The option required MacDonald to make a cash payment of Cdn$10,000, issue 250,000 shares of its common stock, and pay the Cdn$200,000 exploration expenditures required by the option. An initial drillhole has been completed and no mineral value was detected from the assay. The Cdn$10,000 cash payment and the issuance of the 250,000 shares transpired in January 2005 and were divided between Hawk and us on our respective 30 percent and 70 percent basis. Our portion was valued at US$24,721 at December 31, 2004.

The ownership of the option will not be transferred from Hawk to MacDonald and us until the final exploration expenditure has been incurred prior to December 2005. Furthermore, regardless if any of the work scheduled is not completed, the terms of the option agreement requires that the entire Cdn$200,000 is a mandatory expenditure.

Components of participation mining rights are as follows:

	September 30, 2005		December 31, 2004
Investment made in Kwagga	$	2,100,000	$	2,100,000
Historical value assigned to the FSC Project		228,975		228,975
Historical value assigned to the Holdsworth Project		17,235		17,235
Miscellaneous costs (1)		82,889		82,889
McFaulds Lake		129,501		129,501
Gross Participation Mining Rights		2,558,600		2,558,600
Less exploration expenditures report by AfriOre and Kwagga		1,946,821		1,365,340
Less earn in option with MacDonald in McFaulds Lake (2)		24,721		24,721
Less amortization (3)		433,879		328,229
	$	$153,179	$	840,310

(1)	Includes the June 2003 Hawk agreement costs and the issuance of an option to a former director.

(2)	In exchange for the option agreement with MacDonald, they made a cash payment of Cdn$10,000 (our pro rata share in US Dollar value was $5,817) and issued 250,000 shares of their common stock (our pro rata share in US Dollar value was $18,904) both valued as of December 31, 2004.

(3)	All costs have been fully amortized as of June 30, 2005 and the remaining balance of $153,179 represents the cash balance held by Kwagga/AfriOre.

NOTE 7 - DEBT ISSUANCE COSTS

On June 1, 2004, we received gross proceeds of $650,000 pursuant to the issuance of an 18-month secured convertible promissory note to Pandora Select Partners LP, a Virgin Islands limited partnership. We paid or accrued $131,497 of debt issuance costs for the following: (i) origination fees of $40,000; (ii) legal fees of $17,747; (iii) guaranty fees of $48,750; and consulting services fees of $25,000, which are being amortized on a straight-line basis over an 18-month period. The monthly amortization is approximately $7,300 per month. In order to effectuate the note, Pandora required an additional personal guaranty. Wayne W. Mills, a former board member of ours, provided that guaranty.

The following table summarizes the amortization of debt issuance costs:

	September 30, 2005		December 31, 2004
Gross debt issuance costs	$	131,497	$	131,497
Less: amortization of debt issuance costs		116,886		51,138
Debt issuance costs, net	$	14,611	$	80,359

NOTE 8 - PROMISSORY NOTES PAYABLE

Secured Convertible Promissory Note with Pandora Select Partners LP

On June 1, 2004, we received gross proceeds of $650,000 in consideration for issuing an 18-month secured convertible promissory note (the “Note”) to Pandora Select Partners LP (“Pandora”), a Virgin Islands limited partnership. The Note is secured by substantially all of our assets and bears interest of 10 percent per annum. The principal and interest payment is as follows: (a) payments of $5,417 in cash of interest only were payable in arrears on June 28, July 28 and August 28, 2004; and (b) commencing on September 28, 2004, and on the 28th day of each of the following 14 months, we are required to pay amortized principal and interest of $46,278. Notwithstanding the foregoing, in lieu of cash, we may satisfy our repayment obligations by issuing shares of our common stock. The number of shares of our common stock which may be issued to repay any or all of any monthly obligation may not exceed the lesser of: (i) 10 percent of the aggregate number of traded shares of our common stock for the 30 trading days immediately preceding such monthly payment date or (ii) the greatest number of shares of our common stock which, when added to the number of shares of our common stock beneficially owned by Pandora, would not cause Pandora to beneficially own more than 4.99 percent of the our outstanding common stock. If we elect to pay the required monthly payment in shares of common stock (which we elected to do, see the discussion that follows) the per-share value is equal to 85 percent of the average of the high closing bid price of our common stock during the 20 trading days immediately preceding the payment date.

Furthermore, Pandora has the right to convert any portion of the principal or interest of the Note outstanding into shares of our common stock based on a conversion rate equal to the average of the high closing bid prices of our common stock for the 30 trading days immediately preceding the regular monthly payment. However, in no event shall such conversion rate be lower than $0.35 or higher than $0.65 per share.

Since we did not have an effective resale registration statement filed with the SEC covering the shares issuable upon exercise of the five-year warrants (described below) or the shares of common stock issued as payment under or upon conversion of this Note by November 28, 2004, and Pandora did not consent to an extension, the contingent interest clause became effective. The Note specified that for each full month thereafter (prorated for partial months) that the failure continued, we were required to pay additional interest equal to the greater of $1,000 or one percent (1%) of the outstanding principal balance on the Note as of the last day of the prior month. We satisfied the requirement with an effective resale registration statement on February 14, 2005, paid $10,524 in contingent interest and do not have any further contingent interest to contend with beyond the February 2005 payment.

As further consideration for the financing, we issued to Pandora a five-year warrant to purchase up to 928,571 shares of our common stock and issued five-year warrants to purchase an aggregate of 200,000 shares of our common stock to two affiliates of Pandora, both at a price of $0.40 per share, subject to adjustment as defined in the agreement. We issued additional five-year warrants to purchase an aggregate of 475,000 of our common stock to the guarantor of the Note. The proceeds of $650,000 were allocated between the Note and the warrant based on the relative fair values of the securities at the time of issuance. The resulting original issue discount, the fair value of the warrant is being amortized over the life of the Note using the straight-line method, which approximates the interest method.

The following table summarizes the secured promissory note balance:

Original gross proceeds	$	650,000
Less: original issue discount at time of issuance of note		(650,000	)
Less: principal payments		(558,588	)
Add: amortization of original issue discount		577,778
Balance at September 30, 2005	$	19,190

Through March 31, 2005, all principal and interest payments were made in cash. All subsequent payments have been paid by the issuance of common stock. The per-share value is equal to 85 percent of the average of the high closing bid price of our common stock during the 20 trading days immediately preceding the payment date.

The following table summarizes the issuance of our common stock for principal and interest payments.

	April 2005		May 2005		June 2005
Eighty-five percent of average bid price (1)	$	0.20	$	0.20	$	0.15
Monthly principal	$	43,305	$	43,666	$	44,030
Monthly interest	$	2,973	$	2,612	$	2,248
Shares of common stock issued		226,180		236,086		309,698

		July 2005		Aug. 2005		Sep. 2005
Eighty-five percent of average bid price (1)	$	0.14	$	0.13	$	0.10
Monthly principal	$	44,397	$	44,767	$	45,140
Monthly interest	$	1,881	$	1,511	$	1,138
Shares of common stock issued		320,170		362,374		452,369

(1) Rounding occurred in calculating the shares to be issued.

As of September 30, 2005, the Note is current.

Promissory Note with Andrew Green

As additional consideration for the PN, we agreed to amend the terms of a warrant (originally issued as part of our October 2003 private placement) to purchase up to 500,000 shares of our common stock held by Mr. Green to reduce the exercise price per share from $0.25 per share to $0.01 per share based on a default provision in the PN, and we recorded a non-cash interest charge of $55,284 based on the Black-Scholes pricing model. Furthermore, since we had not repaid the PN in full by July 15, 2005, we were required to issue 50,000 shares of our unregistered common stock for each month there remained an outstanding balance beginning August 15, 2005, up to a maximum issuance of 150,000 shares. As of September 30, 2005, we have issued 100,000 of such penalty shares and on October 15, 2005 we issued the final 50,000 penalty shares. We recorded the issuance of these penalty shares as an additional interest component, valuing each issuance with the closing sale price of our common stock. For the quarter ending September 30, 2005, we recorded $15,000 in additional non-cash interest expense.

In August 2005, Mr. Green exercised the warrant to purchase 500,000 shares of common stock (which shares have been registered for re-sale under a current prospectus dated May 4, 2005) and we deducted the new warrant exercise price ($0.01 per share) of $5,000 from the accrued interest owed to him from the PN.

The PN had a due date of September 15, 2005. On October 18, 2005, Mr. Green informed us that he did not consider us in default as of September 16, 2005 and furthermore was open to providing additional funding options to us. See Note 13 - Subsequent Events for information regarding changes in the PN.

Secured Convertible Promissory Note with Pacific Dawn Capital, LLC

Under the Pacific Loan Agreement, beginning October 1, 2005, we have the right to draw up to $100,000 per month (up to an aggregate of $600,000) by providing Pacific notice of our intent to exercise a monthly draw along with a report of the exploration operations for the Bates-Hunter. Pacific has the right to reject the draw if it is not satisfied with the report. If we fail to exercise a draw during any month, we waive our right to draw the $100,000 for that month.

On October 3, 2005, we drew the initial monthly amount of $100,000 and issued to Pacific (i) 500,000 shares of our un-registered common stock (with piggyback registration rights) and (ii) issued a five-year warrant to purchase up to 1,000,000 shares of our common stock with an exercise price of $0.12 per share, subject to adjustment as defined in the agreement.

For each subsequent $100,000 monthly draw, we will issue another five-year warrant to purchase up to 1,000,000 shares of our common stock with an exercise price of $0.12 per share. Should we not draw down any additional monthly draws, we are required to issue 500,000 shares of our common stock as an early termination fee, provided that Pacific has not rejected any of our attempted monthly draws. After the initial draw occurs, we must pay interest in arrears on or prior to the last day of each calendar month, unless converted into common stock.

We also provided Pacific certain preemptive rights under the Pacific Loan Agreement. Furthermore, Pacific has the right to convert any portion of the principal or interest of the Pacific Note outstanding into shares of our common stock based on a conversion rate equal to $0.20 per share. We do have the right to call the Pacific Note at any time the average over 20 consecutive trading days of the daily average of the high and low fair market value of our common stock is at or above $0.50 per share and the shares are registered. See Note 13 - Subsequent Events information regarding changes in the Pacific Note.

NOTE 9 - ACCRUED GUARANTY

In action brought in District Court, City and County of Denver, Colorado, the Company was named a defendant in a proceeding brought by Farmers State Bank of Ft. Morgan, Colorado, in which is was alleged that the Company was liable to the plaintiff as a result of its guaranty of certain secured debt obligations in the aggregate amount of approximately $314,000 of Meteor Marketing, Inc. Meteor Marketing was formerly a subsidiary of Meteor Industries, Inc., until April 2001 when it was sold prior to the completion of the merger transaction between Meteor Industries and activeIQ Technologies Inc., (“Old AIQ”). In October 2003, Meteor Marketing reached a settlement with Farmers State Bank and the matter was dismissed without prejudice. Pursuant to the settlement agreement, Meteor Marketing is required to make monthly payments of approximately $2,600. As of September 30, 2005, the principal balance is approximately $216,000, with an additional accrued interest of approximately $23,000 due.

On October 25, 2005, Farmers State Bank contacted all parties relating to the debt obligation above and made an offer to settle. Farmers State Bank would accept a loan discount offer of $200,000 to satisfy the outstanding debt and accrued interest provided that: (i) Meteor Marketing submits a written acceptance of the offer to discount on or before November 10, 2005, and (ii) that Meteor Marketing pays the $200,000 no later than December 20, 2005. No written notice was made and therefore Farmers State Bank will proceed with a formal foreclosure process to recover the full payoff balance (on October 25, 2005, the principal amount was $215,904 and accrued interest was $23,251) along with their attorney’s fees. This debt obligation has remained past due since November 15, 2004.

The guaranty to the potential liability to Farmers State Bank was not disclosed to us at the time the Meteor Industries-Old AIQ merger was completed in April 2001 and although we were not obligated to make any payments to the bank, we remain contingently liable pursuant to the guaranty. In connection with the merger and the sale by Meteor Industries of all of its operating subsidiaries to Capco Energy, Inc., the Meteor subsidiaries and Capco Energy agreed to indemnify us for any claims relating to any of the subsidiaries. Accordingly, in the event Farmers State Bank seeks to hold us liable under the guaranty, we will seek indemnification from the Meteor subsidiaries and Capco Energy.

Pursuant to FASB Interpretation No. (FIN) 45, the guaranty was valued in the amount of $30,000 during the year ended December 31, 2003.

NOTE 10 - PRIVATE PLACEMENT ESCROW

We were holding advances of $734,950 in escrow related to a private placement of units of our securities, which we completed on January 7, 2005.

NOTE 11 - DISCONTINUED OPERATIONS

Until April 30, 2003, we provided accounting software through our Accounting Software Business and until March 14, 2003, we provided industry-specific solutions for managing, sharing and collaborating on business information on the Internet though our Hosted Solutions Business. We sold substantially all of the assets relating to our Accounting Software and Hosted Solutions Businesses as of such dates.

As a result of the sale of the Hosted Solutions Business and Accounting Software Business, we became an exploratory stage company effective May 1, 2003.

NOTE 12 - RESTATEMENT

Statement of Operations Restatement for the Nine Months Ended September 30, 2004

The condensed consolidated statement of operations are restated to reflect the cumulative changes for the quarters (i) ended March 31, 2004 (to reflect the reclassification of the issuance of common stock ‘penalty’ shares related to a private placement that was completed in October 2003 (an additional expense of $2,152,128) and the reduction of amortization of exploration acquisitions ($241,255)) with a net result of these reclassifications resulting in an increase in net loss of $1,910,873 and loss per share increased of $0.06; and (ii) June 30, 2004 (to restate the loss on impairment of the subsidiary of Brazmin) with a net result of the reclassification resulting in a decrease in net loss of $392,000 and loss per share decrease of $0.01.

NOTE 13 - SUBSEQUENT EVENTS

On October 10, 2005, we entered into a short-term loan arrangement with a shareholder of ours (an individual resident of Minnesota) whereby we borrowed $100,000 through a purchase agreement with an unsecured promissory note. The promissory note bears an interest rate of six percent per annum and matures on April 10, 2006. As further consideration for the financing, we issued a five-year warrant to purchase up to 1,000,000 shares of our common stock with an exercise price of $0.12 per share, subject to adjustment as defined in the agreement.

On November 1, 2005, we renegotiated our financing agreements with Mr. Green and Pacific Dawn Capital, LLC. Mr. Green entered into a new loan and security agreement (the “Green Note”) whereby his original $250,000 unsecured note (“Existing Financing”) was combined to allow us to draw up to an aggregate of $600,000, on terms similar to the Pacific Loan Agreement, as amended. In consideration for the Existing Financing, we issued a five-year warrant to purchase up to 2,500,000 shares of our common stock with an exercise price of $0.12 per share, subject to adjustment as defined in the agreement. On November 9, 2005, we drew the initial monthly amount of $100,000 and issued to Mr. Green (i) 500,000 shares of our un-registered common stock (with piggyback registration rights) and (ii) issued a five-year warrant to purchase up to 1,000,000 shares of our common stock with an exercise price of $0.12 per share. The Green Note bears interest of 12 percent per annum. The Green Note requires no payments until the maturity date of April 30, 2006. We have the option to prepay interest accruing on any given month by paying either (i) the amount of the monthly accrual in cash or (ii) by issuing 50,000 shares of common stock. The Green Note is convertible at Mr. Green’s option at a conversion rate of $0.20 per share. We have a call option that triggers at any time the average over 20 consecutive trading days of the daily average of the high and low fair market value of our common stock is at or above $0.50 per share and the shares are registered. In order to effectuate the Green Note, Mr. Green required an additional personal guaranty. Stephen D. King, a board member of ours, provided that guaranty. In exchange for agreeing to personally guaranty our obligations under the Green Note, we issued a two-year warrant to purchase 1,000,000 shares of our common stock at a price of $0.15 per share to Mr. King (or his assigns).

Contemporaneously, we amended the Pacific Loan Agreement and Pacific Note to allow for similar terms between Mr. Green and Pacific and to enable the parties to have equal security interests in our Company. Pursuant to an intercreditor agreement between Mr. Green and Pacific, Mr.Green is pari passu in a secondary security interest to the assets of the Company. The amended note allows Pacific to receive a monthly interest rate of 12 percent per annum (versus the original rate of six percent). Furthermore, the amended note requires no payments until the maturity date of April 30, 2006 and the monthly interest payments have been modified as follows: we have the option to prepay interest accruing on any given month by paying either (i) the amount of the monthly accrual in cash or (ii) by issuing 50,000 shares of common stock.

As described above, since September 30, 2005, we have received an aggregate sum of $400,000 in new debt financing (with no funds allocated for the FSC Project), issued 1,000,000 shares of common stock and issued 8,500,000 in purchase warrants, all related to the new debt.

On October 25, 2005, Farmers State Bank contacted all parties relating to an original debt obligation of $314,000 of Meteor Marketing, Inc., and that they would accept a loan discount offer of $200,000 to satisfy the outstanding debt and accrued interest provided that: (i) Meteor Marketing submits a written acceptance of the offer to discount on or before November 10, 2005, and (ii) that Meteor Marketing pays the $200,000 no later than December 20, 2005. No written notice was made and therefore Farmers State Bank will proceed with a formal foreclosure process to recover the full payoff balance (on October 25, 2005, the principal amount was $215,904 and accrued interest was $23,251) along with their attorney’s fees. See Note 9 - Accrued Guaranty for more information.

WITS BASIN PRECIOUS MINERALS INC.

(AN EXPLORATION STAGE COMPANY)

Item 2. Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The following management’s discussion and analysis of financial condition and results of operations should be read in connection with the accompanying unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report and the audited consolidated financial statements and notes thereto included in the Company’s Form 10-KSB for the fiscal year ended December 31, 2004.

OVERVIEW

In the future, we will continue to seek new areas for exploration and the rights that would allow us to be either owners or participants. These rights may take the form of direct ownership of mineral exploration or, like our interest in the FSC Project, these rights may take the form of ownership interests in entities holding exploration rights. Furthermore, although our main focus is in gold exploration projects, future projects may involve other minerals.

Our principal office is located at 80 South 8^th Street, Suite 900, Minneapolis, Minnesota 55402. Our telephone number is (612) 349-5277 and our Internet address is www.witsbasin.com.

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004.

Revenues

We had no revenues from continuing operations for the three and nine months ended September 30, 2005 and 2004. Furthermore, we do not anticipate having any future revenues until an economic mineral deposit is discovered or unless we make further acquisitions or complete other mergers or joint ventures with business models that produce such results. It is our estimate that the Bates-Hunter Gold Mine could possibly be the first revenue producing project in our current portfolio.

Operating Expenses

General and administrative expenses were $724,163 for the three months ended September 30, 2005 as compared to $208,941 for the same period in 2004. General and administrative expenses were $3,193,196 for the nine months ended September 30, 2005 as compared to $1,324,018 for the same period in 2004. Of the expenses reported in 2005, the majority related primarily to our investor relations programs, which included direct mailing campaigns, emailing campaigns, minerals trade publications, research analysts, luncheons and special invite events and improvements to our website. We anticipate the future investor relation expenditures will decrease for the remainder of fiscal 2005. Whereas, for the period in 2004, the primary use of dollars went to litigation expense due to a lawsuit from a former CEO.

Exploration expenses were $379,068 for the three months ended September 30, 2005 as compared to $201,624 for the same period in 2004. Exploration expenses were $1,007,055 for the nine months ended September 30, 2005 as compared to $903,114 for the same period in 2004. Exploration expenses for 2005 relate to: (i) expenditures being reported on the work-in-process from the project operator, AfriOre, at the FSC Project site, (ii) McFaulds Lake and (iii) the Bates-Hunter project. We anticipate the rate of spending for the remaining fiscal 2005 exploration expenses will increase due to the due diligence exploratory work at the Bates-Hunter. Exploration expenses for 2004 related to the expenditures being reported on the work-in-process from the project operator, AfriOre, at the FSC Project site and the expenses related to the Brazmin project, which we disposed of in August 2004.

We recorded no amortization expenses for the three months ended September 30, 2005 as compared to $75,234 for the same period in 2004. Amortization expenses were $105,650 for the nine months ended September 30, 2005 as compared to $160,956 for the same period in 2004. Amortization expenses for 2005 include the FSC and McFaulds Lake, both of which will be fully amortized by June 30, 2005. Amortization expenses for 2004 include the FSC and Holdsworth Projects, whereby Holdsworth was fully amortized by December 31, 2004. No further amortization will occur for the remainder of 2005 unless we acquire a project that would allow such practice.

We recorded a loss on impairment for the three and six months ended June 30, 2004 relating to our South American subsidiary project, Brazmin. Upon further analysis of Brazil’s business policies, and further review of the history of discoveries made within the region of the Brazmin properties and our ability to furnish capital on the required schedule, we re-evaluated the rewards that Brazmin offered. We concluded that Brazmin was not a proper fit to our long-term goals and arranged with the previous owner a termination of the original purchase agreement. We recorded a loss on impairment of $466,578 against the value of Brazmin. Furthermore, in June 2005, we received a $75,000 cash payment from the previous owner for our release of future rights we still held in the Brazmin project. We recorded this cash payment as a component of the loss on impairment of Brazmin, since it was a form of recovery of the prior subsidiary.

Other Income and Expense

Our other income and expense consists of interest income, interest expense and loss of investment. On June 15, 2005 we entered into a note receivable in the amount of $20,000 relating to an exercise of a warrant. The note was secured by pledging 100,000 shares of our common stock. The note receivable accrued interest at five percent per annum. The note was paid in July 2005 but we did not collect the de-minimus interest of $47. Therefore, for the three months ended September 30, 2005, we reversed the $47 of interest income recorded in the prior quarter and no interest income is recorded for the nine months ended September 30, 2005. Interest expense for the three months ended September 30, 2005 was $193,211 compared to $124,583 for the same period in 2004. Interest expense for the nine months ended September 30, 2005 was $434,661 compared to $166,113 for the same period in 2004. The 2005 interest expense relates to the notes payable (including non-cash interest and penalties) and we anticipate that interest expense for the final quarter of 2005 will increase due to the new debt financing we have secured. For the three months ended September 30, 2005, we recorded an unrealized loss of $8,842 on the common stock we hold in MacDonald Mines Exploration Ltd., a Toronto Stock Exchange listed company. For the nine months ended September 30, 2005, we’ve recorded an unrealized loss amount of $10,613. We received the shares as a form of compensation for their 55 percent earn in option in the McFaulds Lake Project. We constructively received these shares on December 31, 2004 and anticipate selling them in the final quarter of 2005.

Liquidity and Capital Resources

Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual and operating needs as they arise. We have funded our operations and satisfied our capital requirements primarily through the sale of our business assets and the sale of securities. We do not generate sufficient net positive cash flows from our operations to fund the next twelve months. For the quarters ended September 30, 2005 and 2004, we had net cash used in operating activities of $2,219,932 and $751,706, respectively.

We had working capital of $110,683 at September 30, 2005, compared to $1,076,840 at December 31, 2004. Cash and equivalents were $77,184 at September 30, 2005, representing a decrease of $1,045,164 from the cash and equivalents of $1,122,348 at December 31, 2004.

On June 1, 2004 we received gross proceeds of $650,000 in consideration for issuing an 18-month secured convertible promissory note (the “Note”) to Pandora Select Partners LP, a Virgin Islands limited partnership. The Note is secured by substantially all of our assets. The Note bears interest of 10 percent per annum. The principal and interest payment is as follows: (a) payments of $5,416.67 in cash of interest only were payable in arrears on June 28, July 28 and August 28, 2004; and (b) commencing on September 28, 2004, and on the 28th day of each of the following 14 months, we are required to pay amortized principal and interest of $46,278.15. Notwithstanding the foregoing, in lieu of cash, we may satisfy our repayment obligations by issuing shares of our common stock, which we did for the payments due the months of April through September 2005. We issued an aggregate amount of 1,906,877 shares and as of September 30, 2005, the Note is current.

On June 10, 2004, we entered into an option agreement to earn a 70 percent interest in five mining claims in the McFaulds Lake area of the James Bay Lowlands, Attawapiskat Region of northern Ontario, currently held under option by Hawk. The option agreement required cash payments of Cdn$60,000 (US$45,501) and the issuance of 200,000 shares of our non-registered common stock, valued at $84,000. On December 2, 2004, we entered into a farm out option agreement with MacDonald Mines Exploration Ltd. whereby they can earn a 55% interest (subject to a 2% royalty) in the McFaulds Lake Project by (i) making a Cdn$10,000 cash payment, (ii) issuing 250,000 shares of their common stock and (iii) paying exploration expenditures of Cdn$200,000. Our pro-rata portion of the Cdn$10,000 ($5,817) has been received along with 175,000 shares of MacDonald, valued at $8,292 for the quarter ended September 30, 2005.

As of September 30, 2004, we have invested $2,100,000 in Kwagga, which is being used to fund a three drillhole exploration program on the FSC Project that commenced in October 2003. A balance of US$153,179 remains in Kwagga’s account as of September 30, 2005. Once the entire $2,100,000 has been expended, we will have a further right to increase our equity position in Kwagga for an additional $1,400,000 cash investment.

In September and October 2004, certain warrant holders exercised on previously issued and outstanding warrants at an exercise price of $0.25 per share, providing gross proceeds of $144,108. The holders were offered a reduced price for a limited time and converted into 576,461 shares of common stock. The range of original price of the warrants exercised was from $0.50 to $5.50 per share.

On January 7, 2005, we completed a private placement of units of our securities, each unit consisting of one share of our common stock and a warrant to purchase one-half share of common stock at an exercise price of $0.25 per share. The warrants have an expiration date of December 31, 2006. We sold an aggregate of 25,050,000 units, resulting in gross proceeds of $2,505,000. In connection with the private placement, we engaged a placement agent, Galileo Asset Management SA, Switzerland. As compensation for their services, we agreed to pay compensation: (i) a commission payable in cash equal to 7% of the gross proceeds resulting from the agent’s selling efforts; and (ii) a warrant to purchase such number of shares (at an exercise price of $0.25 per share) of common stock equal to 6% of the units sold as a result of their efforts. In accordance with such terms, we have paid cash commission of $22,750, and issued a warrant to purchase 195,000 shares of our common stock (at an exercise price of $0.25 per share) with an expiration date of December 31, 2006. The warrants were valued at $61,383 using the Black-Scholes pricing model and are recorded as a component in the shareholders’ equity section under Warrants.

On January 21, 2005, we closed on an assignment of a purchase agreement (the “Purchase Agreement”) by and among us, Hunter Corporation and Swaisland. Swaisland has sold us his rights to purchase the assets of the Hunter Corporation. The Hunter Corporation owns a 100% interest in the Bates-Hunter Gold Mine and the Golden Gilpin Mill located in Central City, Colorado. We have begun our due diligence on the Bates-Hunter Gold Mine, which requires cash expenditures of approximately $1,190,000 (we have recorded expenses of approximately $290,000 as of September 30, 2005). Our rights under the Purchase Agreement required us to be completed with our due diligence by November 30, 2005, at which time, should the historical data prove viable, we may complete the purchase of the assets held by the Hunter Corporation for a fixed price of $3,000,000. Effective August 25, 2005, providing that we maintain a $75,000 cash balance in the checking account for the Bates-Hunter, we have received the following extensions: (i) we have until December 31, 2005 to complete the first phase of due diligence testing, (ii) we have until April 30, 2006 to complete the second phase of due diligence testing, and (iii) we have until May 31, 2006 to close on the purchase of the assets (from the previous date of November 30, 2005). The assets consist of the Bates-Hunter Mine, the Golden Gilpin Mill, a water treatment plant, mining properties, claims, permits and all ancillary equipment. In addition to the $3,000,000 purchase price, we will issue the following additional compensation: (i) we will issue a warrant to Swaisland to purchase 1,000,000 shares of our common stock at a price per share equal to the 10-day closing average sale price of our common stock; (ii) Swaisland will retain a two percent net smelter return royalty on all future production from the Bates-Hunter Gold Mine; and (iii) Goldrush Casino and Mining Corporation will retain a one percent net smelter return royalty (up to a maximum payment of $1,500,000). Furthermore, if the $3,000,000 payment has not been made by May 31, 2005 and Hunter Corporation has not otherwise granted an extension for payment, the Purchase Agreement will become null and void and neither party shall have any further rights or obligations thereunder.

In May 2005, we entered into warrant exercise agreements with two warrant holders, allowing them a reduced exercise price on previously issued and outstanding warrants. They held an aggregate of 3,063,834 warrants exercisable with a range of original pricing was from $0.40 to $5.50 per share. Each warrant exercise agreement allows for monthly exercises with an exercise price of $0.20 per share. For the nine months ending September 30, 2005, an aggregate of 794,150 warrants were exercised providing net proceeds of $158,830. Each month hereafter, until March 31, 2006, they can exercise an aggregate of 262,400 warrants. Should each warrant holder exercise their maximum monthly allotment, we would net $52,480 per month. An additional expense resulted from the modification of these warrants and was calculated using the Black-Scholes pricing model. An additional $209,817 was recorded as a component of Prepaid Expenses and is being amortized over an eleven month period to coincide with the terms of the agreements.

In May 2005, we entered into a short-term loan arrangement with a shareholder of ours, Andrew Green, an individual resident of Ohio (“Mr. Green”) whereby we borrowed $250,000 through a purchase agreement with an unsecured promissory note (“PN”). The PN bore an initial interest rate of six percent per annum and since we had not repaid the PN in full by July 15, 2005 the applicable interest rate from July 15 forward increased to 18 percent per annum. As additional consideration for the PN, we agreed to amend the terms of a warrant (originally issued as part of our October 2003 private placement) to purchase up to 500,000 shares of our common stock held by Mr. Green to reduce the exercise price per share from $0.25 per share to $0.01 per share based on a default provision in the PN Furthermore, since we had not repaid the PN in full by July 15, 2005, we were required to issue 50,000 shares of our unregistered common stock for each month there remained an outstanding balance beginning August 15, 2005, up to a maximum issuance of 150,000 shares. As of September 30, 2005, we have issued 100,000 of such penalty shares and on October 15, 2005 we issued the final 50,000 penalty shares. We recorded the issuance of these penalty shares as an additional interest component, valuing each issuance with the closing sale price of our common stock. For the quarter ending September 30, 2005, we recorded $15,000 in additional non-cash interest expense. In August 2005, Mr. Green exercised the warrant to purchase 500,000 shares of common stock (which shares have been registered for re-sale under a current prospectus dated May 4, 2005) and we deducted the new warrant exercise price ($0.01 per share) of $5,000 from the accrued interest owed to him from the PN. The PN had a due date of September 15, 2005. On October 18, 2005, Mr. Green informed us that he did not consider us in default with any terms of the PN and furthermore was open to providing additional funding options to us. (See Note - 13 Subsequent Events, included elsewhere in this Form 10-QSB, for information regarding changes in the PN.)

On September 30, 2005, we issued Pacific Dawn Capital, LLC, a California limited liability company (“Pacific”) a six-month secured convertible promissory note (the “Pacific Note”) in the principal amount of $600,000, or such lesser amount that is actually drawn by us pursuant to a loan and security agreement with Pacific dated September 30, 2005 (the “Pacific Loan Agreement”). The Pacific Note is secured by substantially all of our assets (behind the Pandora position) and bears interest of six percent per annum. In order to effectuate the note, Pacific required an additional personal guaranty. Stephen D. King, a board member of ours, provided that guaranty. In exchange for agreeing to personally guaranty our obligations under the Pacific Note, we will issue a two-year warrant to purchase 1,000,000 shares of our common stock at a price of $0.15 per share to Mr. King. Under the Pacific Loan Agreement, beginning October 1, 2005, we have the right to draw up to $100,000 per month (up to an aggregate of $600,000) by providing Pacific notice of our intent to exercise a monthly draw along with a report of the exploration operations for the Bates-Hunter. Pacific has the right to reject the draw if it is not satisfied with the report. If we fail to exercise a draw during any month, we waive our right to draw the $100,000 for that month. On October 3, 2005, we drew the initial monthly amount of $100,000 and issued to Pacific (i) 500,000 shares of our un-registered common stock (with piggyback registration rights) and (ii) issued a five-year warrant to purchase up to 1,000,000 shares of our common stock with an exercise price of $0.12 per share, subject to adjustment as defined in the agreement. For each subsequent $100,000 monthly draw, we will issue another five-year warrant to purchase up to 1,000,000 shares of our common stock with an exercise price of $0.12 per share. Should we not draw down any additional monthly draws, we are required to issue 500,000 shares of our common stock as an early termination fee, provided that Pacific has not rejected any of our attempted monthly draws. After the initial draw occurs, we must pay interest in arrears on or prior to the last day of each calendar month, unless converted into common stock. We also provided Pacific certain preemptive rights under the Pacific Loan Agreement. Furthermore, Pacific has the right to convert any portion of the principal or interest of the Pacific Note outstanding into shares of our common stock based on a conversion rate equal to $0.20 per share. We do have the right to call the Pacific Note at any time the average over 20 consecutive trading days of the daily average of the high and low fair market value of our common stock is at or above $0.50 per share and the shares are registered. See Note 13 - Subsequent Events, included elsewhere in this Form 10-QSB, for information regarding changes to the Pacific Note.

Our existing sources of liquidity will not provide cash to fund operations for the next twelve months. We have estimated our cash needs over the next twelve months to be approximately $2,800,000 (to include anticipated debt servicing of approximately $1,345,000 (included in this amount is a $900,000 allocation for the Bates-Hunter) and $150,000 for the Holdsworth project. Additionally, should the exploration results for Bates-Hunter prove viable, it will require $3,000,000 to complete the purchase by the extension date of May 31, 2006. Furthermore, in order to continue with exploration at the FSC Project, we are required to have an additional $400,000 advance available, which would be applied to the next investment of $1,400,000 required in order to maintain our level of participation in Kwagga. We will continue our attempt to raise additional capital. Some of the possibilities available to us are through private equity transactions, to develop a credit facility with a lender or the exercise of options and warrants. However, such additional capital may not be available to us at acceptable terms or at all. In the event that we are unable to obtain additional capital, we would be forced to reduce operating expenditures and/or cease operations altogether.

RISKS RELATING TO OUR COMMON STOCK

TRADING OF OUR COMMON STOCK IS LIMITED.

Trading of our common stock is conducted on the National Association of Securities Dealers’ Over-the-Counter Bulletin Board, or “OTC Bulletin Board.” This has an adverse effect on the liquidity of our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us. This may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock.

BECAUSE IT IS A “PENNY STOCK” IT CAN BE DIFFICULT TO SELL SHARES OF OUR COMMON STOCK.

Our common stock is a “penny stock.” Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to the purchase. The penny stock rules may make it difficult for you to sell your shares of our stock. Because of the rules, there is less trading in penny stocks. Also, many brokers choose not to participate in penny stock transactions. Accordingly, you may not always be able to sell our shares of common stock publicly at times and prices that you feel are appropriate.

RISKS RELATING TO OUR FINANCIAL CONDITION

WE CURRENTLY DO NOT HAVE ENOUGH CASH TO FUND OPERATIONS DURING 2005.

As of September 30, 2005, we had only approximately $540,000 of cash and other current assets on hand. Since we do not expect to generate any significant revenue from operations in 2005, we will be required to raise additional capital in financing transactions in order to satisfy our expected cash expenditures. We expect to raise such additional capital by selling shares of our capital stock or by borrowing money. However, such additional capital may not be available to us at acceptable terms or at all. Further, if we sell additional shares of our capital stock, your ownership position in our Company will be subject to dilution. In the event that we are unable to obtain additional capital, we may be forced to reduce our operating expenditures or to cease operations altogether.

WE HAVE NO OPERATING ASSETS.

On March 14, 2003, we completed the sale of our Hosted Solutions Business and on April 30, 2003, we completed the sale of substantially all of the assets of our Accounting Software Business, in which the results of both operations have been reported as discontinued operations, thereby providing no future benefit to our ongoing business plan. Accordingly, we are an exploration stage company and do not anticipate having any revenues from operations until an economic mineral deposit is discovered or unless we complete other acquisitions or joint ventures with business models that produce such revenues. As of September 30, 2005 we have rights in four projects: the FSC Project in South Africa, the Bates-Hunter Gold Mine in Colorado, the McFaulds Lake Project in northern Ontario, and the Holdsworth Property near Wawa, Ontario, Canada. None of these projects may ever produce any significant mineral deposits, however.

WE ANTICIPATE INCURRING LOSSES FOR THE FORESEEABLE FUTURE.

Since becoming an exploration stage company in May 2003 through September 30, 2005, we have incurred an aggregate net loss of $17,564,394. We expect operating losses to continue for the foreseeable future and may never be able to operate profitably.

OUR INDEPENDENT AUDITORS HAVE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

We have had net losses for each of the years ended December 31, 2004 and 2003, and we have an accumulated deficit as of September 30, 2005. Since the financial statements for each of these periods were prepared assuming that we would continue as a going concern, in the view of our independent auditors, these conditions raise substantial doubt about our ability to continue as a going concern. Furthermore, since we do not expect to generate any significant revenues for the foreseeable future, our ability to continue as a going concern depends, in large part, on our ability to raise additional capital through equity or debt financing transactions. If we are unable to raise additional capital, we may be forced to discontinue our business.

THE SOUTH AFRICAN RAND VERSUS THE US DOLLAR.

The majority of all exploration costs that AfriOre deals in, is denominated in the South African Rand, whereas all of our funding has been in the US Dollar. Exchange rates are influenced by global economic trends beyond our control. Since June 30, 2003, the Rand has appreciated against the Dollar by approximately 11 percent. On June 30, 2003, the exchange rates were approximately R7.51 = $1.00. On June 30, 2004, the exchange rates were approximately R6.28 = $1.00. And on September 30, 2005, the exchange rates were approximately R6.35 = $1.00. This reduction plus the cost overruns associated with BH47 and BH48 (the additional depth drilled on each drillhole and sidewall repair on BH48) are the major factors that have contributed to decreasing our initial 5 to 7 drillhole program on the FSC to be revised to only a three drillhole program. Furthermore, should the Dollar weaken further in relationship to the Rand, we may sustain additional reductions in the number of drillholes completed with our investment.

RISKS RELATING TO OUR BUSINESS

SINCE BECOMING ENGAGED IN THE MINERAL EXPLORATION BUSINESS IN JUNE 2003, WE HAVE RELIED ON AN EXCLUSION FROM THE DEFINITION OF “INVESTMENT COMPANY” IN ORDER TO AVOID BEING SUBJECT TO THE INVESTMENT COMPANY ACT OF 1940. TO THE EXTENT THE NATURE OF OUR BUSINESS CHANGES IN THE FUTURE, WE MAY BECOME SUBJECT TO THE REQUIREMENTS OF THE INVESTMENT COMPANY ACT, WHICH WOULD LIMIT OUR BUSINESS OPERATIONS AND REQUIRE US TO SPEND SIGNIFICANT RESOURCES IN ORDER TO COMPLY WITH SUCH ACT.

The Investment Company Act defines an “investment company,” among other things, as an issuer that is engaged in the business of investing, reinvesting, owning, holding or trading in securities and owns investment securities having a value exceeding 40 percent of the issuer’s unconsolidated assets, excluding cash items and securities issued by the federal government. Because the value of our interest in the FSC Project has exceeded 40 percent of our unconsolidated assets, excluding cash and government securities, since June 2003, we may meet this threshold definition of “investment company.” However, the Investment Company Act also excludes from this definition any person substantially all of whose business consists of owning or holding oil, gas or other mineral royalties or leases or fractional interests therein, or certificates of interest or participation relating to such mineral royalties or leases. Based on an opinion of counsel, we believe that we satisfy this mineral company exception to the definition of “investment company” for the period from June 26, 2003 through August 29, 2004. If our reliance on the mineral company exclusion from the definition of investment company during this period is misplaced, we may have been in violation of the Investment Company Act, the consequences of which can be significant. For example, investment companies that fail to register under the Investment Company Act are prohibited from conducting business in interstate commerce, which includes selling securities or entering into other contracts in interstate commerce. Section 47(b) of the Investment Company Act provides that a contract made, or whose performance involves, a violation of the act is unenforceable by either party unless a court finds that enforcement would produce a more equitable result than non-enforcement. Similarly, a court may not deny rescission to any party seeking to rescind a contract that violates the Investment Company Act, unless the court finds that denial of rescission would produce more equitable result than granting rescission. Accordingly, for example, certain investors who purchase our securities during any period in which we were required to register as investment company may seek to rescind their subscriptions.

We further believe that we have continued to qualify for the mineral company exclusion from August 30, 2004 through the date of the Annual Report and are not therefore subject to the requirements of the Investment Company Act of 1940. If in the future the nature of our business changes such that the mineral company exception to the threshold definition of investment company is not available to us, we will be required to register as an investment company with the SEC. The ramifications of becoming an investment company, both in terms of the restrictions it would have on our Company and the cost of compliance, would be significant. For example, in addition to expenses related to initially registering as an investment company, the Investment Company Act also imposes various restrictions with regard to our ability to enter into affiliated transactions, the diversification of our assets and our ability to borrow money. If we became subject to the Investment Company Act at some point in the future, our ability to continue pursuing our business plan would be severely limited as it would be significantly more difficult for us to raise additional capital in a manner that would comply with the requirements of the Investment Company Act. To the extent we are unable to raise additional capital, we may be forced to discontinue our operations or sell or otherwise dispose of our mineral assets.

LAWS GOVERNING MINERAL RIGHTS OWNERSHIP HAVE CHANGED IN SOUTH AFRICA.

On May 1, 2004, the South African Mineral and Petroleum Resources Development Act 2002 (the “MPRD Act”) became effective. The principal objectives set out in the MPRD Act are:

·	to recognize the internationally accepted right of the state of South Africa to exercise full and permanent sovereignty over all the mineral and petroleum resources within South Africa;

·	to give effect to the principle of the State’s custodianship of the nation’s mineral and petroleum resources;

·	to promote equitable access to South Africa’s mineral and petroleum resources to all the people of South African and redress the impact of past discrimination;

·	to substantially and meaningfully expand opportunities for historically disadvantaged persons, including women, to enter the mineral and petroleum industry and to benefit from the exploitation of South Africa’s mineral and petroleum resources;

·	to promote economic growth and mineral and petroleum resources development in South Africa;

·	to promote employment and advance the social and economic welfare of all South Africans;

·	to provide security of tenure in respect of prospecting, exploration, mining and production operations;

·	to give effect to Section 24 of the South African Constitution by ensuring that South Africa’s mineral and petroleum resources are developed in an orderly and ecologically sustainable manner while promoting justifiable social and economic development;

·	to follow the principle that mining companies keep and use their mineral rights, with no expropriation and with guaranteed compensation for mineral rights; and

·	to ensure that holders of mining and production rights contribute towards socio-economic development of areas in which they are operating.

Under the MPRD Act, tenure licenses over established operations will be secure for 30 years (and renewable for 30 years thereafter), provided that mining companies obtain new licenses over existing operations within five years of the date of enactment of the Act and fulfill requirements specified in the Broad-Based Socio-Economic Empowerment Charter for the South African mining industry, or the Mining Charter.

The principles contained in the Mining Charter relate to the transfer of 26 percent of South Africa’s mining assets to historically disadvantaged South Africans, or HDSAs, over a 10-year period, as defined in the Mining Charter. Under the Mining Charter, the South African mining industry has committed to securing financing to fund participation of HDSAs in an amount of R$100 billion within the first five years of the Mining Charter’s tenure. The Mining Charter provides for the review of the participation process after five years to determine what further steps, if any, are needed to achieve the 26 percent target participation. The Mining Charter requires programs for black economic empowerment and the promotion of value-added production, such as jewelry making and other gold fabrication, in South Africa. The Mining Charter also sets out targets for broad-based black economic empowerment in the areas of human resources, skill development, employment equality, procurement and beneficiation. In addition, the Mining Charter addresses other socio-economic issues, such as migrant labor, housing and living conditions.

DUE TO LEGISLATION ENACTED IN SOUTH AFRICA, KWAGGA WILL BE REQUIRED TO SELL A SUBSTANTIAL AMOUNT OF ITS STOCK, WHICH WOULD DILUTE OUR EQUITY POSITION IN KWAGGA.

In accordance with the Broad-Based Socio-Economic Empowerment Charter for the South African mining industry, Kwagga will offer up to 28 percent of its capital stock at fair market value to a HDSA investor group. Any investment by such a group will dilute our ownership of Kwagga and, accordingly, the right to receive profits generated from the FSC Project, if any.

WE ARE SUBSTANTIALLY DEPENDENT UPON OUR CHIEF EXECUTIVE OFFICER.

We are substantially dependent on the expertise and industry knowledge of H. Vance White, our chief executive officer. The loss of his services could have an adverse effect on us and we do not currently have key person insurance with respect to Mr. White.

ONE OF OUR OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTEREST WITH REGARD TO CERTAIN TRANSACTIONS THAT WE MAY ENTER.

H. Vance White, who is a director and the chief executive officer of our Company, is both an officer and director of Hawk Precious Minerals Inc., a junior exploration company and the parent company of Hawk USA, and a partner in Brooks & White Associates, an unincorporated Canadian partnership that provides management, financial and investor relations services to junior mineral resource exploration companies. As a result of his positions with other companies that may, from time to time, compete with us, Mr. White may have a conflict of interest to the extent the other companies with which he is affiliated acquire rights in exploration projects that may be suitable for us to acquire.

OUR SUCCESS IN CONNECTION WITH THE FSC PROJECT IS SUBSTANTIALLY DEPENDENT ON THE PROJECT’S OPERATOR.

We are relying heavily on the ability of AfriOre, the FSC Project operator, to make prudent use of all funds in connection with the exploration of the FSC Project. If AfriOre does not use these funds wisely, we may not realize any return on our investment. Further, we are dependent on the financial health and condition of AfriOre. In the event AfriOre became insolvent or otherwise unable to carry out its obligations of exploration, we could lose the entire amount we have invested in exploration of the FSC Project. We also depend on AfriOre to obtain and maintain various governmental licenses and permits necessary to explore and develop the properties. The failure to obtain and maintain such licenses and permits may cause significant delays in exploring and developing the properties, or even may prevent the completion of any of these activities altogether.

THE OPERATORS OF OUR EXPLORATION PROJECTS MAY NOT HAVE ALL NECESSARY TITLE TO THE MINING EXPLORATION RIGHTS.

We expect that Kwagga and AfriOre will have good and proper right, title and interest in and to the respective mining exploration rights they currently own, have optioned or intend to acquire and that they will explore and develop. Such rights may be subject to prior unregistered agreements or interests or undetected claims or interests, which could materially impair our ability to participate in the development of the FSC Project. The failure to comply with all applicable laws and regulations, including failure to pay taxes and to carry out and file assessment work, may invalidate title to portions of the properties where the exploration rights are held.

WE WILL REQUIRE ADDITIONAL FINANCING TO CONTINUE TO FUND OUR CURRENT EXPLORATION PROJECT INTERESTS OR TO ACQUIRE INTERESTS IN OTHER EXPLORATION PROJECTS.

Additional financing will be needed in order to fund beyond the initial drillhole exploration program currently underway at the FSC Project, to fund exploration of the Holdsworth Project, McFaulds Lake and Bates-Hunter, or to potentially complete further acquisitions or complete other acquisitions or joint ventures with other business models. Our means of acquiring investment capital is limited to private equity and debt transactions. We have no significant sources of currently available funds to engage in additional exploration and development. Without additional capital, we will be unable to fund exploration of our current property interests or acquire interests in other mineral exploration projects that may become available. See “—Risks Relating to Our Financial Condition - We Currently Do Not Have Enough Cash to Fund Operations During 2005.”

OUR PERFORMANCE MAY BE SUBJECT TO FLUCTUATIONS IN GOLD PRICES.

The profitability of a gold exploration project could be significantly affected by changes in the market price of gold. Mine production and the willingness of third parties such as central banks to sell or lease gold affects the supply of gold. Demand for gold can be influenced by economic conditions, attractiveness as an investment vehicle and the relative strength of the US Dollar and local investment currencies. Other factors include the level of interest rates, exchange rates, inflation and political stability. The aggregate effect of these factors is impossible to predict with accuracy. Worldwide production levels also affect gold prices. In addition, the price of gold has on occasion been subject to very rapid short-term changes due to speculative activities. Fluctuations in gold prices may adversely affect the value of any discoveries made at the sites with which we are involved.

THE NATURE OF MINERAL EXPLORATION IS INHERENTLY RISKY.

The exploration for and development of mineral deposits involves significant financial risks, which even experience and knowledge may not eliminate, regardless of the amount of careful evaluation applied to the process. Very few properties are ultimately developed into producing mines. Whether a gold deposit will be commercially viable depends on a number of factors, including:

·	financing costs;

·	proximity to infrastructure;

·	the particular attributes of the deposit, such as its size and grade; and

·	governmental regulations, including regulations relating to prices, taxes, royalties, infrastructure, land use, importing and exporting of gold and environmental protection.

The outcome of any of these factors may prevent us from receiving an adequate return on invested capital.

MINERAL EXPLORATION IS EXTREMELY COMPETITIVE.

There is a limited supply of desirable mineral properties available for claim staking, lease or other acquisition in the areas where we contemplate participating in exploration activities. We compete with numerous other companies and individuals, including competitors with greater financial, technical and other resources than we possess, in the search for and the acquisition of attractive mineral properties. Our ability to acquire properties in the future will depend not only on our ability to develop our present properties, but also on our ability to select and acquire suitable producing properties or prospects for future mineral exploration. We may not be able to compete successfully with our competitors in acquiring such properties or prospects.

Item 3. Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 10-QSB Quarterly Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were adequate and effective (as of the date of their evaluation) for the purposes of recording, processing, summarizing and timely reporting material information required to be disclosed in reports filed by the Company under Exchange Act of 1934.

During the period covered by this report, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect the Company’s internal controls over financial reporting subsequent to such evaluation.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In May 2005, we entered into agreements with two of our shareholders, whereby we offered a reduced exercise price on all stock purchase warrants they held to reflect a $0.20 per share exercise price. They held an aggregate of 3,063,834 warrants with exercise prices that ranged from $0.40 to $5.50 per share. For the quarter ending September 30, 2005, an aggregate of 354,150 warrants were exercised and each month thereafter, until March 31, 2006, they can exercise an aggregate of 262,400 warrants. We relied on the exemption from registration provided by Rule 506 of Regulation D under Section 4(2) of the Securities Act of 1933, as amended. The Company believes that each warrant holder is “accredited” (as defined by Rule 501(a) promulgated under the Securities Act) that no general solicitation was involved, and the transaction did not otherwise involve a public offering.

During the quarter ended September 30, 2005, we entered into an agreement with a consultant for services in public relations. We issued 50,000 shares of our un-registered common stock for its services for a four month term. We relied on the exemption from registration provided by Rule 506 of Regulation D under Section 4(2) of the Securities Act of 1933, as amended. The Company reasonably believes that the consultant is “sophisticated,” that no general solicitation was involved, and the transaction did not otherwise involve a public offering.

During the quarter ended September 30, 2005, we issued to a promissory note holder, 100,000 shares of our un-registered common stock as penalty charges due for not paying the principal due by September 15, 2005; and he exercised on 500,000 warrants held. We relied on the exemption from registration provided by Rule 506 of Regulation D under Section 4(2) of the Securities Act of 1933, as amended. The Company believes that the promissory note holder is “accredited” (as defined by Rule 501(a) promulgated under the Securities Act) that no general solicitation was involved, and the transaction did not otherwise involve a public offering.

Item 5. Other Information

See the disclosures under Item 2.

Item 6. Exhibits

Exhibits

4.1	Form of Common Stock Purchase Warrant dated November 1, 2005.

10.1	Amended and Restated Loan and Security Agreement by the Company to Pacific Dawn Capital, LLC dated November 1, 2005.

10.2	Amended Secured Convertible Promissory Note by the Company to Pacific Dawn Capital, LLC dated September 30, 2005.

10.3	Loan and Security Agreement by the Company to Andrew Green dated November 1, 2005.

10.4	Secured Convertible Promissory Note by the Company to Andrew Green dated November 1, 2005.

31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	WITS BASIN PRECIOUS MINERALS INC.
Date: November 11, 2005
	By:	/s/ H. Vance White
		H. Vance White Chief Executive Officer


	By:	/s/ Mark D. Dacko
		Mark D. Dacko Chief Financial Office

EXHIBIT INDEX

Exhibits No.	Description

4.1	Form of Common Stock Purchase Warrant dated November 1, 2005.

10.1	Amended and Restated Loan and Security Agreement by the Company to Pacific Dawn Capital, LLC dated November 1, 2005.

10.2	Amended Secured Convertible Promissory Note by the Company to Pacific Dawn Capital, LLC dated September 30, 2005.

10.4	Loan and Security Agreement by the Company to Andrew Green dated November 1, 2005.

10.3	Secured Convertible Promissory Note by the Company to Andrew Green dated November 1, 2005.

31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EXHIBIT 10.1

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

This Amended and Restated Loan and Security Agreement (the “Amended Agreement”) is entered into as of the 1^st day of November, 2005, by and among Wits Basin Precious Minerals Inc., a Minnesota corporation (the “Company”), and Pacific Dawn Capital, LLC, a California limited liability company (the “Lender”).

INTRODUCTION

A. On September 30, 2005, the Company and the Lender entered into that certain Loan and Security Agreement (the “Loan Agreement”), pursuant to which the Lender provided bridge financing to the Company in the amount of up to $600,000 against a secured convertible promissory note accruing interest at a rate of 6% per annum.

B. On the date hereof, the Company entered into a similar loan and security agreement (the “Green Loan”) with Andrew Green (“Green”), pursuant to which Green provided bridge financing to the Company in the amount of up to $600,000 against a secured convertible promissory note accruing interest at a rate of 12%.

C. As a condition to the Green Loan, the Company is required to grant Green a secondary security interest in all of its assets, such interest to be pari passu with the Lender’s security interest.

D. In consideration of the Lender’s agreement to amend the terms of the Loan Agreement to (i) consent to the Green Loan, (ii) allow the Company to grant to Green a security interest in the assets of the Company pari passu with Lender’s security interest and (iii) to provide for a balloon payment of principal and interest at the Maturity Date (as defined herein), and certain other amendments, the Company has agreed to increase the applicable interest rate under the Note (as defined herein) to 12% per annum.

E. Accordingly, the Company and the Lender desire to amend and restate the terms of the Loan Agreement as set forth in this Amended Agreement.

AGREEMENT

Now, Therefore, in consideration of the foregoing facts and premises hereby made a part of this Amended Agreement, the mutual promises hereinafter set forth and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

Article 1

Loan

1.1 The Loan. On the terms and conditions hereof, the Lender hereby agrees to loan the Company up to $600,000 (the “Loan”) pursuant to mutually acceptable monthly draws by the Company of up to $100,000 (each a “Monthly Draw”). The parties hereby acknowledge the acceptance of the first Monthly Draw, and that such Monthly Draw occurred on October 1, 2005 via a wire transfer of immediately available funds by Lender to the Company (the “Initial Monthly Draw”). Thereafter, the parties may mutually agree to additional Monthly Draws during each successive month commencing November 2005 and ending March 2006 (each such month shall be hereinafter referred to as a “Month” and each additional Monthly Draw an “Additional Monthly Draw”).

1.2 Mechanics of Additional Monthly Draws. If the Company intends to exercise an Additional Monthly Draw for any Month, it shall deliver to the Lender a written notice of its intent (each, a “Notice”), such Notice to include the amount of such draw (not to exceed $100,000) and current assay reports relating to the Company’s exploration operations (“Assays”), on or prior to the 25^th day of the calendar month prior to the such Month. If the Lender intends to reject such Additional Monthly Draw, it shall, within three (3) Business Days of its receipt of Notice, deliver to the Company written notice of such rejection. If the Lender accepts the Additional Monthly Draw, it shall deliver to the Company, via wire transfer of immediately available funds, the amount of such draw specified in the Notice on or before the fifth (5) day of such Month (the “Wire Date”). For purpose of this Amended Agreement, “Business Day” means any day other than a Saturday, Sunday or legal holiday in the State of Minnesota. In the event any day upon which notice is required to be delivered falls on Non-Business Day, a weekend or holiday, the party shall have until the end of next Business Day to deliver such notice to the other party.

Notwithstanding the foregoing, in the event the Company does not exercise its Monthly Draw during any Month, the Company waives its right to exercise the funds representing the Monthly Draw for that Month. The aggregate amount of the Monthly Draws shall be referred to herein as the “Loan Amount.”

1.3 Consideration.

(a) Initial Monthly Draw. In consideration of the Initial Monthly Draw, the Company shall, within two (2) Business Days of the Company’s receipt of such Initial Monthly Draw:

(i) Issue and deliver to the Lender a convertible secured promissory note in a principal amount equal to the Loan Amount, in the form attached hereto as Exhibit A (the “Note”);

(ii) Issue and deliver to the Lender 500,000 shares of its restricted common stock, par value $.01 per share (the “Common Stock”); and

(iii) Issue and deliver to the Lender warrants to purchase 1,000,000 shares of Common Stock at an exercise price of $0.12 per share (the “Warrants”), a form of which is attached hereto as Exhibit B.

(b) Additional Monthly Draws. For each additional Monthly Draw, the Company shall:

(i) Issue to the Lender, within two (2) Business Days of the Wire Date associated with such Monthly Draw, Warrants to purchase an additional 1,000,000 shares of Common Stock at an exercise price of $0.12 per share; and

(ii) Reflect in the Company’s records the increase to the Principal balance of the Note (as such term is defined in the Note).

(c) Non-Usage of Draws. In the event the Company does not exercise any Additional Monthly Draws, the Company shall issue to the Lender 500,000 shares of Common Stock; provided that, the Company shall not be required to issue Common Stock pursuant to this Section 1.3(c) if the Company provides one or more Notices to exercise an Additional Monthly Draw and each such Notice is rejected by the Lender.

Article 2

Company Representations and Warranties

The Company hereby makes the following representations and warranties to the Lender as of the Closing Date.

2.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota. The Company has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Amended Agreement, the Note and the Warrants (together, the “Transaction Documents”), to issue and sell the shares of Common Stock issuable hereunder and upon exercise of the Warrants (the “Warrant Shares”), to carry out the provisions of the Transaction Documents, and to carry on its business as presently conducted and as presently proposed to be conducted. The Company is duly qualified and is authorized to do business and is in good standing in each jurisdiction in which the nature of its activities makes such qualification necessary, except for those jurisdictions in which failure to be so qualified would not have a materially adverse effect on the Company or its business, taken as a whole.

2.2 Authorization; Binding Obligations. All corporate action on the part of the Company, its officers, directors and shareholders necessary for the authorization of the Transaction Documents, the performance of all obligations of the Company hereunder, including the authorization, sale, issuance and delivery of the Common Stock, including the Warrant Shares, has been taken. The Transaction Documents, when executed and delivered, will be valid and binding obligations of the Company enforceable in accordance with their respective terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and according to general principles of equity that restrict the availability of equitable remedies.

2.3 Issuance of Common Stock. The shares of Common Stock issuable hereunder, including upon exercise of the Warrants, when issued, shall be validly issued, fully paid and nonassessable.

2.4 Collateral. The Company is the legal and beneficial owner of the Collateral, as defined in Article 4 hereof. The Collateral is subject to a priority security interest held by Pandora Select Partners, L.P. (the “Priority Security Interest”) and a secondary security interest held by Andrew Green (the “Secondary Security Interest”). Except for the Priority Security Interest and the Secondary Security Interest, the Collateral is free and clear of all mortgages, security interests, liens, encumbrances and claims of every kind (the “Encumbrances”). The Collateral is and will remain free and clear of all Encumbrances of any nature whatsoever, except for the Priority Security Interest, the Secondary Security Interest and those contemplated herein.

2.5 Offering. Assuming the accuracy of the representations and warranties of the Lender contained in Article 3 hereof, the offer, issue and sale of the Note, Warrants, the Common Stock and the Warrant Shares (collectively, the “Securities”) is and will be exempt from registration and prospectus delivery requirements of the Securities Act of 1933, as amended, and are exempt from registration and qualification under the requirements of all applicable state securities laws.

Article 3

Lender’s Representations and Warranties

The Lender hereby represents and warrants to the Company, as of the Closing Date, as follows:

3.1 Investment Representations. The Lender understands that neither the offer or the sale of the Securities have been registered under the Securities Act. The Lender also understands that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in material part upon the Lender’s representations contained in the Amended Agreement. In this regard, the Lender additionally represents and warrants as follows:

(a) The Lender has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company. The Lender must bear the economic risk of this investment indefinitely unless the Shares are registered for resale pursuant to the Securities Act, or an exemption from registration is available. The Lender has no present intention of selling or otherwise transferring the Securities, or any interest therein. The Lender also understands that there is no assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow the Lender to transfer all or any portion of the Securities under the circumstances, in the amounts or at the times the Lender might wish. Lender represents and agrees that if, contrary to the foregoing representations and warranties, Lender should later desire to dispose of or transfer all or any portion of the Shares or Securities in any manner, Lender shall not do so without complying with applicable securities laws.

(b) The Lender is acquiring the Securities for the Lender’s own account, for investment only, and not with a view towards their public distribution. Lender is not aware of any occurrence, event or circumstance upon the happening of which Lender intends to transfer or sell the Securities. Lender has been informed that, in the view of the certain state securities commissions, a purchase of Securities with a current intent to resell, by reason of any foreseeable specific contingency or anticipated change in market values, any change in the condition of the Company or the investment market as a whole, or in connection with a contemplated liquidation or settlement of any loan obtained for the acquisition of the Securities, would represent a purchase with an intent inconsistent with the representations set forth above, and that certain state securities commissions might regard such sale or disposition as a deferred sale with regard to which an exemption from registration is not available.

(c) The Lender represents that, by reason of the business or financial experience of Lender’s management , the Lender has the capacity to protect his own interests in connection with the transactions contemplated in this Amended Agreement and the Securities. Further, the Lender is aware of no publication of any advertisement in connection with the transactions contemplated in the Amended Agreement.

(d) The Lender represents that the Lender is an accredited investor within the meaning of Regulation D under the Securities Act.

(e) Lender represents and warrants that this Amended Agreement and the obligations of Lender hereunder have been fully authorized by Lender, and are legal, valid and binding upon Lender, enforceable in accordance with their terms and that Lender is limited liability company duly organized in the State of California.

3.2 High Risk. The Securities offered hereby are highly speculative in nature and an investment therein involves a high degree of risk, including but not limited to the risk of losing the entire investment in such Securities.

3.3 No Governmental Approval. No federal or state agency, including the Commission or the securities commission or authority of any state, has approved or disapproved the Securities, passed upon or endorsed the merits of the issuance of Securities or the accuracy or adequacy of any information provided by the Company, or made any finding or determination as to the fairness or fitness of the Securities for sale.

3.4 No Reliance. Lender has been encouraged to rely upon the advice of its legal counsel, accountants or other financial advisors with respect to tax and other considerations relating to the purchase of the Securities pursuant hereto. Lender is not relying upon the Company with respect to the economic considerations involved in determining to make an investment in the Securities.

3.5 Access to Information. Lender has been given access to full and complete information regarding the Company and has utilized such access to Lender’s satisfaction for the purpose of obtaining information respecting the Company. Particularly, Lender has been given reasonable opportunity to meet with and/or contact Company representatives for the purpose of asking questions of, and receiving answers from, such representatives concerning the terms and conditions of the issuance of the Securities and to obtain any additional information, to the extent reasonably available, necessary to verify the accuracy of information about the Company already obtained.

Article 4

Other Agreements

4.1 Security Agreement. To secure the full and timely payment and performance of the Company’s obligations under this Amended Agreement and the Note, the Company hereby grants to Lender a security interest (the “Security Interest”) in the property of the Company identified on Exhibit C hereto, whether now owned or later acquired or created, and including all proceeds therefrom, whether cash or non-cash (collectively, the “Collateral”). The Security Interest is secondary in interest to the Priority Security Interest held by Pandora Select Partners, L.P., and, pursuant to [that certain Intercreditor Agreement entered into effective November 1, 2005 by and between Lender and Andrew Green], pari passu with the Secondary Security Interest held by Andrew Green.

4.2 “Piggyback” Registration. Except in the event of a public offering of securities by the Company, at any such time the Company proposes to file a registration statement with the SEC under the Securities Act registering equity securities or debt with equity features for public sale or resale (except by a Form S-4 or Form S-8 Registration Statement or any successor forms thereto), it will give Lender at least ten (10) days’ advance written notice of its intention to file such registration statement and Lender shall have the right to have included in such registration statement the number of shares of Common Stock issued to Lender hereunder, including shares issued upon conversion of the Note or exercise of the Warrants, as Lender shall designate to the Company within ten (10) days after the date the Company provides such notice. The Company will use commercially reasonable efforts to cause all of such shares to be included in such registration statement proposed to be filed by the Company; provided, however, that nothing herein shall prevent Company from, at any time, abandoning or delaying any registration. If any registration pursuant to this Section is underwritten in whole or in part, the Company may require that the shares be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters and that the Purchaser execute any underwriting agreement, “lock-up” letters or other customary agreements or documents executed by all of the other selling securityholders in connection with that underwritten offering. If, in the reasonable opinion of the managing underwriter of the proposed offering, the number of shares offered for participation in the proposed offering cannot be accommodated without adversely affecting the proposed offering, then the amount of such shares proposed to be offered, as well as the number of securities of any other selling stockholders participating in the registration, shall be proportionately reduced to a number deemed satisfactory by the managing underwriter.

4.3 Preemptive Rights. Except for Excluded Shares (as defined below), the Company shall not, for cash, issue, sell or exchange, agree to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange, (i) any shares of its Common Stock, (ii) any other equity securities of the Company, including, without limitation, shares of Preferred Stock, (iii) any option, warrant or other right to subscribe for, purchase or otherwise acquire any equity securities of the Company, or (iv) any debt securities convertible into capital stock of the Company (collectively, the “Offered Securities”), unless in each such case the Company first delivers to the Lender a written notice of any proposed or intended issuance, sale or exchange of Offered Securities (the “Offer”), which Offer shall (i) identify and describe the Offered Securities, (ii) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (iii) identify the persons or entities to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (iv) offer to issue and sell to or exchange with the Lender such portion of the Offered Securities as the aggregate number of shares of Common Stock then held by the Lender pursuant to this Amended Agreement (on an as-converted basis assuming the conversion of the Loan Amount on the Note and the exercise of outstanding Warrants) bears to the total number of shares of Common Stock outstanding on an as-converted basis. The Lender shall have the right, for a period of 20 days following delivery of the Offer, to purchase or acquire, at a price and upon the other terms specified in the Offer, the number or amount of Offered Securities described above. The Offer by its term shall remain open for such 20-day period. For purposes of this Amended Agreement, “Excluded Shares” shall include securities of the Company issued pursuant to (A) a stock option plan (or similar equity incentive plan) to employees, consultants or directors for the primary purposes of soliciting or retaining services, (B) a conversion or exercise of derivative securities, (C) a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale of all or substantially all of the assets of the Company or a third party, (D) a financing of the Company whereby the Company receives gross proceeds of $2,000,000 or more, (E) a public offering of securities of the Company, and (F) the Green Loan.

Notwithstanding the foregoing, in the event the Board of Directors of the Company determines, in its good faith and reasonable discretion, that the Company is unable to obtain available financing necessary to the Company due to its obligation to provide the Lender the rights referenced in this Section 4.3, the Company is entitled to obtain such financing and shall use its best efforts to offer the Lender the opportunity to purchase like-securities of the Company at terms similar to those provided to third-party investors in such financing arrangement.

4.4 Future Issuance of Warrants. On each date which the Company prepays outstanding Principal (as defined in the Note) under the Note (each, a “Payment Date”), the Company shall issue to the Lender a warrant to purchase the number of shares of Common Stock into which such Principal would be convertible on such Payment Date (each, a “Payment Warrant”) at an exercise price equal to the Conversion Price applicable on the Payment Date (subject to adjustment), in a form substantially similar to that provided herein as Exhibit B relating to the Warrants. Each Payment Warrant shall be exercisable from the date of its issuance through and including the Maturity Date (as defined in the Note).

Article 5

General Provisions

5.1 Entire Agreement. The Transaction Documents and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. This Amended Agreement amends, restates and supercedes the terms of the Loan Agreement.

5.2 Governing Law; Venue. This Amended Agreement shall be governed by the laws of the State of California without regard to its conflicts-of-law principles. The parties expressly acknowledge and agree that any judicial action to enforce any right of any party under this Amended Agreement, the Note or the Warrant may be brought and maintained in California state or federal courts. Accordingly, the parties hereby submit to the process, jurisdiction and venue of any such court. Each party hereby waives, and agrees not to assert, any claim that it is not personally subject to the jurisdiction of the foregoing courts in the State of California or that any action or other proceeding brought in compliance with this Section is brought in an inconvenient forum.

5.3 Survival. The representations, warranties, covenants and agreements made herein shall survive the Closing.

5.4 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a holder of the Securities from time to time.

5.5 Severability. In case any provision of the Amended Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

5.6 Amendment and Waiver. This Amended Agreement may be amended or modified, and any provision hereunder may be waived, only upon the written consent of the Company and the Lender.

5.7 Notices. All notices, requests, consents, and other communications hereunder shall be in writing and shall be deemed effectively given and received when delivered in person or by national overnight courier service or by certified or registered mail, return-receipt requested, or by telecopier, addressed as follows:

(a) if to the Company:

Wits Basin Precious Minerals Inc.

80 South Eighth Street, Suite 900

Minneapolis, Minnesota 55402

Attention: Mark D. Dacko, Chief Financial Officer

Facsimile: (612) 395-5276

(b) if to the Lender:

Pacific Dawn Capital, LLC

2556 W. Woodland Drive

Anaheim, CA 92801

Attention: Donald S. Stoica

Facsimile: (____) _____________

5.8 Counterparts. This Amended Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement binding on the parties. Facsimile and electronically transmitted signatures shall be valid and binding to the same extent as original signatures. Each party shall become bound by this Amended Agreement immediately upon signing and delivering any counterpart, independently of the signature of any other party. Nevertheless, in making proof of this Amended Agreement, it will be necessary to produce only one copy signed by the party to be charged.

5.9 Further Assurances. Each party hereby agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Amended Agreement and the transactions contemplated hereby.

Signature Page Follows

In Witness Whereof, the parties hereto have set their hands to this Amended Agreement to be effective as of the date first set forth above.

COMPANY:			LENDER:

WITS BASIN PRECIOUS MINERALS INC.			PACIFIC DAWN CAPITAL, LLC

By:/s/ Mark D. Dacko			By: /s/Donald Stoica
Its: CFO			Its: Manager


	WITS BASIN PRECIOUS MINERALS INC.

	By:
		Mark Dacko
		Its Chief Financial Officer




Date: November 11, 2005	By:	/s/ H. Vance White
		H. Vance White
		Chief Executive Officer




Date: November 11, 2005	By:	/s/ Mark D. Dacko
		Mark D. Dacko
		Chief Financial Officer




Dated: November 11, 2005	By:	/s/ H. Vance White
		H. Vance White
		Chief Executive Officer